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CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­press.co.za

he long-awaited Tri­par­tite Free Trade Area (TFTA) was launched in Egypt this week, spawn­ing eu­phoric of­fi­cial praise for the “Cape to Cairo” trad­ing bloc, which is meant to be the foun­da­tion for an even­tual sin­gle African econ­omy. The sum­mit this week did not, how­ever, ac­tu­ally cre­ate a “free trade” area in the tra­di­tional sense of the term. That is still a dis­tant prospect with hag­gling around the ba­sic is­sues like ac­tual tar­iff re­duc­tions, per­mis­si­ble pro­tec­tion from im­ports and the all-im­por­tant “rules of ori­gin” ex­pected to carry on for at least the next year.

What is now about to be­come a bind­ing agree­ment be­tween al­most half the con­ti­nent will first push a far more prag­matic agenda, with the “pro­gres­sive elim­i­na­tion of tar­iffs” tak­ing the back seat for now.

De­spite its name, the TFTA doesn’t re­ally fit the tra­di­tional la­bel of free trade area, said Trudi Hartzen­berg, ex­ec­u­tive direc­tor of the Stel­len­bosch-based Trade Law Cen­tre. “I’d pre­fer to call it an in­te­gra­tion plan, not a free trade agree­ment.”

The TFTA text from this week was sup­posed to get launched in De­cem­ber last year, but was de­layed.

It has now been signed just in time for the be­gin­ning of ne­go­ti­a­tions on the larger Con­ti­nen­tal Free Trade Area, which will be cer­e­mo­ni­ally launched to­mor­row at a meet­ing of the AU in Jo­han­nes­burg.

Sign­ing the TFTA deal just be­fore the African Union launch was prob­a­bly a con­sid­er­a­tion to sig­nal com­mit­ment to the over­all project of African in­te­gra­tion, said Hartzen­berg.

It does also show that there is suf­fi­cient agree­ment on “the prac­ti­cal stuff”, she told City Press.

The TFTA text un­veiled in Egypt on Wed­nes­day will have to be rat­i­fied by mem­ber coun­tries’ par­lia­ments. It comes into ef­fect when 14 of the par­lia­ments have okayed it. By now, 15 coun­tries have al­ready sig­nalled that they will rat­ify it, mean­ing the deal is more or less sealed.

The meat and bones of the free trade agree­ment will, how­ever, be con­tained in 14 or so an­nexes, each deal­ing with a cru­cial as­pect of the deal.

The ba­sic “free trade” an­nexes on tar­iffs, reme­dies and the rules of ori­gin are still be­ing fi­nalised. This is called “phase one”. Phase two, on the trade in ser­vices, in­tel­lec­tual prop­erty, com­pe­ti­tion pol­icy and other is­sues, has a tar­get for com­ple­tion in 2017. The two will run con­cur­rently.

The par­ties are giv­ing them­selves a year to com­plete phase one, which will see coun­tries make of­fers on tar­iff re­duc­tions among them­selves, ac­cord­ing to Trade and In­dus­try Min­is­ter Rob Davies.

An an­nex on non-tar­iff bar­ri­ers is, how­ever, agreed, which some think is re­ally the more im­por­tant is­sue.

“We don’t need a tra­di­tional free trade area. We need prag­ma­tism,” said Hartzen­berg. “What Africa re­ally needs is bet­ter roads and reg­u­la­tions.”

As an ex­am­ple of “prac­ti­cal stuff”, she cites reg­u­la­tions on axle loads for trucks. If the max­i­mum load al­lowed changes at a bor­der, it cre­ates a pretty se­vere trade bar­rier.

One-stop bor­der posts are an­other sim­ple but key in­ter­ven­tion to end the need for truck­ers to stop on one side and then on the other of a bor­der, and in essence do the same pa­per­work twice.

“Tar­iffs are in­her­ently more sen­si­tive. They are used to pro­tect in­dus­tries, they are vis­i­ble and they also pro­vide rev­enue to gov­ern­ments.”

Lib­er­al­is­ing trade will in­evitably lead to ad­just­ments where there are win­ners and losers, said Hartzen­berg. “Do­mes­tic pol­icy needs to mit­i­gate the im­pact.”

Asym­me­try is, how­ever, a key prin­ci­ple and larger, more de­vel­oped economies will have to give more than they take.

Even with­out the de­tailed an­nexes, it is clear that the TFTA is not meant to dam­age the pri­mary com­mod­ity mar­kets on which much of the con­ti­nent de­pends – or in­ter­fere with at­tempts to lever­age benefits off “strate­gic” nat­u­ral re­sources.

Na­tional poli­cies on the im­port or ex­port of “strate­gic min­er­als” fall un­der the gen­eral ex­cep­tions.

“We are not look­ing to ex­pand trade in min­er­als among our­selves,” said Davies. “The fo­cus is very much on value-added prod­ucts. We’re not go­ing to pro­mote more re­gional trade if we only do trade in­te­gra­tion.”

The TFTA agree­ment will still al­low coun­tries to use coun­ter­mea­sures if im­ports from the other TFTA part­ners “threaten to cause se­ri­ous in­jury to do­mes­tic pro­duc­tion”.

Re­duc­ing tar­iffs by it­self will not re­ally do much to in­crease trade on the con­ti­nent, said Davies.

The fo­cus is on value-added goods and “devel­op­ment in­te­gra­tion”, which in­cludes in­vest­ment in trans­port in­fra­struc­ture that crosses na­tional bor­ders.

At this past week’s sum­mit, sec­re­tary-gen­eral of the Com­mon Mar­ket for Eastern and South­ern Africa and out­go­ing chair of the TFTA task force Sindiso Ng­wenya crit­i­cised the de­vel­op­men­tal ad­vice given to newly in­de­pen­dent African coun­tries in the 1960s by the World Bank and oth­ers to not build am­bi­tious mega in­fra­struc­ture un­sup­ported by cost-ben­e­fit analy­ses.

If the West had fol­lowed that ad­vice, the West­ern fron­tier of the US would never have been con­quered, said Ng­wenya.

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