Trade disputes between Comesa countries and overlapping membership spell double trouble

Monday October 18 2010

A worker seals cooking oil at the Bidco oil  plant in Thika. File Photo

A worker seals cooking oil at the Bidco oil plant in Thika. File Photo 

By Jaindi Kisero

Zambia has now requested the Secretariat of the Common Market for Eastern and Southern Africa to intervene to urgently resolve longstanding disputes with Kenya over the latter’s exports of cooking oils to the country.
Lusaka lodged the request during the recently-concluded meeting of the Comesa Council of Ministers.

Specifically, Zambia has asked that an independent verification committee of experts be sent to Nairobi to address its concerns over Kenya’s exports of palm-oil based cooking fat to Zambia.

It is the latest in a long series of disputes over non-tariff barriers between the two countries. Zambia has all along insisted that imports into the country of palm-oil based cooking fats from Kenya should be subjected to extra verification and scrutiny to determine whether or not they comply with Comesa’s rules of origin.

In the past, Zambia argued that since Kenya is not a producer of palm oil, its cooking fat cannot possibly meet the 35 per cent value-added threshold requirement under Comesa’s rules of origin.

Consequently, the country has been demanding a security deposit of 25 per cent on imports of palm-oil based cooking fat from Kenya pending verification from Kenya that the products indeed passed the rules of origin test.

Another longstanding dispute over non-tariff barriers imposed in Zambia on milk imports from Kenya also remains unresolved.

Clearly, protectionist tendencies remain entrenched within the trading bloc.

Last year, Sudan stopped imports of galvanised steel pipes from Kenya on the grounds that the products did not meet the rules of origin.

The dispute has since been resolved.

There was also the dispute where Malawi was accused of applying discriminatory excise duties on cooking oils and soaps from Kenya.

After investigations into the case conducted early this year, it was established that the duties do not target goods manufactured in Kenya alone.

Mauritius has also lodged a complaint with the Comesa secretariat that Kenya has imposed unwarranted technical specifications on its exports.

Still, the biggest challenge to Comesa going forward are plans to progress the trading bloc from its current free trade area status to a fully fledged Customs Union with a common external tariff.

Although the grouping launched a Customs Union in June last year, the truth of the matter is that Comesa is still very far from achieving a functioning one.

As a matter of fact, several member states have not even reached the stage of signing the Comesa Free Trade Area — a sign that they are nowhere near prepared to progress to the next stage. These are Uganda, DR Congo, Eritrea and Ethiopia.

Comesa’s proposed Customs Union has a four-tariff band structure of 0 per cent for raw materials, 0 per cent for capital goods, 10 per cent for intermediate goods and 25 per cent for finished goods.

Sensitive goods

It also has a long list of sensitive goods and exclusions to take care of interests and problems bound to arise when smaller economies are grouped together with larger economies.

Already, smaller economies have warned against a common external tariff for the trading bloc.

During last month’s meeting in Lusaka, representatives from the Seychelles and Mauritius strongly argued that a common external tariff will result in price increases for many smaller countries — especially those with a substantial number of tariff lines with rates below the recommended CET.

The other major challenge facing the trading bloc is the ongoing discussions to create a tripartite free trade area for Comesa, the Southern African Development Community and the East African Community.

One of the high points of the Lusaka meeting was the endorsement of a draft treaty establishing the tripartite free trade area.

The new arrangement has been touted as the solution to problems of overlapping membership of countries in regional economic blocs.

Tanzania, a member of both the EAC and SADC, is not a member of Comesa, while Kenya, Uganda, Rwanda and Burundi are members of the EAC and Comesa.

If the idea of a tripartite free trade area takes root, Dar es Salaam will have found the space to wriggle out of the awkward situation of belonging to two Customs Unions.

The rest of the member states of the EAC are not as exposed as Tanzania because Comesa is moving towards adopting the common external tariff of the East African Community.