Diagram : EPAs Configuration in Eastern and Southern Africa

Sixteen (16) countries of the Common Market for Eastern and Southern Africa (COMESA) have agreed to negotiate the Economic Partnership Agreement (EPA) with the European Union (EU) under the eastern and southern African (ESA) configuration. These countries are Burundi, Comoros, DRC, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia and Zimbabwe. These countries are also members of the Eastern African Community (EAC), the Inter-Governmental Authority (IGAD), the Indian Ocean Commission (IOC) and the Southern African Development Community (SADC). Among all the EPA configurations in Africa, ESA is the largest, and 12 of its members are not only least developed (LDCs), but the majority are also highly indebted poor countries (HIPC).

The ESA configuration is premised within COMESA, which is also the largest economic grouping in Africa and trading block in the Eastern and Southern African (ESA) region. This region whose membership is 19 countries, has the potential to grow, and average economic growth of member –states remained at between 3 to 4%. The region has a market size of 400 million people while generating GDP of US$180 billion per annum. Data available shows that total intra-regional trade among member-states rose from US$2.7 billion in 1997 to US$4.6 billion in 2002, and finally US$5.3 billion in 2003. Table 1 also shows that in 2003 Kenya, Zimbabwe and DRC were leading suppliers of commodities to this region followed by Ethiopia, Swaziland and Malawi. Similarly, Egypt, Sudan, Uganda and Zambia were the main consumers of regional products over the same period.

Table 1: Intra-COMESA Trade, US$ millions

	2000		2001		2002		2003
	Imports	Exports	Imports	Exports	Imports	Exports	Imports	Exports
Angola	61.95	1.89	87.79	1.62	174.32	5.33	178.65	5.33
Burundi	18.46	4.69	45.47	8.02	26.30	4.30	42.76	4.32
Djibouti	66.76	4.08	65.93	10.76	61.71	17.37	66.47	17.44
DRC	217.83	179.66	116.86	254.26	121.97	214.37	170.78	228.26
Egypt	189.96	95.47	254.31	125.46	502.40	145.53	502.22	267.92
Eritrea	7.09	0.18	1.42	0.12	1.83	0.08	7.55	0.48
Ethiopia	107.40	156.14	116.34	98.13	120.47	129.75	128.87	129.72
Kenya	158.91	461.04	216.01	467.18	187.57	625.65	242.08	738.21
Comoros	5.19	0.21	5.44	0.08	5.85	0.19	7.49	0.76
Madagascar	66.32	34.47	80.90	32.41	83.09	26.21	66.21	48.87
Mauritius	56.71	89.68	61.12	103.79	79.29	113.53	89.015	78.99
Malawi	106.93	40.74	52.82	77.90	96.55	80.24	82.90	110.10
Rwanda	36.30	3.71	28.44	30.77	21.61	15.44	42.58	21.29
Seychelles	12.51	3.16	10.31	8.25	23.57	36.21	22.46	9.73
Sudan	181.79	92.93	221.75	95.46	252.21	103.75	367.80	107.73
Swaziland	9.45	74.75	2.79	65.30	4.08	112.94	3.37	120.90
Uganda	241.29	74.15	257.07	96.29	255.10	90.55	273.88	111.94
Zambia	95.15	162.78	135.56	126.71	146.34	146.14	246.25	167.94
Zimbabwe	88.04	180.86	105.08	182.81	103.12	257.52	67.38	308.98
Intra-Trade*	1 750.58	1 750.58	1 877.29	1 877.29	2 292.02	2 292.02	2 644.89	2 644.89
Intra-Trade*	3 501.16		3 754.58		4 584.04		5 289.78

Source: COMESA Annual Report, 2003; * Figures exclude Namibia, which pulled out in May 2004

As stated above, multiple regional memberships are based on valid and sovereign reasons including the desire to co-operate with the view to deepen regional integration. This seriousness to promote regional integration was amply demonstrated in 2000, when nine (9) member-states signed a Free Trade Area (FTA) protocol that provides for variable speed to allow other countries to make the necessary adjustments before joining. Initial FTA countries are Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe, which were joined this year by Burundi and Rwanda. Available data indicate that the FTA zone account for 54% of the COMESA population and up to 85% of the total intra-COMESA trade. This economic size is likely to increase, given measures adopted by FTA member-states to substantially reduce tariff levels to between 60 to 80% in addition to harmonizing customs procedures and adhering to strict rules of origin as a way of regulating trade between/among them. This is also demonstrated by the establishment of vital trade and investment instruments including the Eastern African Trade and Development Bank (PTA Bank) which finances development projects within the region; the African Trade Insurance Agency which provides non-commercial risk cover; and the COMESA Common Investment Area (CCIA), which seeks to attract increased sustainable levels of investment in addition to such policy instruments like the Yellow Card for transit cross border third party insurance scheme. All the above are giant steps that EPAs negotiations outcome should promote if regional integration is to further deepen.

Politically, the COMESA region is moving out of military conflicts, which has been the main contributor to low economic production and poor export competitiveness. The return to tranquility and normalcy in Angola, much of the Great Lakes and Sudan, which has recently signed a peace accord seeking to end the long fratricidal war, will trigger higher levels of economic development and export-oriented production.

Socially, COMESA is among the poorest regions of the continent as characterised by rising poverty and social services decay. Indeed, neo-liberal policies have contributed to deteriorating social sector delivery while governments have abrogated their responsibilities.

For the purposes of EPA negotiations, ESA countries, which also belong to multiple regional organisations, have to choose and participate only under one configuration, whose outcome will shape their medium- to long-term trade relationship with the EU. The assumption is that the outcome not only promotes regional integration and sustained economic development, but also transform the structure of member-states including export diversification and supply-side rigidities.

1.1 State of Preparedness

During the launch of ESA-EPA negotiations in Mauritius in February, countries agreed on the roadmap to negotiate trade and development on six (6) clusters (development issues, market access, agriculture, fisheries, trade in services and trade related areas) as well as the establishment of national and regional structures. It is on this basis that each ESA country is mandated to establish a National Development and Trade Policy Forum (NDTPF), which is not only multi-sectoral, but also comprises of government and non-state actors (civil society, private sector, trade unions, etc.). This institution is expected to formulate national positions in the selected clusters with the view to feed into the Regional Negotiating Forum (RNF) represented by at least three (3) people (from government and non-state actors) from each country; cluster lead Ambassadors in Brussels; regional organizations (COMESA, IOC and IGAD) Secretariat; and one regional civil society that is focusing on trade and negotiations issues.

In order therefore for ESA group to benefit from these negotiations, a lot of preparations is necessary both at the national and regional level. This entails proper identification of priorities and capacities, a process that is expected to end by September 2004, and to be followed by substantive negotiations. ESA countries are at different levels of preparedness as illustrated in the table below. This table is showing progress made by ESA member-states in undertaking National Impact Assessment (NIA) studies, which are vital in developing national and regional positions for on-ward negotiations with the EU.

Table 2: Status of National Impact Assessment Studies, by country

Country	Remark
Burundi	v      Consultancy firm selected, but there were delays in disbursing funds; v      Preliminary findings are expected in a months time;
Comoros	v      Applied for official assistance from EU; v      Terms of reference sent to COMESA Secretariat; v      Change of government and the appointment of new minister delay the launch of the study;
DRC	v      Sent funding request to the EU; v      Study not yet started, funds for this purpose to be released;
Djibouti	v      Problems in finalising tender as the government prefer national experts; v      Terms of reference and tendering have been re-done;
Eritrea	v      Prepared proposal for the study; v      Tendering process in progress and contract expected to be finalised next month;
Ethiopia	v      Tendering process just been completed; v      Workshops currently in progress;
Kenya	v      To commission sectoral studies in August; v      Technical training done
Madagascar	v      Study completed; v      Complementary studies done;
Malawi	v      Study has just been completed, and dissemination of findings in progress; v      New government names new ministry – Trade and Privatisation;
Mauritius	v      Completed the study long back; v      Undertaken sectoral studies;
Rwanda	v      Absent from the meeting
Seychelles	v      Study completed, and is ready to be sent to COMESA;
Sudan	v      Study completed, but done in hurry; v      Considering major changes to the study;
Uganda	v      Study findings are being discussed;
Zambia	v      Study expected by end of August;
Zimbabwe	v      Study just been completed; v      Dissemination of findings in progress;

This shows that the NIA studies, which are a vital output to the preparation of national and subsequently regional positions are at different stages. While 9 countries have completed the studies, wide consultations are yet to done. In many countries, consultations have been limited to dissemination workshops while other countries expressed dissatisfaction in the selection of consultancy, most of whom are recruited from the EU. It merged also that fundamental national elements are ignored, thereby raising serious questions on how to utilise the findings to develop national positions. It also emerged that both national and regional structure lack resources (finance and human) to solidly develop positions, a process that requires serious capacity building.

2.0 SUB-REGIONAL CHALLENGES

While negotiating an EPA as a relatively larger configuration with an enlarged EU excites member-states, the expected outcome is likely to be diluted by overwhelming sub-regional challenges likely to arise from this process. These challenges are discussed below, and are premised on the socio-economic and political realities of the configuration.

2.1 Everything, But Arms Initiative

Twelve (12) LDCs countries views EPA negotiations as an opportunity to negotiate trade and developmental issues within the six clusters. Unlike the “Everything, But Arms” (EBA) initiative, whose conditions are given by the EU, EPA negotiations is will result in a legal binding trade and development agreement, and is expected to resolve the supply-side constraints which has contributed to minimum entry of commodities into the EU market. The outcome is also expected to resolve the non-tariff barriers currently facing exporters including sanitary and phyto-sanitary and environmental regulations. Countries attribute their failure to access the EU market to such supply-side constraints as unreliable public utilities (electricity and water), poor public infrastructure (run down roads, bridges and railways), weak institutional policy frameworks (fluctuating exchange rates, high inflation rates and poor fiscal measures) and low labour productivity (arising from poor education, health and housing provisions). All these requires huge resources, which countries may fail to get from EU, and/or may take much longer to be disbursed. It also appears like the EPA negotiations outcome will not only directly counter the gains and benefits countries are currently enjoying under EBA initiative, but also expose the economies to higher competitive market environment. It remains to be seen how the LDCs in particular will remain focus on these issues with the view to bring more benefits than they currently enjoy.

2.2 Neo-liberal policies, Industrial Production and Competitiveness

Many countries in the ESA configuration have failed to improve the productive sectors of their economies despite a history of implementing market reforms. Neo-liberal policies have dismally failed to stimulate industrialization, export diversification and competitiveness in many countries. The level of industrial base has remained very weak, narrow and highly oriented towards producing and exporting primary and unprocessed commodities, which are competitive rather that complementary at the international market. Most ESA exports include coffee, cereals, flowers, fish and tea. Some countries are also mono-export commodities. For example DRC, Zambia and Zimbabwe generated 57.5, 47.1 and 15.9% of the total export earnings from diamonds, copper and tobacco, respectively in 2000. Similarly, Malawi in 1999 received 62 and 9% from tobacco and tea, respectively. However, the value of foreign currency so generated remains marginally low at a time when countries are net-importers of raw materials, intermediary products, foodstuff, finished goods, capital equipment, tools and machinery. In addition, some countries such as Zambia and Zimbabwe have registered successive significant fall in foreign direct investment of US$198 and US$444 million in 1998 to 72 and 5 million in 2001, respectively (see Table 3) while others have huge, but growing external debt obligations, which have to be serviced by limited foreign currency so generated. All this indicates constraints to economic development, which an EPA outcome may fail and/or take much longer time to resolve. EPAs are likely to intensify further opening up of the national and regional economies to international competition, in the same way structural adjustment programmes did. It thus appears that EPAs outcome will also further de-regulate the entry and operation of EU investors and businesses in the ESA region in particular and Africa in general

Table 3: FDIs inflows by country, 1990 to 2001, US$ million

Country	1990-1995	1996	1997	1998	1999	2000	2001
DRC	-3	25(a)	-44(a)	61(a)	11(a)	23(a)	32(a)
Malawi	15	44	22	70	60	45(a)	58(a)
Mauritius	21	37	55	12	49	277	12
Seychelles	23	30	54	55	60	56	34
Zambia	122	117	207	198	163	122	72
Zimbabwe	34	81	135	444	59	22	5

EPAs outcome is expected to result in loss of industry competitiveness and employment. In addition, member-states as they implement reduced tariff rates will, at least in the short-term experience huge revenue losses, a development that contribute to loss of domestic and regional industrial competitiveness. It therefore remains to be seen how the EPA outcome will provide additional resources, which enable countries to counteract this loss of revenue, competitiveness and employment. This loss of fiscal revenue will also negatively affect most vital sectors of the national and regional economies. In addition such measures as standards; SPS laws and regulations; and establishment of new institutions and structures will have direct bearing on government expenditure and private sector competitiveness.

2.3 The debt burden

Most countries in this configuration are highly indebted poor countries (HIPC), a development that make it impossible to stimulate industrial development and growth with the view to access the enlarged EU market. Some ESA countries spend more than half of their export earning on servicing their external debt. This retards economic growth and development, and requires urgent solution. Neo-liberal policies have conditionalities that are negatively impacting on those HIPC member-states wishing to re-schedule existing loans in order to obtain loans or aid from multilateral and bilateral institutions. Countries have to fulfil a set of conditions before receiving the promised aid package. With low industrial base, particularly value addition entities, most countries find it hard to generate the necessary foreign currency amid rising national demand including external debt service obligations. It therefore remains to be seen how EPAs are to resolve the growing debt burden and its subsequent service, which is also contributing to low development and export production. In particular, HIPC nations of ESA configuration are expecting the EU and member-states to cancel debt and/or at least create a modality to address this issue once and for all. It remains to be seen if the EPA outcome is to provide aid relief package that has less conditionalities than those currently applying under the HIPC initiative. Indeed, expectation to resolve the debt burden is premised on stimulating economic activities leading to more export competitiveness.

2.4 Multiple memberships

While countries belong to more than one regional organization, it is yet to be seen if the EPA outcomes are to maintain existing regional integration efforts and boundaries as well as harmonizing multiple membership. While ESA configuration was expected to cover all the COMESA member-states, at the time of the launch, some countries opted to negotiate under the SADC-EPA configuration. These are Namibia, which finally withdrew from the grouping in May this year, and Angola and Swaziland. But Tanzania and Namibia despite pulling out of COMESA in 2000 and 2004, respectively, are still members to many of COMESA institutions. Thus, whatever outcome from the ESA-EU relations affects these countries. A direct challenge will arise if both ESA-EPA and SADC-EPA arrive at different negotiations outcome, whose implementation may further create a rift between/among the EAC, SADC and COMESA trading groupings thereby undermining any regional effort still existing.

2.5 Military conflicts

The ESA region has its share of military and political conflicts, which directly impacted negatively on production and trade flows. Military conflicts destroyed infrastructure, human life, country’s prosperity, capacity and productivity, all leading to falling economic growth. To this end, military conflicts have significantly contributed to poor economic growth and development, leading to equally low trade creation capacities/capabilities and regional integration. Military conflicts in the Great Lakes region - DRC, Burundi and Rwanda - though greatly subsided, along the borders tension continue to occupy inter-states relations. Similarly, Eritrea and Ethiopia are yet to amicably resolve their long-standing border dispute while Zimbabwe is still embroiled in verbal war with the EU. The above have serious implications to the on-going negotiations, first within the configuration, and secondly between EU and the region and/or individual countries. It is in this spirit that the EU is demanding that an EPA configuration be responsible for any political shortcoming of a fellow sovereign member-state through the collective punishment clause, a development that constitute interference in the sovereignty of an ESA member-state(s). This has the potential to create a rift within the configuration since some countries may refuse to support the EU proposal, as is the case between EU and Zimbabwe. Indeed, if the EU insist on including this clause, then political posturing is likely to dominate the negotiations despite tight and rigid time-frame to conclude the EPA negotiations.

2.6 Industrial linkages

Some countries in the ESA-EPA configuration lack common historical linkages and orientation leading to poor or low potential trading links. The ESA configuration brings together countries with different background and experiences. For instance, some countries are Francophone and English speaking while others are land-located and small islands. It appears that some countries such as Comoros and Djibouti have little or no any trade links to protect, and little potential to develop a sizeable industrial base. Small island states have poor transport and communication infrastructure that summarily erodes their competitiveness at the EU market. This setback is likely to undermine efforts to conclude the trade pact as a cohesive group. Indeed, some countries my feel as if they are taken for a ride by those with strong industrial linkages with the global and regional markets.

2.7 Regional integration

EPAs are re-orienting countries to new regional trade groupings, a process that unfortunately is not informed by a thorough cost and benefit analysis of the social, economic and political realities of member-states. Member-states are expecting EPA outcome to harmonize regional trade policies and multiple memberships; and maintain member-states consistency in their development strategies in addition to avoiding systematic undermining of existing regional integration efforts. The challenge that arises relates to the following:
• How to respect existing regional trading groupings, to which countries are not only costumed to, but also continue to enjoy growing intra-regional trade?
• How to respect various existing regional trade protocols (EAC, COMESA, IOC, IGAD and SADC) to which members have a long history of belonging?
• How to promote cross border movement of factors of production and citizens, which are the pillar of deepening regional integration?
• How to recognise the developmental agenda of the countries by seeking to comply with WTO rules on regional trade agreements?
• How to respect regional socio-economic and political choices and development priorities of the member-states within each regional trading bloc?

Indeed, a fragmented ESA region is facing a united and enlarged Europe, which is also frustrated by the expansion of USA AGOA project in the continent. It thus appears like history repeating itself – the 1884 Berlin conference, where developed nations scrambled for African resources and markets? Indeed, big global economic blocs are competing to share resources and markets in Africa in general and ESA region in particular.

2.8 Phasing of EPAs Negotiations

The failure by the First Phase of negotiation to arrive at a legally binding agreement to serve as a point of reference to this process has resulted in countries raising doubts about the credibility of the whole process. In addition, deliberate phasing of the EPAs negotiations process in the same sub-region, in which ESA and SADC launched their negotiations in February and July, respectively raises fears that any agreement arrived at between the EU and any regional EPA configuration could serve as a “template” for the agreements with the other regional EPA. These two regions are likely to compete and quickly conclude a trade pact with EU whose binding will unlikely to benefit the majority of citizens.

2.9 EPA Signatures

EPAs negotiations have to be completed by the year 2006 for signature by December 2007. This raises the question of who will sign the agreement in each configuration, especially where a configuration is not yet a Customs Union as the case with ESA. While COMESA is expected to become a Customs Union next year, does this mean that ESA is now subsumed by COMESA? What will be the feeling of other regional grouping within the ESA configuration? Does this mean that each of the configuration member-states will sign it individually with the EU consisting of 25 countries as a bloc? Does this also mean that EPAs configurations have legal status as a bloc?

2.10 Relations between regional Secretariats

Among the regional trading blocs within ESA, COMESA secretariat has the hegemony on the ESA-EPA negotiation process in terms of providing logistics, commissioning of respective country and/or regional studies, and providing liaison between Brussels and the capitals. This is well shown in the just ended Entebbe, Uganda RNF meeting when proposal by the COMESA secretariat to commission studies on “Trade in Services” in the configuration includes Egypt and Swaziland, the other members of COMESA regional bloc. The justification being that these countries should benefit from the broader programmes of the ESA region as members of COMESA region. This justification however left out Angola, the other member of COMESA and Tanzania, the other member of the EAC. In terms of economic linkages, it appears that Tanzania is far closer to the whole of ESA configuration than Swaziland. However, what remains a guess are the feeling of EAC secretariat, other ESA member-states, and the secretariats of IGAD and IOC about this hegemonic practice by COMESA secretariat.

3.0 CONCLUSION

In the ESA, EPAs negotiations are complex and between two unequal parties in both economic and political terms. ESA-EPA configuration is fragmented, weak, valuable, but lack requisite human and financial resources to adequately prepare for negotiations. This is likely to pose a threat to an already vulnerable local production and processing industry, especially food sector and infant manufacturing industries in some countries. It could be better if the ESA-EPA has mechanisms of minimizing the impact of negotiations outcomes to the member-states, particularly small economies.

EPAs outcomes require ESA member-states to undertake reciprocal trade liberalisation with the EU. As it stand, most countries in this region, and indeed, in many other regions of Africa, Caribbean and Pacific are not yet ready to respond to full and rapid trade liberalisation due to supply-side constraints; obstacles to competitive production and marketing; and the developing nature of the economies. Given the way in which events are moving and the set time-frame, ESA configuration is unlikely to fully prepare conclude a trade pact with an increasingly fortified EU. EPAs consultations are still very low in many countries. The involvement of other stakeholders is also still limited. Some countries have not yet established national structures (the NDTPF) while others lack democratic space that facilitates all-inclusive participation to this process. In many countries, this issue is not yet subjected to national parliaments, a development that is also worsened by change of governments and poor media coverage of national and regional meetings. Forexample, the recently ended Entebbe meeting was not covered in the media, and that the participation of national organisations were outnumbered by the neighbouring Kenya.

It is therefore imperative for ESA configuration to summon all its resources (financial and human) in order to carry out independent studies with the view to repackage all EPAs negotiations, and indeed, Cotonou related agreements in a manner that increases the level of awareness to the national and regional citizens.