Aid for Trade in COMESA: Past Experience, Lessons Learnt and the Way Forward

CTA Briefing No. 3

Can Aid Fix Trade? The New Aid for Trade Agenda

Presentation on Aid for Trade in COMESA: Past Experience, Lessons Learnt and the Way Forward Brussels 5 December 2007 James Musonda

Outline of presentation

1. Background to COMESA

2. COMESA’s Trade Regime

3. Trade policy regulation and trade

development

4. Building the region’s productive capacity

5. Trade-related infrastructure

6. Trade-related adjustment

COMESA Fund as an Instrument for Aid for

Trade

CTA Briefing No. 3 Can Aid Fix Trade? The New Aid for Trade Agenda

1. Background to COMESA COMESA is a regional grouping comprising 19 MS namely Burundi, Comoros, Congo DR, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Uganda, Seychelles, Swaziland, Sudan, Zambia and Zimbabwe with: Combined GDP (2005) - US$275 Billion Population (2005) - 390 million Total Trade (2005) - US$160 Billion CTA Briefing No. 3 Can Aid Fix Trade? The New Aid for Trade Agenda

1. Background to COMESA cont’d…

COMESA’s vision is to attain a fully integrated

internationally competitive regional economic

community;

a community within which there is economic

prosperity with high standards of living of its people, with political and social stability and peace;

- a community within which goods, services, capital and labour move freely across borders.

CTA Briefing No. 3 Can Aid Fix Trade? The New Aid for Trade Agenda

2. COMESA’s Trade Regime COMESA has a Free Trade Area among 13 of its members and plans to launch a Customs Union in December 2008. The region has clear and streamlined Rules of Origin, trade defence regulations, a regional competition policy ad regulations and a dispute settlement mechanism involving a Court of Justice. It has a trade and development bank and sectoral development institutions. CTA Briefing No. 3 Can Aid Fix Trade? The New Aid for Trade Agenda

3. Trade Policy Regulation and Trade Development COMESA has developed a Free Trade Area premised on rules. COMESA has regulations relating to safeguards, unfair trade and anti- competitive practices; COMESA has developed practical rules of origin which limit trade deflection and maximise legitimate intra-regional trade but are simple to understand and more importantly, to apply. CTA Briefing No. 3 Can Aid Fix Trade? The New Aid for Trade Agenda

3. Trade Policy Regulation and Trade Development cont’d … The region has adopted international trade policy tools including the HS classification and the GATT Valuation Code. COMESA has also adopted trade facilitation instruments including single Customs Declaration document, a carriers licence, the Yellow Card, axle load limits, harmonised vehicle dimensions. These measures and the regional integration efforts have caused intra-COMESA trade to grow at a relatively high rate. CTA Briefing No. 3 Can Aid Fix Trade? The New Aid for Trade Agenda

CTA Briefing No. 3

4. Building the region’s productive capacity One of the major challenges of the region is overcoming supply-side constraints. The region considers human resource development, investment in plant and machinery, research and development as key elements of its productive capacity. While efforts continue, esp. through sectoral institutions, a lot still needs to be done to raise the productive capacity of the region. The slow pace of integration in some countries is due to limited human capacity.

CTA Briefing No. 3

5. Trade-related infrastructure Another constraint that goes with limited productive capacity that significantly raises the cost of doing business in the region is the poor state of the region’s infrastructure... road and railway networks, waterways, air and sea port facilities, energy generation and distribution facilities , and harnessing of water. Enormous resources are required by way of initial capital outlays and in maintenance to sustain the facilities.

CTA Briefing No. 3

6. Trade-related Adjustment Adjusting to regional integration does not occur without a cost. Economic liberalisation and streamlining of tax structures have led to negative results in the economies of most COMESA countries. It is, therefore, essential that adjustment support be provided to these countries if they are to continue with further integration into the global economy, integration that’s more equitable and seen to benefit more the poor of the world.

CTA Briefing No. 3

7. COMESA Fund as an instrument for AfT To address productive capacity and infrastructure needs, to address adjustment costs associated with integration and economic reforms, COMESA has established a COMESA Fund as vehicle for mobilising resources. The COMESA Fund has a Adjustment Facility to address costs that may arise from implementing regional integration measures including trade reform and being part of the FTA and the Customs Union.

CTA Briefing No. 3

7. COMESA Fund as an instrument for AfT cont’d… The COMESA Fund also has an Infrastructure Window intended to mobilise resources for the construction and maintenance of infrastructure, and for addressing some of the limited productive capacity. The COMESA Fund has been ratified and is now in force. COMESA is, therefore, looking to resource- rich countries and development agencies to contribute to the Fund and enable it address the many challenges the region faces.

CTA Briefing No. 3

7. COMESA Fund as an instrument for AfT cont’d… COMESA is offering the North-South Corridor as a first candidate for Aid for Trade resources to address trade-related infrastructure. COMESA also has identified a number of important infrastructure projects that would greatly enhance development and integration once implemented. Once adequately resourced, the Adjustment Facility of the COMESA Fund will encourage a lot more countries to integrate further into the regional and global economy.