IMPLICATIONS OF THE GLOBALIZING DIGITAL RETAILING ON COMPETITION AND CONSUMER PROTECTION IN COMESA COUNTRIES

ABSTRACT

IMPLICATIONS OF THE GLOBALIZING DIGITAL RETAILING ON COMPETITION AND CONSUMER PROTECTION IN COMESA COUNTRIES

 

Digital retailing has become one of the major factors contributing to globalization of markets with a substantial impact on trade and consumer welfare at the national, regional as well as multilateral levels. However, digital retail base in developing countries remains relatively low due to competitiveness challenges including weak institutional frameworks, inadequate supportive infrastructure, limited market size and skills gap, among others which make it difficult for an individual developing country to apply policies to effectively address competition and consumer protection related challenges.  As a result, some of the developing countries may find it difficult to apply competition and consumer protection policies to fully utilize digital retail potential while ensuring consumer welfare in the market. The challenges are exacerbated by practices in foreign territories, where developing countries have no jurisdiction, but which have an impact on them due to cross border effects. The study therefore sought to identify specific policy options and implementation approaches countries in the Common Market for Eastern and Southern Africa (COMESA) can adopt to address the multi-jurisdictional limitations of digital retail to promote effective competition and ensure consumer welfare while harnessing the potential of ecommerce in the region.

Legal regime and regulatory frameworks to support implementation of AfCFTA and improve compliance by the Member States

Efficient supranational institutions will be required to coordinate implementation and deepening of the African Continental Free Trade Area (AfCFTA). The AfCFTA will need supranational institution similar to those at the national level and probably with much higher authority to monitor and enforce implementation of the AfCFTA decisions in the member states and at the regional level. To achieve this, Member States need to cede some sovereign powers to the continental authorities and allow their national bodies to operate on the principal of subsidiarity. In other words, the ultimate power has to be at the continental level as operations and enforcement are achieved through the national bodies.

The AfCFTA should avoid following wholesomely the footsteps of the existing economic blocs in Africa. A closer look at these blocs reveals that only a few supranational authorities have been established and even then they are not empowered with enough authority to monitor and enforce implementation of the decisions. In most of the economic blocs in Africa, the visible and operational supranational institutions are mostly the Secretariats. This is noticeable with economic blocs such as EAC, COMESA, SADC, ECOWAS and IGAD, among others. Although the Secretariats are important in the integration process, their main function has been mainly to coordinate the blocs in the integration process. Secretariat have been limited to preparation and coordination of  meetings, following-up and tracking progress on implementation of the decisions and updating the responsible parties. In most cases and as reflected in article 13 of the agreement establishing the AfCFTA, Secretariats have limited powers to enforce implementation and reprimand member states for noncompliance.

However, supranational institutions are meant to break the barriers of sovereignty and increase openness in all economic forms. Thus they need adequate mandates and authority to act independently on measures of Member States that are inconsistent with the Treaty. Take an example of article 116 of the Treaty on the functioning of the European Union (TFEU), the Commission is mandated to monitor and determine consistence of the measures in Member States, determine whether they distort the conditions of competition in the internal market and consult the Member States concerned to address the distortion. Where consultation fails, the European, Parliament and the Council, are mandated to issue the necessary directives to address the distortion. Articles 28 and 30 of the TFEU prohibit imposition of customs duties or charges with equivalent effect on goods originating from a member state. In article 258 the Commission is mandated to assess whether a Member State is fulfilling an obligation under the Treaties, if it is not conforming, the Commission delivers a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations. Where the State concerned does not comply with the opinion within the period laid down, the Commission can forward the matter before the Court of Justice of the European Union.

It is clear from the example above that EU member states intentionally empowered the Commission to be an authority on matters of enforcing compliance. African Union can borrow a leaf to establish institutions with such powers. Member States cannot be left alone to monitor and compel themselves to comply with the Agreement. They are competitors in the market with domestic, sovereign and political interests to serve. This brings in a conflict of interest which has to be checked by an independent party.  

For example, in addition to the Secretariat and the Dispute Settlement Authority that have already been established under articles 13 and 20 of the Agreement establishing the AfCFTA, more authorities will be needed to ensure effective coordination, monitoring and enforcement of Agreement. Other supranational or continental authorities required Include

(a)  the Surveillance and Monitoring Authority to monitor the market, assess the application of the AfCFTA Agreement by the Member States and  ensure  fulfillment by the AfCFTA Member States of their obligations. The Authority should be given powers and mandate similar to those of the EU Commission or the Surveillance Authority of the European Economic Area (EEA). Where a new authority is not possible the Secretariat can be empowered to perform this function.

The AfCFTA Protocol on rules and procedures on settlement of disputes as currently designed will not be sufficient to compel Compliance by the Member States. Articles 4 to 10 on nondiscrimination of the AfCFTA Protocol on trade in goods or article 4 of the Protocol on trade in services will require close monitoring and surveillance. Member States tend to apply complex measures to evade compliance and takes a dedicated market surveillance and technical assessment to ascertain existence of a noncompliance measure by a Member State. Leaving it to the traders to identify such measures and then report to their countries to raise the matter may not be the best way to go about. Moreover, Member States have other considerations before raising any complaint against a trading partner. A Member State may choose not to complain or report an ongoing non-tariff barrier in fear of trade retaliation or in other spheres. It is easier to secure compliance where an independent body is responsible for picking up inconsistent measures and following the laid up procedure impose a remedy

(b)   Competition Commission to implement decisions aimed at maintaining fair competition within the AfCFTA by monitoring and enforcing measures on anti-competitive conducts by companies that would damage the interests and erode the benefits of the FTA. The powers and mandates should be aligned  with existing regional competition commissions under COMESA, EAC, ECOWAS and say with similar arrangements to the EU and EEA.

(c)  Court of Justice to interpret the AfCFTA Agreement and related decision to make sure it is applied the same way in all Member States, and to settle legal disputes between national governments and AfCFTA institutions. The powers and mandates should be aligned with national  courts and the existing regional Courts of Justice under COMESA, EAC, and ECOWAS, among others  

(d)   System of standards development, accreditation and surveillance on application and compliance. Standardization plays a central role in the proper functioning of the market. Harmonized AfCFTA standards will help to ensure free movement of goods within the internal market and allow enterprises to become more competitive. Harmonization helps producers to produce with one standard for all the AfCFTA market. However monitoring and enforcing compliance on standards should be lifted to continent level to avoid member states using this area to impose technical barriers to trade.

(e)  The Pan African Parliament will require supranational legislative, supervisory or budgetary powers to promote effective transparency, accountability in member states and strength cooperation under the AfCFTA.

The protocols establishing the above institutions must have clear sanctions and execution criteria in cases where there is noncompliance by the Member State or the Authority itself. The protocols must have supranational jurisdiction over the national laws.

Lastly, one important cross cutting element that must be ensured is the funding of supranational institutions. They have to be properly facilitated to enable them perform their work effectively. Lack of funding will render the supranational institutions ineffective and dependent on donor funding from development partners whose interest may not be aligned with the objectives of AfCFTA.

Regional Integration presents advantages to a landlocked country

For years it has been believed that countless ries needs access to the see in order for them to participate effectively in international trade. It is believed that transport costs would hinder countries to cost export to the markets. This idea was put in the forward because the assumption was that international market means western markets.

Regional markets were not considered to be potential markets for regional trade. All governments in Africa bought into this misnomer. They followed suit of the plan of the colonists to link Africa to Europe through railway lines and roads lead to the coast. Even a country with 5 countries to the cost would still strive to access coast without ever targeting to trade with the same countries. The countries would only roads linking to the coast but otherwise they were not interconnected on all the geographical coonners

Understanding your notes on international trade or any other topic

Many times students spend a lot of time revising the notes but at times the results from the exams do not reveal the efforts. Consider a topic on why countries engage in international trade, a student will revise this topic for five times or so prior to the exams but strangely the results will not reflect the efforts of the students. 

So what goes wrong? the problem is in the way students read and revise their notes or textbooks. When revising in preparation for an exam, say on international trade, one cannot read is if its a news paper. Human beings have a short, medium and long term memories. These affect the way we recall and respond to questions in an exam. A short term memory last between a second to say two to three days.  After that a person may not recall anything about the event or the occurrence. For example the memory of the mosquito hoovering on your head may last for two seconds. A medium term memory may last for a week and up to a few months but it may not be easily recalled after that period. For example the name of the person you met once and for a very short encounter, may be recalled at least in a few months but  after a year, it will be difficult unless that person had a subsequent impact or role in your life.. The long term memory lasts for years and at times forever in ones mind. For example the day of graduation or a weeding. the first day a new school or first sexual encounter will be recalled as if it happen yesterday, even after 30 years. 

So what is the magic? the trick is in the way we process what we read. We do not process the information to final a conclusion so as to understand it fully and be able to remember it vividly whenever we are required to do so.  Information has to be rehearsed o the point the where it be easily stored and retrieved from the long term memory. The process of rehearsing help one to put information into context and to be able to understand it from a real life perspective. This involves building of scenarios different from the way information has been packaged but pointing to the same conclusion. For example, when the topic is "International Trade" the reader is expected to first under the meaning of topic even before proceeding to the body.   The reader should be begin by asking and answering questions such as what is international?, what is trade? what is international trade? Is their another form trade that is not international, what is the difference between the other form of trade and international trade?. This approach should be done over and ever for each subtopic. 

Answering these questions before reading the body makes one gauge the existing level of knowledge on the matter. The reader should then read the body in the same manner of reasoning while ensuring that each word or sentence is understood in its true meaning and context. Real life scenarios must be drawn to ensure that the issues are understood in practical circumstances. It is known that international trade is the trade between two or more nations. If taken literally it could mean that trade occurs only when two countries are trading which of of course will be wrong because the country as a country does not trade but its Government or people do. However as long as there is trade across borders then international trade has occurred. Trade manifests in form of goods and people crossing the border and exchange of goods for a price. So the reader must visual these to comprehend the concept. 

The reader should ensure to track and look out for answers to the questions drawn and compare with the original answers that were made before reading. Any incorrect answers made at the beginning are a sign of low levels of appreciation or understanding of the topic which should improve as one reads. This process must be repeated every time the reader comes back to the same topic and its sub topics.

The First Ever U.S-Africa Summit: A Chance to Improve U.S-Africa Trade and Investment Relations

An opportunity is presenting itself to improve U.S-Africa trade and investment relations.  President of the United States, H.E Barack Obama is scheduled to host the first ever U.S.-Africa Summit in Washington, DC on August 5 and 6, 2014. African leaders will therefore have an opportunity to identify and present their ideas to President Obama on what they believe should be done to improve to the U.S-Africa trade and investment relations. 

Africa is being seen as one of the world’s most dynamic and fastest-growing regions. According to the 2014 projections released by the Economist Intelligence Unit, four out of ten fast growing countries of the world are in Africa. These include Sierra Leone (11.2%), Libya (8.8%), Eritrea (8.0) and Zambia (7.9). Actually, Africa's growth is superseding the rates in Asia. The African Development Bank has projected that by 2030 much of Africa will graduate into middle class economies with the majority attaining consumer spending level of $2.2 trillion. These projections clearly show that the next lead destination continent for foreign direct investment will be Africa. 

It is not surprising therefore that the United States is hosting a U.S-Africa Summit which is expected to focus on trade and investment relations between the two parties. The Summit is also expected to discuss America’s involvement in ensuring Africa’s security and promoting democratic principles

The AGOA has not yet improved the US-Africa Trade and Investment Relations

African leaders however, need to take advantage of this first ever U-S-Africa Summit and use it to reverse the trade and investment trends which hitherto have been unfavorable to Africa. The U.S provides to Sub Saharan Africa duty free quota free market access to the America market under the AGOA arrangement. The objective of the AGOA is to enable Sub Saharan countries to integrate into global economy as competitive and meaningful trade and investment players. However, it does not seem that this noble objective is about to be achieved, even when AGOA has been in existence for over 13 years.

Data available from United States International Trade Commission (USITC) shows that over 32% of the exports to the US under the AGOA are contributed to by Nigeria. South Africa and Angola each contribute about 24% of the total exports from Sub Saharan Africa.  However, all LDCs in Sub Saharan Africa are contributing less than 1% to the exports under the AGOA. 

The above situation reveals that the objective of the AGOA has not been achieved. In spite of the dismal performance under the AGOA, Africa continues to import massively from the U.S a situation that is worsening the trade imbalance between the two parties and more specifically with those Africa countries whose export base does include minerals. It should be noted that oil and petroleum exports account for about 84% of the total exports under the AGOA. Apparel and textiles which supposedly are the mainstay of the AGOA, contribute about 17% of the total exports excluding oil and petroleum related exports.

Statistics can at times be misleading; the USITIC data shows that in 2013 the U.S recorded a trade imbalance with Africa to the tune of $15,286.2 million. This ordinarily implies that the U.S is importing more from Africa than it exports to the continent.  But a quick look at the data reveals that a few of the African countries are actually benefiting from this situation. These are mineral reach countries i.e. Nigeria-Oil, Angola-Diamond and South Africa-Gold. These are the main countries that have a trade balance with the U.S led by Angola which recorded $7,294.90 million in 2013 and flowed by Nigeria at $5,249.4 million. Actually Angola and Nigeria alone contribute over 70% of the total trade deficit the U.S is recording with Africa. The majority of the African countries and mainly LDCs are recording a trade deficit with America. 

The poor performances of the exports from African countries save for those that are endowed with rich mineral resource base are attributed to a number of factors which indicated below;

Factors affecting the growth the U-S-Africa Trade and Investment Relations

1. Some of the agricultural products in which African countries have competitive advantage are not included  in the list of AGOA eligible products. These include coffee, tea and tested herbal medicines, among others. This has limited the scope of exportable products available to these countries. The majority of the provided would require African countries to begin, integrate and standards their production process. In other words agricultural based economies were not provided with an opportunity to start from the acquis (i.e. to start and build from the existing production systems in place), because the traditional products whose production system had already been developed are excluded from the AGOA.
2. Africa has not been able to attract U.S citizens to invest in Africa which is one of the mechanism through which Africa was expected to uplift its production levels.
3. The costs of doing business remain very high due to the supply side constraints.
4. The value chain of the agricultural products are not integrated due to lack of mid-level value addition investments. As a result Africa continues to export sem-finished or raw products. This plays to the advantage of the U.S since it provides an avenue to access the much needed raw materials for U.S industries. 
5. Trade infrastructure is inadequate to facilitate the production, value addition and transaction of the products. Africa still lacks transport inter-connectivity that can be used to facilitate not only the backward and forward follow of goods but also to enable value chain integration or cumulation   between African countries. In addition to transport infrastructure, Africa is yet to provide for adequate storage (include cold and warm chains stores) and warehousing facilities along the value chain of the targeted products.
6. The rules of origin and the standards requirements by the U.S are not favorable for the improvement of the U.S-Africa trade and investment relations. The requirements remain so stringent and sometimes unnecessarily above the international standards in order to provide Americans with an effective competitive level.
7. Predictability under the AGOA remains a very big hindrance to the attraction of targeted investments. The AGOA was first introduced for five years and later on extended for 8 years. But in both the first and the second AGOA the time has been so short for African countries to attract meaningful and targeted investments. An investment must be provided with an incubation period within which production will stablise and investment costs recovered before the returns to investment can be realized. The time allowed for this could be up to to ten years, a period longer than the duration of the AGOA itself. Therefore is therefore need for a more predictable and reliable regime within the U.S-Africa trade and investment relations will be improved. The AGOA should be extended for at least 15 years. Anything duration below, is simply not going to support Africa improve her trade relations with America but instead, it will only serve to provide a platform for the U.S to make propaganda of its efforts to uplift Africa.
8.  Transaction costs are very high mainly because of the high transport costs. There are limited or no direct flights from Africa to U.S. These force exporters to go through Europe or Asia before delivering to the U.S. Exporters are made to pay unnecessary transport costs just because the U.S, accordingly for security reasons, has not accredited some of its airlines to fly directly to Africa. The persistent labeling of Africa as an insecure continent have continued to make direct roots as not worthwhile investment ventures.
9. There is limited collaboration between trade facilitating institutions in Africa and their counterparts in the U.S. For example on issues of sanitary and phytosanitary standards, the U.S food and drugs must accredit related products before they are imported into the U.S. There is however not much collaboration with the equivalent institutions in Africa to ensure that the requirements are adhered to and that the accreditation process is fast-tracked. This is also true with customs agencies as far as issues of tariffs and rules of origin are concerned.     
10. Immigration visas to the U.S remain to most costly and unfriendly for business. The requirements and procedures involved do not necessarily promote movement of business persons from Africa to the U.S. As long as business people are not allowed to easily move to the U.S, there is no way that U.S-Africa trade and investment will improve.

The need for Africa to maximize from the U-S-Africa Summit

In a nutshell, African leaders will need to reflect on these and others issues in their engagement with the United States during their first ever US-Africa Summit. Africa must rise up to the occasion and call for terms of engagement which will promote mutually beneficial US-Africa trade and investment relations. It is important for Africa to move to the Summit with one voice and position on their expected outcomes. The U.S should be made to understand that there are now many world trade and investment players and that if they, the U.S, do not provide favorable terms, then there will be options for Africa in promoting its trade and investment relations with third parties. Africa has showed that it can emerge and so, this should be the opportunity for the continent to influence global economics to its advantage.

The U.S-Africa Summit: An New Effort to Keep Meaningful Trade and Investment Relations Between the Parties

The United States of America will host the first U.S-Africa Summit on 5-6 August 2014 in Washington DC. The U.S wishes to use the Summit to strengthen ties with Africa, the world’s most dynamic and fastest-growing continent. The Summit will build on Obama's trip to Africa last year and will focus on enhancing the U.S-Africa trade and investment relations, cooperation on security and ensuring democracy in the territories of the parties.

In hosting the Summit, the U.S joins regions the likes of EU and Japan which have held such high level meetings before with African leaders. As Obama's administration has observed, Africa is increasingly growing into economic power house and is attracting and shifting the focus of the hitherto global economic powers. China has also changed the landscape and lenses through which the west looks at Africa. China is currently the single largest bilateral source of annual foreign direct investment (FDI) in Africa’s 54 countries. China’s investment in Africa of various kinds exceeds $40 billion, among which $14.7 billion is direct investment. In addition to investments, China's aid to Africa is almost free of conditionalities and is directed mainly to physical and productive infrastructure. Africa is, therefore, slowly turning to China something that is, to the west, a worrying development.

The west had until now capitalized on its aid and unilateral offers for trade preferences (the likes of AGOA and EBA) in attracting loyalty from African countries. On the basis of the existing or prospected aid, Africa assured investment deals and exported raw materials to the west. With Africa growing out of this economic doldrums end now beginning to influence the global economics, the west is worried and is changing strategies to ensure that either the status quo is maintained or if the change is inevitable, then it should remain in their favour.

In light of the above, the U.S has embarked on the process of reviewing the AGOA in order to ascertain its relevance and possibly refocus and align it with the current dynamics in Africa. In this regard the United States Trade Representative (USTR) launched fours studies in 2013 aimed at informing the U.S on how to move forward with the AGOA come 2015 and generally in focusing the U.S-Africa Trade and investment relations.

The first study will assess the trade and investment performance of the AGOA and the impact it has had on the economies of sub-Saharan Africa. More importantly to the U.S, the study will review the the AGOA against the existing current or potential sub-Saharan African reciprocal trade agreements and the objectives of AGOA. This will certainly be a big factor in the reauthorization of the AGOA. What is clear here is that the study will asses the implications of the Economic Partnership Agreements the European Union has or is negotiating with Africa against the non reciprocal unilateral arrangements (such as the AGOA) which until now, has been the basis for U.S-Africa trade and investment relations.

The second investigation, will assess the economic effects of providing duty-free treatment for AGOA imports on U.S. industries and consumers. In other words, the study will asses whether the AGOA is enabling access to raw materials and or promoting industrialization in the US. The study may also assess whether the AGOA optimizes or undermines the welfare of the U.S consumer. If the reverse is true, that is, if the AGOA is making the U.S consumer worse off and is promoting competition with U.S industries thereby impacting on the employment capacity of the country, then its reauthorization might be brought into question.

The third investigation is aimed at identifying possible changes to the rules of origin under the AGOA with the potential to increase exports from Africa. The issue here to note is that the U.S will be looking at how the AGOA rules of origin are promoting increased exports from Africa. Looking closely at this study together with the first two, one begins noticing that interest of U.S will be at the forefront in the  reauthorization of the AGOA.

The fourth investigation will assess the impact of the EU-South Africa free trade agreement on U.S. exports to South Africa.This last study tells it all. The colonial masters are it again. The scramble for Africa has been relaunched to counteract the struggle for an economic independence which seems to be a new resolve by the African countries.

The dynamics in Africa have changed and the strategies of engagement are also changing. EU-Africa Summit will be held in April 2014. The first ever U.S-Africa Summit will be held in August 2014. China and Japan also began this kind of engagement with Africa in the last decade.

To understand what is behind the new economic and power strugles, one needs to read through the declaration of ministers in charge of foreign affairs, foreign trade and international co-operation at the end of their conference on China-Africa Cooperation held in 2000. One of the paragraphs reads "We reaffirm that the injustice and inequality in the current international system are incompatible with the trend of the times towards world peace and development, hinder the development of the countries of the South and pose threats to international peace and security. We stress that the establishment of a just and equitable new international political and economic order is indispensable for the democratisation of international relations and for the effective participation of developing countries in the international process of decision-making."

Okay, there you have it, Africa has come out of the political and economic doldrums and this is threatening the global stability. All the powers seem to me going back to the drawing board but this time round Africa is being invited to the table. The question remains, will Africa come out the winner?

EAC and U.S Experts Conclude Consultations on Trade and Investment Partnership in Burundi

The East African Community (EAC) and the United States of America (U.S) engaged in an exploratory meeting on the proposed EAC-U.S Trade and Investment Partnership from 12-15 February 2014 in Bujumbura, Burundi. The meeting discussed the draft text of proposed Investment Treaty and approaches to the cooperation under the Trade Facilitation, TBT and SPS, Capacity Building and Commercial dialogue components.

The technical experts engaged in the EAC-US exploratory meeting made comments and clarifications on the terminologies and derogatory provisions in the proposed text for negotiations. Accordingly, both Parties are still consulting on how to treat terminologies "like circumstances" as used in the National Treatment and MFN provisions; "Customary International law" as a minimum standard that the Parties should apply in ensuring fair and equitable treatment to the covered investment; "prompt" in relation to compensation of expropriated investments; "indirect expropriation" in relation to what would constitute actions of Government which in turn would result into in direct expropriation; and "Senior Management" in the context that Parties should not condition an investor to employ a person of a particular nationality in the senior management level.

The EAC-US meeting discussed examples of some of the non-conforming measures that can be derogation from the application of the provisions on National Treatment and Most Favored Nations, performance requirements and senior management obligations. The meeting looked at three areas as some of the possible categories in which such measures can be derogated: (i) Existing policies, laws and regulation that would contradict the Treaty, (ii) the sectors which either Party would want to protect for purposes of public interest and (iii) those relating to the promotion of financial prudence in the economy.

The parties continue to also consult on other provisions in the draft text for EAC-US Investment Treaty including: limitations on performance requirements; denial of benefits to shareholding investors originating from third parties, subjecting taxation to indirect expropriation provision and exit clauses on the duration and termination of the Treaty, and the dispute settlement mechanism, among others.

Regarding the partnership on Trade Facilitation, Sanitary and Phyto-sanitary Standards and Technical Barriers to Trade, the EAC-U.S consultative meeting observed that there are in place related agreements at the WTO which can be used sufficiently to promote the cooperation between the U.S and the EAC.

The Parties agreed to consult on using Action Plan approaches under which the U.S would extend capacity building support to the EAC Partner States to enable them comply with their obligations under the related WTO agreements. The EAC-U.S consultative meeting observed that capacity building support by the more developed countries to developing countries is envisaged by the WTO agreements. Both parties are to continue with internal consultations on the matter.

As part of the capacity building partnership, the EAC-U.S consultative meeting reflected on the Obama Trade Africa initiative, the East Africa Trade and Investment Centre (TIC) in Nairobi and USAID partnership with Trademark East Africa. The parties are however yet to harmonize position on specific outcome of the negotiations under the Capacity Building component. While the EAC seems to be insisting on an outcome that includes a mutually agreed mechanism of delivery of support under the capacity building component, the U.S which is the target donor does not seem to be taking the same direction.