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.

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.

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.