The EAC and U.S Techinical Level Makes Progress on Trade and Investment Partnership

The East African Community (EAC) and the United States of America held a technical level meeting on Trade and Investment Partnership (TIP) from 17 to 20 April 2013 in Arusha Tanzania. The EAC-U.S Technical Level meeting made progress on the four components of the Trade and Investment Partnership.  The meeting finalized the Terms of reference for the Commercial Dialogue and made consultations in the other three components, that is the proposed; Investment Treaty, Trade Facilitation and Continued Capacity Building.

The EAC-U.S Technical Level meeting made recommendations on the four components for consideration by the Ministerial meeting scheduled for end of June 2013 at the sidelines of the AGOA Forum in Addis Ababa, Ethiopia.

On the ToRs for EAC-U.S Commercial Dialogue, the EAC-U.S Technical level meeting on Trade and Investment Partnership made recommendations on the scope, objectives and priority areas to be covered under framework. The meeting noted that the objective of the Dialogue should be improving the trade and investment relationship between the EAC and the U.S through private-private sector engagements, private-public engagements and public-public engagements. As regards the scope, the meeting recommended that through the Dialogue, both parties should at the private-private sector level identify policy constraints to trade and investment development and present for consideration by both governments. The EAC-U.S Commercial Dialogue should also promote the business to business engagements including undertaking of business missions, trade fairs and developing joint ventures and business deals. Priority areas for consideration under Commercial Dialogue should include promotion and enhancing trade and investment in Energy, infrastructure, ICT and outsourcing, Trade in Services such financial services and tourism, agro-business, value addition and industrialization. The priority areas are to be presented to the private sector of both parties for further discussion and enrichment.

Regarding Trade Facilitation, the EAC maintained that the EAC-U.S Trade and Investment Partnership should address all barriers to trade and not just customs constraints as proposed by the United States. The Trade Facilitation Model Agreement proposed by the U.S focuses on addressing customs related operations including, Express shipment, advance ruling, transparency, transit procedures, customs valuation procedures and rights of appeal of cargo owners. The EAC maintains that although customs issues are important especially in enabling free and faster movement of goods across the borders, they are not the only constraints to export development especially in trading with the United States. The EAC observes that as a region they also affected by other other constraints such as stringent Sanitary and Phyto-sanitary rules, requirements under the rules of origin, non tariff barriers including the lack of a direct flight to the U.S and the lengthy and costly U.S visa requirements. The U.S insists that the issues being raised by the EAC cannot be included under the Trade Facilitation agreement given that even at the WTO, they are negotiated separately. The parties agreed to consult further and revert with a view to reaching a common understanding.

On the proposed U.S. Model Investment Treaty, the EAC-U.S technical level meeting on Trade and Investment Partnership consulted and made clarifications on the various provisions included in the model. The EAC made observations and sought for clarifications from the U.S. side on various terms and clauses included in the document. The Parties agreed to continue exchanging information on the interpretations of the various areas with a view to reaching a common understanding on the document before negotiations can be launched.

The meeting also covered capacity under the U.S presented to the EAC its trade and investment areas they are or have been supporting. The U.S indicated that they are supporting the Secretariat to implement EAC decisions regarding customs operations relating to one border post, simplified rules of origin and the development interface frameworks to enable data interchange between the Customs Authorities. The U.S Also indicated that they are supporting EAC Partner States at the national in a number of areas including firm level interventions.

EAC on its part appreciated the support U.S is providing to the EAC but called on the U.S to consider broadening the scope of capacity building to enable EAC address some of its other priority areas. The EAC observed that under the TIP, the parties should devise and bring on board new elements to capacity building. The new elements should include development additional priority areas and ensuring effective coordination and delivery of support. Both parties agreed to continue with consultations on the matter with a view to reaching a common position for consideration by the Ministerial meeting in Addis Ababa, Ethiopia.

The 16th COMESA Summit in Kampala to Focus on MSMEs Development

Uganda will host the 16^th Summit of the Common Market for Eastern and Southern Africa (COMESA) Heads of State and Government on 23^rd-24^th November, 2012. The 16^th COMESA Summit will be held under the “Enhancing Intra-COMESA Trade Through MSMEs Development,” as a way of emphasizing the importance and central role that Micro, Small and Medium Enterprises (MSMEs) are playing in the economies of our Member States. This is good news because it shows that the leaders of COMESA are now finally embarking on promoting MSMEs and enabling them to access the intra-regional market.

An EAC study of 2010 indicates that the MSMEs sub-sector is the biggest employer and constitutes about 90% of the private sector in the EAC region with contributions to GDP of 20% in Uganda, 33% in Tanzania and 50% in Kenya. Despite this significance of the MSMEs, the report shows that the subsector is sometimes regarded as constituting survivalist entities operated by school leavers and job seekers awaiting formal employment, retirees, retrenchees or people supplementing their low incomes from formal jobs.

The study also shows that the activities in MSMEs are mostly characterized by easy entry and exit, self-employment with a high proportion of family workers and apprentices, reliance on indigenous resources, small scale of operation with little capital and equipment, high labour intensity, limited adaptation of modern technology, low skills with acquisition of skills mostly outside the formal schooling system, lack of access to organized markets for key resources (financial markets, education and training) and lack of access to supporting services. According to the study the subsector is seen as functioning as a fallback position. This outlook has sometimes not helped to develop MSMEs especially micro into dynamic private sector activities.

It is therefore well-timed for the 16^th COMESA Summit to seize this opportunity and recorgonise the role played by the MSMEs. If implemented, the measures to be put in place by the heads of state should put the COMESA region on the right path to achieving sustainable development. COMESA needs to attain competitive intra-regional trade and investment in order to achieve its development goals. The 16^th COMESA Summit should therefore development measures to support Member States enhancing the capacity of entrepreneurs especially the small and medium enterprises with a view to enabling the region attain market competitiveness supported by high-tech production and inter-connected market systems.

COMESA and the Member States must support the MSMEs to enable them meaningfully become the private sector sought to be the backbone of the economy. Effective measures are required to support the MSMEs in; ensuring that production is aligned to market standards, harmonizing policies and regulations impacting on both internal and cross border trade and investment; facilitating the free and faster flow of goods and services; improving information flow of market opportunities; improving and simplifying access to trade finance; opening and widening portential investment and trade opportunities; enabling transfer of appropriate technology and promoting regional business linkages and transactions, among others

The 16^th COMESA Summit is expected to among others discuss the COMESA Free Trade area, COMESA Customs Union and the EAC, SADC, COMESA Tripartite free trade area. Other issues that are likely to be on the agenda include reports on the directive by the Heads of State to the COMESA to work with member states in the establishment of Science, Technology and Innovation Parks, and priority industry clusters and the development of mechanism for exchange and sharing of experiences amongst Member States

At the sidelines of the Summit, the private sector will hold a business forum under theme “Promoting Intra-COMESA Trade through Micro, Small and Medium Enterprise Development – Seizing Opportunities for Innovation and Prosperity in Business”. The forum presents an opportunity for the private sector form the COMESA region to dialogue and work with Governments in determining policy interventions necessary to create an enabling business environment. This forum should help bring out relevant regulatory reforms and interventions that for COMESA to undertake in promoting the growth and emancipation of small and medium enterprises (SMEs). The forum should also review and come up with clear and robust innovative ideas and conventional ways of strengthening the SMEs in order to attain meaningful intra-regional trade and sustainable regional development.

Progress on the EAC-US Trade and Investment Partnership

The East African Community (EAC) and the United States Government announced on 19th October 2012 the progress under the EAC-U.S. Trade and Investment Partnership (TIP). In their Joint Statement issued on Friday last week, the EAC Ministers of trade and investment in the EAC Partner States and the Deputy United States Trade Representative (USTR) announced that they have taken "important steps" to advance the Partnership.

Releasing the Joint Statement the Minister of Trade, Industry and Cooperative, Hon Amelia Kyambadde who co-chaired the Joint Press Conference noted that the new initiative will support the economic integration of the EAC and enhances the EAC-U.S. trade and investment partnership. The Hon Minister said that the new Partnership is built on the recognition of the important role that trade and investment play in economic and social development including job creation, both in East Africa and the United States.

On his part, the Deputy USTR said that the EAC and the United States agreed on a framework to move forward on the establishment of a Commercial Dialogue, which will be formally launched in late November 2012. Commercial Dialogue is a component under the TIP that establishes a consultative mechanism which will serve as a cornerstone of linking and engaging Governments with the private sector of both Parties. The dialogue will focus on promoting effective public-private partnership, which are a critical mechanism for attracting greater U.S. investments to the EAC region, especially in the area of infrastructure development, supply of services, mineral development and manufacturing. The Dialogue will implement its activities through targeted sector trade missions, activities and events; coordinated programs between U.S. agencies and their EAC counterparts in conjunction with trade associations and the diaspora. The East African Business Council will lead the EAC private sector in engaging with their counterparts in the U.S.  

According to the Joint Statement the EAC and the United States also agreed that their respective technical teams will meet at the soonest possible date for further consultations and negotiation on the other three components of the EAC-U.S Trade and Investment Partnership, that is; a bilateral investment treaty, a trade facilitation agreement and continued capacity building.

The Bilateral Investment Treaty (BIT) aims at;

·        Protecting investments in the territories of either Party where investor rights are not already protected through existing agreements;

• Encouraging the adoption of market-oriented domestic policies that treat private investment in an open, transparent, and non-discriminatory way; and
• Supporting the development and application of international law and standards consistent with the objectives of the cooperation.

The Parties will also negotiate and sign a Trade Facilitation Agreement which will provide for development and implementation of policies that promoted efficiency in the territories of the Parties through reduced transaction costs associated with the enforcement, regulation, and administration of trade policies.

The technical teams will further discuss and agree on the trade capacity building assistance, including identification and agreement of priority areas for support under the Trade and Investment Partnership. The EAC has identified the priority areas for the U.S support under the EAC-U.S Trade and Investment Partnership including the strengthening of region Integration by supporting EAC Partner States on

• Harmonizing customs regulations, improving customs inter-connectivity and harmonization of standards, 
• Development of  an efficient regional payment system, customs and  financial market integration 
• Establishment of an efficient regional infrastructure
• Promotion of technology transfer
• Development of capacity for trade and business development.

Through consultations the EAC will identify more priority areas for support under the EAC-U.S Trade and Investment Partnership. The negotiations may include development of a binding mechanism for delivery and implementation of the program under the capacity building support. 

The EAC Ministers acknowledged that the United States already provides substantial assistance to the EAC Partner States and the Secretariat, including an additional amount of up to $10 million (ten million United States Dollars) that the United States will provide over the next five years to the EAC Secretariat to support regional economic integration.

As the next step, the EAC Ministers and the USTR agreed to advance the EAC-U.S Trade and Investment Partnership within their respective administrations. They also agreed to hold their next Ministerial meeting on the margins of the 2013 AGOA Forum.

The EAC-U.S TIP negotiation process was initiated and announced by the EAC Ministers of Trade and the USTR at the AGOA Forum in Washington D.C. earlier this year. In the first Joint Statement released on 14^th June 2012, the EAC and U.S announced that the new EAC-U.S. Partnership will build on the foundations of the existing trade and investment relationship, including the African Growth and Opportunity Act (AGOA), and the U.S.-EAC Trade and Investment Framework Agreement (TIFA). In addition, the Statement indicates that the TIP will provide new business opportunities to U.S. and EAC firms by reducing trade barriers, improving the business environment, encouraging open investment regimes, and enhancing two-way trade. It is hoped that the EAC-U.S Trade and Investment Partnership arrangement will also serve as a building block towards a more comprehensive trade agreement over the long term.

The EAC-U.S. Trade and Investment Partnership is also an important component of the U.S. Strategy Toward Sub-Saharan Africa, which President Obama announced in June 2012. The Strategy outlines four main pillars which include.

1. Strengthening democratic institutions,
2. Promoting economic development,
3.  Ensuring regional security, and
4. Continuing to improve development assistance initiatives.

The strategy makes clear that the focus of Obama’s plan lies in the first two pillars.

Lesson to Africa on the High Poverty Levels in the U.S. and China

The total of all people in Uganda (35.8m) , Botswana (2.09m), Swaziland(1.38m), Namibia (2.16m) are below poverty line in America.  A report from Indiana University found out that increasing numbers of Americans are still below the poverty line. In 2006, it was 36.5 million people, by 2010, it was 46.2 million and a further increase was predicted for 2011, given the way the economic crisis has dragged on.

Interestingly all the above African countries are beneficiaries of the support to reduction of poverty from the U.S. in one way or another. One element that you may need to note is that a poor person in the United States is actually poor. In Uganda about 32% of the population leave below poverty line, i.e. they earn less than a dollar a day.  But come to think of it, all these people continue to live without external support. In other words, they earn just enough for survival. An American in the same position must get supported or he or she will starve.

So why do reach countries continue to support less developed countries on the fight against poverty when in their countries the situation is staggering also? China has over 100 million people living below the poverty line. Actually all the people in Uganda, Rwanda and Kenya would be below poverty line in China despite its emergence as the world's second largest economy. Yet China continues to pump money to African economies instead of concentrating on elevating its own people out of poverty. Of course the amount of money China is using in country to fight poverty is excessive but I am sure that if they diverted what they are spending in Africa they would have everybody in china above the poverty line.

Could it be that developed countries continue to support Africa such that they too can keep their own poverty levels low?  Could it be true that developed countries actually continue to support developing countries as a mechanism to reducing economic imbalances in the home countries?

The other irony which still eludes my mind is the fact the gap between the poor and the rich in the developed countries is also staggeringly high. According to a 2010 Federal Reserve Board report, the net worth for all United States households was $53.1trillion. The net worth of the poorest 60% of U.S. households was $1.26 trillion. The net worth for the Forbes 400 was $1.37 trillion.  Therefore, the richest 400 people in the United States have more wealth than the bottom 60%, nearly 160 million people (Forbes, 2010, September 22). But how is this being acceptable by America when in their drive to ensure good governance in the developing countries, this is one of their biggest concerns.

We in the developing countries what lessons do we learn from the above situation. Some school of economist believes that a country requires a middle class for it also to be a middle income country.   It is easier and cost effective to collect taxes from a few than it is from very many people. If rich are fewer, they are easily mobilized to support a developmental goal and direction of the country than when they are many. Resources are limited and if they are in the hands of the many they are scattered and will have minimal incidence to the economy and to the individuals owning them. For effective utilization of resources, they must be concentrated and specialized in the production process. For these reasons, a middle class is inevitable and will always be a small fraction of the population. 

Probably the U.S. is following up from the above arguments.  But in Africa the development of a middle class where the so rich are fewer is discouraged. The developed countries are at the helm of discouraging African from pursuing this line. Africans are advised to ensure that everybody averagely wealthier. In other words scatter resources so that almost no one has the ability to form a global corporate company that can influence global market dynamics. Can African learn to learn from the development path of their colonial masters?

EAC-US Begin Discussion on Trade and Investment Partnership, 26th July 2012, Arusha, Tanzania

The East African Community has begun consultations with the United States Government with a view to starting negotiations on the Trade and Investment Agreement (TIP). The negotiations of the EAC-US Trade and Investment Agreement are based on the Policy Strategy of Presidents Obama's Administration’s on Sub-Saharan Africa which was released on June 14 2012, The Strategy outlines four main pillars which include.

1. Strengthening democratic institutions,
2. Promoting economic development,
3.  Ensuring regional security, and
4. Continuing to improve development assistance initiatives. The strategy makes clear that the focus of Obama’s plan lies in the first two pillars.

The EAC-US Trade and Investment consultation meeting which began on 26th July 2012 in Arusha, Tanzania is in response to the directive of EAC Ministers responsible for trade and the United States Trade Representative in a Joint Statement released on June 14, 2012 on the sidelines of the AGOA Forum between the United States and the East African Community (EAC) Partner States, in Washington, D.C. The Statement recognizes the importance of strengthening the economic links between the United States and East Africa, by pursuing a new Trade and Investment Partnership between the United States and the East African Community. 

Through the EAC-US Trade and Investment Partnership the parties will build on the foundations of our existing trade and investment relationship, including the African Growth and Opportunity Act (AGOA), and the U.S-EAC Trade and Investment Framework Agreement (TIFA) to provide new business opportunities to U.S. and EAC firms by reducing trade barriers, improving the business environment, encouraging open investment regimes, and enhancing our two-way trade.

In the Joint Statement the parties agreed to explore under the new umbrella partnership; a regional investment treaty, a trade facilitation agreement, continued trade capacity building assistance, and a commercial dialogue. It hoped that these agreements and other activities that they will pursue will help to promote EAC regional integration, economic growth, and expand and diversify EAC-US Trade and Investment. They could also serve as building blocks towards a more comprehensive trade agreement over the long term. The Joint Statement directs the respective technical teams to begin consultations on each of the agreed areas of the EAC-US Trade and Investment Partnership.

In the meeting, the parties proposed an ambitious timeframe for regular engagements at all levels which will include Experts, Senior Officer and Ministerial levels as indicated in the table below.

	EAC Side	US Side
1.	EAC Ministers led by Trade Ministers	USTR
2.	Permanent Secretaries (Senior Officer)	Assistant STR Africa Affairs
3.	EAC Experts Officials	US Expert officials

The US team expressed interest in understanding the state of play on the trade and investment regimes in the EAC Community. A number of areas were highlighted for consideration in the development of the Investment Treaty whose main objective is to increase FID to the EAC region. They include provisions on;

1. National Treatment and Most Favoured National principals as applied at the WTO
2. Fair and Equitable treatment
3. Free transfer of capital
4. Obligation on compensation in cases of expropriation
5. Transparency especially on publication of policies
6. Allowing advance comments on new policies
7. Rights of investors on recruitment of personnel
8. Performance Requirements, and
9. Dispute settlement mechanism

The Investment Treaty will allow policy space for either party to act in a manner that contravenes the agreed terms for example in situations where there is a security or a balance of payments issue. It will not necessary include sector specific provisions. Negotiations will follow after initial consultations on the investment regimes operations in the jurisdictions of the two parties. The consultations will then highlight the areas for negotiations as part of the process to developing the Treaty. The meeting agreed to hold regular technical committees meetings in order to generate enough workload for the Ministers.

On Trade Facilitation the US indicated that they are interested in improved customs processes and procedures. They listed the following areas as the areas to be negotiated

1. Publication and Transparency
2. Simplified procedures and faster release of goods
3. Expedited Shipments
4. Appeals
5. Advance rulings
6. Simplified procedures and guarantees on transit goods
7. Implementing a Leniency system on the Penalty regime
8. Exchange of information on customs procedures
9. Elimination of consular fees and formalities

The EAC on its part expressed interest in negotiating additional areas such as;

1. The simplification of SPS and Rules of Origin to exporting to the US,
2. Removal other non-tariff barriers to exporting to the US
3. Cooperation on development and implementing IPR regime within the EAC
4. Trade infrastructure development 

Regarding Capacity Building, the US shared with the EAC the areas the possible areas support relating to trade and investment. These include;

• Customs Union: Harmonizing Customs Regulations, evaluations, clearance audit and customs interconnectivity, harmonizing standards on staple foods, and supporting to member states on harmonizing SPS
• Common Market: development of efficient payment systems including electronic cross border payments, integrated border management, implementation of the simplified certificate of origin, development of a web based trade statistical data base( www.rfbs.in ), and financial market integration 
• Regional Infrastructure: development of financial regional infrastructure, ICT development, technology transfer and infrastructure investment as a whole
• Regional Productive Structure:  Integrating staple foods into the regional markets through improved technology, provision of inputs and increasing private sector investment in the region. Support is also directed to cleaner energy and global climate change as part of the effort to promote sustainable natural resource management
• Support to EAC Institutions: Support has been support to Lake Victoria Basin Commission on the water trans-boundary water for biodiversity in the Mara-River Basin Initiative. The US Government also supports the safe skies for Africa including the EAC on establishing Civil Aviation Safety and Security Oversight Organization
• Training on policy development, SPS, codex etc

On Commercial dialogue, the meeting noted that the proposed consultations process will serve as a cornerstone of linking, informing Governments on private sector priorities. The forum will help in linking the private sector agenda to Government programs. It is proposed that the dialogue should focus on promoting effective public-private partnership (PPPs), which are a critical mechanism for attracting greater U.S. investment, to the EAC region, especially for infrastructure projects. The dialogue will implement its activities through: targeted sector trade missions; coordinated programs between U.S. agencies and their EAC counterparts in conjunction with trade associations, regional and diaspora chamber activities and events.

African Union Summit Concluded With Commitment on Increasing Intra-Africa Trade, Addis, 16 July 2012

African Union Summit concluded in Addis Ethiopia on 16 July 2012, with African Leaders committing on the theme of the Summit “boosting intra-Africa trade”. The Summit which elected Ms Nkosazana Dlamini-Zuma of South Africa as Chairperson of the African Union Commission Mr. Erastus Mwencha of Kenya to be the Deputy, noted the need infrastructure development with a view to linking up the continent. The Summit also emphasized the principal of progressive integration and allowing the regional blocs to consolidate their integration goals as part of the process promoting intra-Africa trade. 

One speech was particularly spot on. This was the speech by the President of Uganda, H.E Yoweri Kaguta Museveni. The President noted that intra-Africa trade is low because the continent is not linked. He noted that the construction of the hardcore surface roads and railways which link the East Africa region to Kisangani, Juba and Addis Ababa is must. 

On energy, President Museveni reminded his counterparts that Africa generates very little energy which cannot enable the continent improve intra-Africa Trade not even meeting its minimum industrial development goals . He noted that the sub-Saharan countries excluding South Africa produce only 28 GW of electricity equivalent to the output capacity of Argentina or just 2 more GW of what is produced by Norway. President Museveni said that whereas countries like the US have a Kilowatt Hour (KWH) Per Capita of about 13000, some countries in Africa only have a KWH per capita of 12. He also compared Africa with some of the emerging economies such as Singapore whose KWH per capita is 7948, South Africa 4532 and Libya 4170. The President noted that although Uganda has achieved the KWH per capita of 200 up from 28, this is not yet enough to enabling the country attain industrial development.

President Museveni called on Africa to wakeup and address infrastructural constraints which he said are hindering intra-Africa trade development. The President called on the friends of Africa to support the continent in building and enhancing infrastructure rather than just talking about other small things such as homosexuals noting that “even the homosexuals need electricity”. The President also highlighted the need for African Governments to improve on connectivity especially in the area of air and maritime transport which he said that their contribution to intra-Africa trade has been insignificant. He also observed that deficiencies in the communication sector are also hindering intra-Africa trade development noting that currently it easier and cheaper for business persons to call their European counterparts than those in Africa, a situation he said deos not facilitate intra-Africa trade.

The meeting also reviewed the progress in achieving the Millennium Development Goals noting that although some progress has been made especially in regard to poverty reduction, education and emancipation of women and youth, the continent has not done well in other areas.

On the conflict situation in Africa, the African Leaders condemned the acts of Al-Shabab in Somalia, the LRA in East and Central Africa, the rebels in DRC and Mali. The leaders resolved to take action on the rebels in Mali. The Summit recognized the efforts of the AMISON, the African Union Mission in Somalia. Countries such as Uganda, Kenya, Burundi and Ethiopia were particularly appreciated for their efforts in ensuring peace and security in Somalia. The leaders also called on Sudan and South Sudan to observe peace and cease hostilities. 

G-20 Governments Demonstrate Leadership-A call in the Interagency Report

Formed in 1999, the G-20 represents 85% of the world’s economy and two-thirds of world’s population. The G-20 aims at providing developing countries with a better position to influence the dynamics of the global economy. Now, the Interagency Report on “Sustainable Agricultural Productivity Growth And Bridging The Gap For Small-Family Farms” recommends that G20 Governments should “demonstrate leadership in multilateral negotiations. The  Interagency Report which was published on 12 June 2012 by a group of multilateral organization (Bioversity, CGIAR Consortium, FAO, IFAD, IFPRI, IICA, OECD, UNCTAD, Coordination team of UN High Level Task Force on the Food Security Crisis, WFP, World Bank, and WTO), emphasizes the need for G-20 need to demonstrate leadership in order to strengthen international disciplines on all forms of import and export restrictions, as well as on domestic support schemes that distort production incentives”.  

The  Interagency Report, which was used as a key input in the discussions of the G20 Agricultural Group, was compiled in response to the request to international organization by the G20 President early 2012 in Mexico to examine practical actions that could be undertaken to sustainably improve agricultural productivity growth, in particular on small family farms. The  Interagency Report states that “substantially reducing trade and production distorting domestic support, improving market access opportunities, eliminating export subsidies and strengthening the disciplines on export restrictions will improve the enabling environment for investment and productivity growth”.

The Interagency Report also notes the critical role played by the WTO’s Sanitary and Phytosanitary Agreement in contributing to the reduction of production losses due to pests and diseases, and the need to support capacity building in this field, including through the Standards and Trade Development Facility.