President Robert Mugabe was elected chairman of the Common Market for Eastern and Southern Africa, four months after the formation of the inclusive government, as the organisation agreed to launch a Customs Union marking an important step toward achieving full economic integration.
COMESA aimed to establish a single monetary union by 2018 as a prelude to creating a single market.
Although members endorsed the legal instruments for the Customs Union, few announced their intention to join.
Most cited the need to rationalise their overlapping membership of regional economic organisations like the East African Community and the Southern African Development Community.
Member States agreed to align their national tariffs with the COMESA common external tariff before 8 June 2012 although the Council of Ministers reserved the right to extend the period until 8 June 2014.
Full cable:
Viewing cable 09LUSAKA426, COMESA LAUNCHES CUSTOMS UNION, PURSUES BROAD AND AMBITIOUS
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Reference ID |
Created |
Classification |
Origin |
VZCZCXRO1293
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHLS #0426/01 1671427
ZNR UUUUU ZZH
R 161427Z JUN 09 ZDK
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC 7058
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORP 0136
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 05 LUSAKA 000426
SENSITIVE
SIPDIS
STATE PASS TO USTR (BILL JACKSON)
STATE FOR AF/EPS (ADA ADLER)
USAID FOR AFR/SD (BRUNO CORNELIO)
E.O. 12958: N/A
TAGS: EAID ECIN ETRD PREL SENV XW XA ZU
SUBJECT: COMESA LAUNCHES CUSTOMS UNION, PURSUES BROAD AND AMBITIOUS
REGIONAL AGENDA
REF: LUSAKA 312
LUSAKA 00000426 001.2 OF 005
¶1. (SBU) Summary. Leaders from the Common Market for Eastern and
Southern Africa (COMESA) launched a customs union and a regional
payment and settlement system during the recent COMESA Summit in
Victoria Falls, Zimbabwe. Eight of COMESA’s 19 Member States are
disposed to join the Customs Union, although in the course of the
three to five-year implementation period, other countries are likely
to join. The COMESA delegates reiterated their commitment to
merging with other regional economic communities (RECs), namely the
East African Community (EAC) and the Southern African Development
Community (SADC). Although economic integration dominated the
meeting agenda, infrastructure development and climate change were
also recurring themes. The COMESA Heads of State condemned the
unconstitutional change in power in Madagascar and recognized other
pockets of instability within the region, including the conflict in
Darfur, piracy off the coast of Somalia, and the Eritrea-Djibouti
and Sudan-Chad border disputes. They also spoke out on behalf of
Sudanese President Omar El-Bashir, calling for the suspension of the
International Criminal Court (ICC) indictment. With (surprisingly)
little political grandstanding, Zimbabwean President Mugabe assumed
the chairmanship of the COMESA Authority. End Summary.
———-
Background
———-
¶2. (U) On June 7-8, COMESA held its long overdue summit, an event
that had been postponed twice in 2008 due to the Zimbabwean
electoral crisis. Eight heads of state attended, including
Zimbabwean President Robert Mugabe, Swazi King Mswati III, Kenyan
President Mwai Kibaki, Ugandan President Yoweri Museveni, Sudanese
President Omar al-Bashir, Djiboutian President Ismail Guellah,
Seychellois President James Michel, and Zambian President Rupiah
Banda. Most other countries were represented at the cabinet level.
In defiance of Madagascar’s unconstitutional change in power, COMESA
invited ousted President Marc Ravalomana (referred to during the
summit as “President of the Republic of Madagascar”) to represent
the Malagasy island nation.
¶3. (U) Working level meetings of the Intergovernmental Committee,
two ministerials (a trade ministers meeting known as the “Council of
Ministers” and a foreign ministers meeting), and a COMESA Business
Council-led “Business Summit” preceded the heads of state (“COMESA
Authority”) summit. The decisions and recommendations of the
preceding meetings fed into the COMESA Authority discussion, most of
which was closed to non-COMESA participation. During the summit,
President Kibaki handed over the chairmanship of the Authority to
President Mugabe, who will hold the position until the next summit
convenes in Mbabane in 2010 when King Mswati III will assume the
chair. Until then, the COMESA Authority will be headed by President
Mugabe (chair), King Mswati III (vice-chair), and President Kibaki
(rapporteur).
¶4. (U) COMESA emerged in 1994 out of the Preferential Trade Area
for Eastern and Southern Africa (PTA). Its membership includes
Libya, Egypt, Sudan, Ethiopia, Djibouti, Eritrea, Uganda, Kenya, DR
Congo, Rwanda, Burundi, Zambia, Malawi, Zimbabwe, Swaziland,
Madagascar, Comoros, Mauritius, and Seychelles. Angola technically
still is a member, but in practice participates as an observer. The
COMESA Free Trade Area (FTA), which was launched in 2000, consists
of all COMESA Member States with the exception of DR Congo, Eritrea,
Ethiopia, Uganda, and Swaziland. The COMESA Secretariat is based in
Lusaka. Primary COMESA institutions include Eastern and Southern
Africa Trade and Development Bank (PTA Bank), COMESA Re-Insurance
Company (ZEP-RE), Africa Trade Insurance Agency (ATIA), COMESA
Clearing House, COMESA Regional Investment Agency (RIA), COMESA
Competition Commission, and COMESA Court of Justice, Federation of
COMESA Women in Business Associations (FEMCOM), Alliance for
Commodity Trade in Eastern and Southern Africa, and COMESA
Telecommunication Company (COMTEL).
————-
Customs Union
————-
¶5. (U) The most significant achievement of the summit was the
launch of the COMESA Customs Union, marking an important step toward
achieving full economic integration (COMESA aims to establish a
monetary union by 2018 as a prelude to the creation of a single
market). Member States endorsed the legal instruments for the
Customs Union and agreed on a common external tariff (CET) of zero
percent on raw materials, ten percent on semi-processed
(“intermediate”) products, and 25 percent on finished goods. Member
States consented to align their national tariffs with the COMESA CET
LUSAKA 00000426 002.2 OF 005
within three years (i.e. before June 8, 2012) — although the
Council of Ministers reserved the right to extend the period to five
years (until June 8, 2014). The Council established a COMESA task
force on the Customs Union and directed that during the
implementation period, Member States are to submit their lists of
sensitive (exempted) products to the task force. (Note: The
negotiations on these lists have not yet been concluded; for the
customs union to maintain relevance, COMESA will need to keep these
as short as possible. End Note.)
¶6. (SBU) Despite the effulgence given to the launch of the Customs
Union, few if any countries announced their intention to join it.
The Ugandan and Rwandan delegations noted that COMESA Member States
that also belong to the East African Community (EAC) (Uganda,
Rwanda, Burundi, Kenya; although Tanzania is a member of the EAC, it
is not a member of COMESA) need more time to consult among
themselves. A COMESA Member State diplomat told emboff that eight
countries will join the Customs Union, although Egypt was unlikely
to be one of them. He pointed to reservations about committing to
the Customs Union at this early stage, without an administrative
structure in place to manage customs operations and revenue
collection.
¶7. (SBU) Presumably, many countries also are deterred by the
problem imposed by overlapping membership in other regional economic
communities, including SADC, EAC (which has also launched a customs
union), and the Southern African Customs Union (SACU). According to
World Trade Organization rules, countries may not belong to more
than one customs union. The COMESA Secretariat has attempted to
resolve this difficulty by harmonizing its CET with that of EAC and
announcing its intention in October 2008 of merging into a single
COMESA-EAC-SADC FTA (see para 10).
¶8. (U) The COMESA CET may also present problems to COMESA Member
States that belong to the World Trade Organization (WTO) and that
previously had bound their tariffs below the COMESA CET rates. The
COMESA Council of Ministers acknowledged that before these countries
can implement the CET, they will need to negotiate bilaterally with
WTO members with whom the bound tariffs originally were negotiated.
Additionally, some COMESA Member States that are implementing World
Bank/International Monetary Fund programs may need to consult with
these two institutions to ensure that the CET rates do not conflict
with prior commitments.
¶9. (U) Despite these difficulties, COMESA has made provisions for
some of the structural challenges accompanying joining the Customs
Union. The COMESA Fund, which provides financial assistance to
countries facing revenue losses during their adjustment to a Customs
Union, is operational and may help mitigate the immediate financial
impact on some Member States. The first disbursements will be made
to Rwanda and Burundi for approximately USD 15 million and USD 6
million respectively.
———-
Tripartite
———-
¶10. (U) The COMESA leaders confirmed their commitment to
“tripartite” cooperation, referring to the October 2008 agreement in
Uganda to merge EAC, COMESA, and SADC into a single REC in
preparation for an African Economic Community. They identified a
common FTA (followed by a common Customs Union) as the course for
achieving this, but acknowledged that the Tripartite Task Force had
not finalized yet its road map for fusing the three FTAs.
Nevertheless, officials from all three organizations have begun
harmonizing their common tariff nomenclatures and trade regulations
as well as working toward the removal of non-tariff barriers.
Throughout the meetings, participants emphasized repeatedly the
potential benefit of tripartite partnership to increase Member
States’ bargaining positions in multilateral trade negotiations,
notably the WTO Doha Round and the EU Economic Partnership Agreement
discussions.
¶11. (U) COMESA leaders also recognized the benefits of tripartite
cooperation in relation to infrastructure development, citing the
recent tripartite North-South Corridor conference (reftel) as a
model aid for trade initiative that should be replicated in other
trade corridors. In this regard, they directed the Tripartite Task
Force to organize a high level, “resource mobilization” conference
for the development of the Northern Corridor
(Mombasa-Goma-Kigali-Bujumbura), the Lamu-Southern Sudan-Ethiopia
Corridor, the Djibouti-Addis Ababa Corridor, and the Central
Corridor (Dar es Salaam-Goma) as well as other corridors in the
COMESA region. COMESA also announced the establishment in Mauritius
of a COMESA Infrastructure Fund as a platform for mobilizing private
LUSAKA 00000426 003.2 OF 005
and public sector resources on infrastructural development
projects.
¶12. (U) Note: The tripartite partnership grew out of a U.S.-led
initiative in the mid-1990s to encourage COMESA-EAC-SADC
coordination on transportation issues. Initially, the RECs resisted
the U.S. overtures but soon began to see the benefits (and
necessity) of cooperation, particularly as most countries belong to
more than one REC and tripartite discussions shifted the burden of
harmonization from Member States to the RECs. End Note.
————–
Climate Change
————–
¶13. (U) The Council of Ministers also noted tripartite cooperation
on climate change programs and noted that the COMESA Secretariat
together with EAC and SADC had secured resources from the Norwegian
Government and the Rockefeller Foundation to support the climate
change initiatives of the three RECs. They noted the establishment
of a Climate Change Unit at the COMESA Secretariat to push forward
its environmental programs, which focus on conservation agriculture
and deforestation, and to coordinate COMESA’s contribution to a
common African position in global climate negotiations.
¶14. (SBU) The topic of climate change surfaced in virtually every
session of the COMESA meetings. COMESA officials linked the issue
closely to food security and underscored the need to implement
mitigation programs. African inclusion in global carbon reduction
efforts may also entail significant economic benefit to a region
with a relatively small carbon footprint. COMESA Secretary General
Sindiso Ngwenya suggested that if a post-2012 climate change regime
includes provisions for the reduction of green house gas emissions
by agriculture, forests, and sustainable land use, Africa could
generate up to three billion dollars per year in carbon trade. The
Council of Ministers also noted the Secretariat’s intent to
establish a Carbon Facility to fund regional mitigation efforts,
perhaps with partial support from the United Nations Convention to
Combat Desertification (UNCCD) Global Mechanism.
——————–
Economic Development
——————–
¶15. (SBU) Africa’s response to the global economic downturn was a
topic of interest, with leaders frequently underscoring to the need
to promote agricultural growth in order to achieve regional food
security and economic diversification. With regard to adding value
to African natural resources and agricultural production, leaders
reiterated the importance of expanding African manufacturing,
agro-processing, and refining. Ugandan President Museveni described
the export of unprocessed coffee, for example, as an economic
donation to Europe. “We are the real donor countries,” he quipped.
Others referred to the export of raw materials as “exportation of
wealth.”
¶16. (U) The COMESA leaders called for the speedy implementation of
the African Union’s Comprehensive Africa Agricultural Development
Program (CAADP) at both national and regional levels (Note: Although
COMESA does not have an agricultural directorate, the New African
Partnership for African Development has appointed COMESA to be the
implementing institution for CAADP within the region). To achieve
this, COMESA leaders endorsed the launch of the Alliance for
Commodity Trade in Eastern and Southern Africa (ACTESA), a COMESA
agency that USAID/East Africa has partnered with to promote regional
agricultural growth by improving agricultural policies, regulations,
and procedures as well as market facilities and services.
¶17. (U) The Summit also saw the launch of the Regional Payment and
Settlement System (REPSS), which aims to facilitate intra-regional
trade by reducing the cost of international transactions. The
REPSS, based at the central bank in Mauritius, will also reduce the
time it takes to complete an international transaction to 24 hours.
There was also a renewed call to strengthen public-private
partnerships as well as to implement COMESA energy programs and seek
investment in power generation. The COMESA Authority announced the
establishment of a COMESA Competition Commission in Malawi, the
COMESA Telecommunications Company in Djibouti, and the Federation of
Women in Business (FEMCOM) in Malawi.
———————-
Political and Security
———————-
¶18. (SBU) Although the Intergovernmental Committee, Business
LUSAKA 00000426 004.2 OF 005
Council, and Council of Ministers focused almost entirely on
economic issues, the foreign ministers and heads of state allegedly
devoted most of their closed door meetings to regional political and
security issues. Their subsequent strong public statements on these
topics set this summit apart from those that preceded it and suggest
that COMESA may intend to take a more prominent role on peace and
security issues in the future. Delegates frequently identified
political stability as a prerequisite for regional integration and
expressed interest in COMESA support to election monitoring. They
also urged Member States to enhance conflict prevention through the
establishment of an effective Conflict Early Warning System and to
take a more active role in post-conflict reconstruction and
development issues.
¶19. (SBU) Despite many references to good governance, however, the
topic of corruption went virtually unmentioned throughout the
meetings. Instead, heads of state drew attention to piracy off the
coast of Somalia and border disputes (Sudan-Chad and
Eritrea-Ethiopia). They also “unconditinally rejected and
condemned in the strongest tems” the unconstitutional change of
government inMadagascar and called for a return to constitutionl
rule. The urged Sudan to work with the UnitedNations and African
Union to solve the Darfur coflict. The Authority congratulated
Mugabe and Tvangirai for establishing a government in Zimbabweand
called upon the international communty to lift “all declared and
undeclared” sanctions. Most notably, the COMESA Authority expressed
concern about the International Criminal Court (ICC) indictment of
Sudanese President al-Bashir and endorsed the African Union position
to call for the ICC to suspend its indictment.
¶20. (SBU) COMESA elected the first five members of a “Committee of
Elders” to prevent and mitigate regional conflicts and to complement
the African Union “Panel of the Wise.” The committee ultimately
will consist of nine members who will serve staggered two-year
terms. COMESA foreign ministers will chose the remaining four
members at the COMESA meetings in Mbabane in 2010. The five elected
representatives are Immaculee Nahayo (Burundi), Soad Shalaby
(Egypt), Bethuel Kiplagat (Kenya), Anund Priyay Neewoor (Mauritius),
and Atem Garang Deng Deduek (Sudan).
——-
Comment
——-
¶21. (SBU) With COMESA internal trade increasing from USD 3.2 billion
in 2001 to USD 15.2 billion in 2008, COMESA’s integration programs
are certainly relevant if not effective. Intra-COMESA trade as a
percentage of total trade, however, remains small (at four percent
in 2007). True integration ultimately should reflect regional
interdependence, with Member States benefitting from – and seeking
out trade relationships with — neighboring economies as much as
they do European, North American, and Asian markets. A fully
functioning Customs Union and REPSS will be invaluable to achieving
higher levels of intra-regional commerce. Although infrastructure
development will bring down production and transportation costs,
cross-border trade facilitation requires commitment to reducing or
removing non-tariff barriers and greater political-level engagement
and follow-through.
¶22. (SBU) By increasing its agricultural productivity, the COMESA
region can contribute to African food security and help meet rising
global consumer demand. To this effect, the USG will continue to
provide regional support through USAID/East Africa. COMESA’s
ability to succeed, however, will depend largely on the actions of
its Member States, many of which continue to discourage agricultural
investment by their market-distorting export bans on staple
products. Although the Secretariat has recommended policy reforms,
it lacks the human resources as well as the authority to enforce
existing agreements and commitments. Some of the newly established
COMESA institutions, such as ACTESA and the Association for
Strengthening Agricultural research in Eastern and Central Africa
(ASARECA) could help influence national policies. A more cohesive
U.S. regional strategy for Eastern and Southern Africa might
integrate more effectively USG diplomatic and developmental
engagement.
¶24. (SBU) As COMESA broadens its role to include infrastructural
development, climate mitigation, and peace and security, it is
redefining its original mandate (from economic growth and
integration and socio-economic development) to one of “increased
cooperation and integration in all fields of development.”
According to its mission statement, this includes transport,
communications, information, industry, energy, information,
agriculture, environment, natural resources, and gender matters —
all “under an environment of peace and security.” Some COMESA
LUSAKA 00000426 005.2 OF 005
donors are privately questioning whether COMESA may be stepping up
to fill the gap created by SADC’s waning efficacy and credibility.
Either way, COMESA’s economic leadership gives its political
messages greater urgency and lends its partnership with the United
States greater appeal.
Koplovsky
(94 VIEWS)
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