Exploring the Regional Dimension of Aid for Trade in the EAC

Highlights from Country Update Notes

As usual, several country update notes were prepared by country partners in consultation with relevant stakeholders in their respective countries. They scrutinized the opportunities and feasibility for the EAC to ask for AfT and EIF funds jointly as a region for cross-border projects.

The authors first examined the relevance of regional Aid for Trade projects to address bottleneck of regional integration. It appears that AfT and EIF are well suited to improve soft (e.g. customs procedures) and physical (e.g. roads and storage facilities) infrastructure, which would help bringing transport costs down. This is critical especially for the landlocked Burundi, Rwanda and Uganda who depend on neighbouring countries for both import and exports. For example in Rwanda, it is estimated that 40% of the price of their exports is attributed to transport. There is a lot of room for improvement in this area as freight costs along the main transport corridors are still 50% higher than those in the USA or EU.

Already, projects are undertaken to reduce these costs and the EAC member states are aware of the non-harmonization of their trade documents and other trade impediments. Some of these trade capacity projects are addressed through Aid for Trade (AfT) and Enhanced Integrated Framework funds. In this context, emphasis has been put on modernizing trade facilitation institutions (e.g. introduction on one-stop-border-posts, Trade Facilitation initiative by TMEA), hard infrastructure projects and feasibility studies (e.g. railway linking Rwanda and Burundi to Dar-es-Salaam, South corridor funded by DFID). In the country update notes, the authors identified other possible areas of for regional Aid for Trade interventions. These include: (i) training of trade negotiators; (ii) construction of border markets to facilitate cross-border trade; (iii) Funding for implementation of the East African Railway Master Plan; and (iv) elimination of NTBs through such projects also seems to be highly desired by interviewed stakeholders, especially in the private sector.

It is reported that the design phase of regional projects would be of critical importance to ensure that the project is relevant for all countries and that it is aligned with national and regional priorities for equal benefits by all parties. This requires broad-based ownership and inclusive stakeholder consultation. Moreover, benchmarking should also be seriously undertaken with the aim to jointly come up with a strong agreement for Monitoring and Evaluation (M&E), and clear implementation guidelines should be developed to avoid misunderstandings and conflicts. Finally, one of the notes recommended that the EAC Secretariat should be empowered to initiate and oversee the implementation of such projects.

Besides this, several challenges will have to be addressed by the EAC countries if they want to jointly engage in a regional Aid for Trade project, while Kenya is not an LDC and is therefore not eligible to the EIF. In this regard, a CSO representative interviewed by an author felt that it this particular case Kenya should be allowed to access EIF funding.

Consultations with stakeholders on the ground revealed that both state and non-state actors generally perceive such regional projects positively. Nevertheless, some interviewees had reservations about the EIF. For instance, a trade expert in Uganda lamented that the EIF does not address the worsening terms of trade of LDCs who export raw materials and import finished products. Another trade consultant in Uganda lamented that EIF funding is conditioned ion the DTIS which he felt should be applied very selectively as some recommendations could actually be very harmful to vulnerable people.

The country update notes concluded with recommendations for both national policy makers and Geneva-based Ambassadors. At the national level, several notes recommended building the capacity of the private sector and of line ministries. Another recommendation was that the EAC Secretariat should be empowered to initiate and oversee the implementation of such projects. Finally, the recommendations specifically targeted to Geneva-based Ambassadors included: (i) the need to negotiate for more AfT funding and demand additionality. In fact, most programmes have only been repackaging existing trade aid; and (ii) to continue engaging actively in the debates about international aid architecture.

Discussions

In reaction to these insights from the ground, a delegate pointed out that mechanisms for regional projects exist under the EIF and should be used. For instance, Rwanda has submitted a regional Tier II project under the EIF on border market development to address the substantial informal trade. This is likely to be implemented, despite the fact that the same proposal had been refused by donors in the past.

Some delegates expressed concern about the EIF which includes conditionalities and the funds available are not sufficient to undertake the kind of large infrastructure projects that are required in the region. They were more positive about Aid for Trade and lamented that developed countries have always presented the EIF as being part of AfT rather than a separated programme. In fact, this has made it difficult for LDCs to apply for AfT projects rather than EIF projects. There was a consensus that the recommendation of empowering the EAC Secretariat to initiate regional projects should be seriously considered in the context of Aid for Trade.

In concluding the discussion, Rashid S. Kaukab, Director, CUTS International Geneva, brought to the delegates’ attention that CUTS published a study in 2010 that explored the regional dimension of the EIF. This study titled “Reassessing Scope and Mandate of the Enhanced Integrated Framework” is available at http://bit.ly/VRc5oq. It was also suggested that the discussions between CUTS and the EAC WTO delegates on this topic continue informally in the run up to the 9th Ministerial Conference in Bali.

The “Plurilateral” Temptation and the Doha Round

At the request of the EAC WTO delegates at the previous meeting, CUTS International Geneva presented an analytical note for discussion on the topic “The Plurilateral Temptation and the Doha Round: Implications and Options for the EAC”.

Highlights from the analytical note

Today the “plurilateral track” is becoming more attractive for several members as a way to advance deeper liberalisation inside or outside the multilateral trading system. However, not all WTO members have the same level of sympathy toward plurilaterals as a solution to the Doha Round impasse, as it is considered that they may divert members’ attention off the round, potentially break the single undertaking principle and ignore the development dimension of negotiations.

There are diverse types of plurilaterals, including WTO plurilaterals (MFN and non-MFN), RTAs and plurilaterals outside the WTO. Proponents a plurilateral generally expect to create a precedent that the whole WTO membership or at least other members could accept at a later stage. It is noteworthy that plurilaterals work within the framework of the WTO, are subject to Dispute Settlement and the oversight of the General Council, and cannot beestablished without the consensus of the whole WTO membership at a Ministerial Conference. Existing Plurilaterals include the Agreement on Government Procurement (GPA), the Agreement on Trade in Civil Aircraft (TCAA), both non-MFN, and the Information Technology Agreement (ITA) which is MFN-based.

A recent phenomenon that is emerging is trade-related plurilaterals outside the WTO. The only non-WTO plurilateral that has been adopted so far in the Anti-Counterfeiting Trade related Agreement of 2011 (ACTA), which has been particularly controversial due to low level of transparency and openness, and the fact that it raises the level of IP enforcement above the TRIPS Agreement.

Several proposals for new plurilateral agreement have recently emerged. The most important ones are a potential International Services Agreement (ISA) and a potential Sustainable Energy Trade Agreement (SETA). If plurilaterals become a more serious alternative, developing countries need to explore their use in sectors and areas of their interest. This for example could include a plurilateral that will jointly deal with CBD/TRIPS issues as well as geographical indication (GIs), and a potential GATS mode four agreement including tariff, non-tariff measures and subsidies among willing participants.

An increased number of plurilaterals may have far reaching implications for the EAC and other developing countries. In fact, it may weaken even further the multilaterals trade system, as has already occurred with the proliferation of RTAs, and will affect the overall balance of the Doha Round as well as the principle of the single undertaking. Plurilaterals may also become a way to avoid the incorporation of new forms of S&DT, especially when related to tariff and market access concessions. Moreover, new plurilaterals may be required under the accession processes of acceding countries and in future RTAs or bilateral deals. For example, it is highly probable that the ACTA or similar standards will be required to counterparts in bilateral deals with developed countries. On the other hand, plurilaterals adopted on MFN basis allow developing countries to get benefits while avoiding the assumption of new obligations.

Discussions

The note was very well received by the delegates who reiterated their keen interest and concern over this issue. They agreed with the view that an increased number of plurilaterals will erode the multilateral trading system, and further explanations were requested about the nature and implications of ACTA which was of particular concern to the delegates. They were also concerned with ISA which is progressing very fast, covers a very broad range of sectors, and they were under the impression that emerging economies may become a party to the agreement.

In conclusion, it was pointed out that while plurilaterals within the WTO provide reasonable safeguards, such agreements outside the WTO like ACTA should be of more concern to developing countries as they would have no legal justification to oppose it. Given the level of interest of the delegates on this issue, a follow-up note may be developed depending on the developments on the ISA.