Duty-free sugar at the Mombasa port. Under the proposed Africa trade
pact, only 10pc of goods will be rated ‘sensitive’ and accorded
protection. FILE PHOTO | NATION
Traders and manufacturers in Africa will soon access an expanded
market of over one billion people, following the launch of a mega trade
deal expected in March.
The Continental Free Trade
Area (CFTA) agreement to be launched by heads of state in Kigali, comes
amid fears that trade liberalisation could lead to a loss of tariff
revenue for smaller economies.
The CFTA is expected to
remove taxes from up to 90 per cent of the 200 items traded on the
continent, making them cheaper for consumers.
Only 10
per cent of goods will be classified as “sensitive” and accorded
protection to enhance growth of industries. Sensitive items are those
that require protection from cheap imports to allow infant industries to
grow.
The EastAfrican has learnt that the
proposed CFTA agreement will be signed on March 21 in Kigali at an
extraordinary summit of the African Union, to be hosted by President
Paul Kagame.
Sensitive items
However,
no deal has been reached on negotiations touching on the items to be
classified as sensitive and those to be excluded from taxation, as the
least developed and developing economies are worried about losing their
key revenue streams.
“These issues are still being
negotiated. No one knows until the countries say which products they
will designate as sensitive and which ones they will exclude.
But
from experience, sugar and milk tend to be sensitive. And some Muslim
countries exclude alcohol and pork. But Nigeria tends to exclude
products produced by important personalities in order to limit
competition on the market,” said the director of trade, Customs and
monetary affairs at the Comesa Secretariat, Dr Francis Mangeni.
In
the East African Community, maize, wheat, milk and its by-products,
rice and textiles are treated as “sensitive” and therefore attract
higher duty ranging from 35 per cent to 60 per cent.
The CFTA agreement
The
tripartite free trade area, which brings together the 26 countries of
the three economic blocs — EAC, Comesa and SADC — has agreed that 80
per cent of tariff lines will be liberalised upon implementation of the
agreement, and that the remaining 20 per cent will be negotiated over
five to eight years.
However, the regional trading blocs are yet to agree on tariff offers.
The
CFTA agreement, which had initially been slated for signing in December
2017, has four legal instruments: The framework agreement establishing
the CFTA; the protocols on trade in goods; protocol in trade in
services; and the protocol in dispute settlement.
The
signing of the agreement is expected to pave the way for the conclusion
of negotiations on outstanding issues which include tariff offers and
rules of origin, and the commencement of the next phase of talks
covering investment, competition and intellectual property.
Tariff lines
It
is estimated that 10 per cent of the tariff lines on the continent will
be excluded from tariff reduction but for countries like Zambia which
has fewer tradable goods, this could cover all intra-African imports.
It
is feared that excluding even a small portion of the products from
taxation could easily affect the most traded products in Africa as the
continent trades on only a few product lines estimated at 200 or even 70
for some countries.
According to a report by the
United Nations Conference on Trade and Development (UNCTAD) released in
February, African countries could gain $3.6 billion per annum by
completely eliminating tariffs on all goods traded among them.
However applying taxes on even a modest five per cent of products reduces this gain to $1.5 billion.
Comparatively, eliminating the non-tariff barriers will increase the monetary gains of the countries by $20 billion.
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