Trade in services and regional integration in SSA: Status and key challenges

13 August 2012

Future growth, development, and integration in Sub-Saharan Africa (SSA) depend on a well-functioning, competitive, and well-regulated services sector. Restricted access to competitive services, however, remains an impediment in most SSA countries, partially due to their poor state of economic infrastructure, small market size, and limited endowment of capital, skills, and technology.  A properly sequenced and complementary program of enhanced openness and regulatory reform could alleviate these constraints. In addition, greater regional and global integration could, in principle, alleviate the constraints on the development of the services sector.

A snapshot of regional integration in SSA’s trade in services presents limited overall progress in service sector integration beyond trade facilitation services related issues, including the movement of persons.  In addition, the challenges and bottlenecks faced in the various Regional Economic Communities (RECs) are quite similar.

West Africa and Central Africa
The West African region has two services integration schemes. The first, under the Economic Community of West African States (ECOWAS) 1975-1993 Trade Protocol, has brought about progress in the now free movement of persons without visas, the adoption of the ECOWAS passport, and the right of establishment.  The ECOWAS region has also adopted supplementary acts, one harmonising telecommunication regulations and one on investment. The second service integration scheme, under the sub-regional West African Economic and Monetary Union (WAEMU/UEMOA), is a subset of ECOWAS containing a directive that harmonises regulations in telecommunications and transport services. UEMOA is a common market, and intra-UEMOA liberalisation of trade in services is currently underway. The region has also introduced new regulatory frameworks to reduce historical monopolies in the region.

The West African region faces a myriad of challenges and bottlenecks common to the rest of SSA. These obstacles – which hinder the free movement of people and economic operators – include multiplicity of two regional groupings with distinct objectives; weak political support; poor coordination among ministries; weak outreach to stakeholders and operators; poor funding by Member States; and non ratification and non implementation of protocols.  The region is also characterised by historical linguistic, currency, and legislative frictions and hence consists of heterogeneous communities with historical ties.

In central Africa, the Economic Community of Central African States (ECCAS) under the ECCAS Treaty of 1983 is implementing a cooperation program in transport and communications. Annex 7 of the treaty contains disciplines on the movement of naturalised persons and the right of establishment. CEMAC, which is a sub-group of ECCAS, has also made progress towards liberalisation of air transport, and the region is implementing a regional fibre-optic backbone project.  Following the CEMAC 1994-2008 agreements, CEMAC members are involved in EPA negotiations, including discussions on trade in services, and the region is developing a services master plan to promote sector development both regionally and nationally.

Challenges in the central African region include slow, highly priced surface transportation due to cartelization and restrictive regulations, limited connectivity of air transport between CEMAC and ECCAS members, and backbone infrastructure in the relatively early stages of development. The use of new ICT technology is modest, due to high prices and low access rates, and still developing ICT infrastructure.

East and Southern Africa
The East African Community launched a common market in July 2010. The Common Market Protocol (CMP) provides for the free movement of goods, persons and labour, services, capital, and the rights of establishment and residence. The CMP annex V on Free Movement of Trade in Services is a services GATs based liberalisation schedule with seven initial sectors - business and professional services; communication services; distribution services; education services; financial services; tourism and travel-related; and transport services.  Five additional sectors have also been identified for negotiation: construction and related services; environmental services; health-related and social services; recreation, culture and sporting services; and other services not included elsewhere.  Additionally, the region has an EAC passport and is implementing the protocols on the movement of workers and persons.  Work permit fees have recently been abolished between Rwanda and Kenya, and there are efforts to harmonise regulatory measures in some services sectors and institute an EAC tourist visa.  Some sub sectors in the professional services category are also developing mutual recognition agreements to allow for the free movement of professional services and, further, the EAC now has a professional services platform.

Given the high level of political will, bottlenecks and challenges in the EAC are largely in the implementation stages of agreed liberalisation and integration agreements. At a national level, the relevant CMP legislation and implementing institutional frameworks are not yet in place. Like the other regions discussed, however, there are challenges in the areas of coordination, overlapping membership in COMESA and SADC, and limited resources for capacity building and training on common market integration processes. The region also has weak and uneven regulatory frameworks governing services sectors and ambition is asymmetrical amongst partner states.

The Common Market for Eastern and Southern Africa (COMESA) agreement (1994) provides for the Free Movement of Persons, Labour, Services, and the Right of Establishment. Early regional cooperation came in transport and financial services to facilitate the movement of goods, and the COMESA Framework for liberalising trade in services was developed and adopted by the Council in June 2009. It consists of (i) regulations on Trade in services anchored on the GATs, (ii) annex on the temporary movement of persons, and (iii) services negotiating guidelines. Ten member States have validated schedules in the four priority sectors including communication, finance, transport and energy, and the COMESA Secretariat has initiated a complimentary process to consider the specificities of these sectors in collaboration with other COMESA programs.

The challenges and bottlenecks in the COMESA region include overlapping membership in RTAs with ongoing services negotiations, technical capacity constraints, WTO ongoing accession processes, divergent levels of development, lack of political will, and issues of prioritisation alongside the ongoing tripartite negotiations.  The protocol is also not fully operational; as of March 2010, only four member states – Kenya, Rwanda, Burundi, and Zimbabwe – had signed the Protocol.

The Southern Africa Development Community (SADC) ministers of trade adopted a draft SADC trade in services protocol in 2009 modeled largely on the GATS.  Negotiations began in April 2012 in six identified priority sectors that include finance, communication, transport, energy, construction, and tourism. SADC has several sector and modal-specific protocols which include the Finance and Investment protocol (mode 3), draft protocol on movement of persons (mode 4), and protocols specific to transport, communication, tourism, and education. The SADC Facilitation of the movement of persons was intended to facilitate lawful entry without a visa into the territory of another State Party for a maximum period of 90 days per year. However, this is not in force due to a lack of sufficient ratifications.

Bottlenecks in the SADC region have revolved around the conclusion and adoption of the Draft Trade in Services Protocol, with some uncertainty as to whether the protocol will be presented to the SADC Summit for signature in August 2012.  The back-loading of negotiations on the schedules of commitments until after SADC protocol adoption and capacity constraints in the management of negotiations have slowed progress. Like other regions, there is limited funding for the negotiation activities and weak coordination and involvement of regulators and private sector in services negotiations. SADC has also experienced limited political will, fearful that SADC EPA services negotiations will overtake SADC FTA services negotiations, resulting in an impetus for change coming from an EU-driven agreement. Difficulties in ensuring consistency between liberalisation of services and mandates of various protocols in specific services sectors, along with data limitations, are also concerns.

Overall, it appears that similar challenges impede the various regions, including limited funding by member states, poor coordination of negotiations and consultative processes, overlapping membership, implementation challenges, capacity issues, and political will.  EAC and UEMOA have made the most progress on services integration and liberalisation, and could provide useful lessons for the rest of SSA. At a broader level, the COMESA-EAC-SADC Tripartite FTA is looking to expand trade, investment opportunities, and cooperative arrangements to diversify markets and take advantage of trading opportunities. Overall progress towards negotiations and implementation in SSA has in practice been patchy and plagued with similar challenges and constraints.  There is, in this sense, a compelling case to be made for supporting a continental African regional approach to promoting service sector development, regional services integration and services liberalisation. Such an approach could positively reinforce individual REC efforts to remove barriers to services trade, as well as streamline the coordination process towards the longer-term goal of achieving a Continental Free Trade Area (CFTA) and broader African Economic Community (AEC).

Author: Lynette Gitonga, Trade lawyer and ILEAP Programme Officer, based in Nairobi. This article is based on a forthcoming ILEAP publication “Services Trade and Regional Integration In Sub-Saharan Africa: Options For Continental Collaboration”.

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