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Somalia Expands Trade Territory, Joins COMESA

But questions linger on the country’s
ability to compete with the other member states

Somalia has joined the membership to the regional bloc Common Market for Eastern and Southern Africa (COMESA) raising the number from 19 to 21 thus making the largest regional economic community in Africa even larger.

The other new member Tunisia, was also admitted after having fulfilled the terms and conditions of accession to the COMESA Treaty.

Mr Hassan Ali Khaire, Prime Minister of the Federal Republic of Somalia led the delegation which finalized the deal and signed the admission documents at the 20th Comesa Summit in Lusaka during meeting of the Heads of State and Government in Lusaka, Zambia on July 19th.

COMESA is the largest regional economic organisation in Africa with 21 member states, after the admission of Tunisia and Somalia. It has a population of about 390 million. The bloc has a free trade area and launched a customs union in 2009.

But questions are abound as the benefits that Somalia will enjoy by joining COMESA. Namibia and Tanzania are among the countries who have pulled out of the regional trading bloc in the past. Both the countries believed that they were not benefiting from the organization, with Namibia saying   its imports are 10 times more than its exports into the member market.

Member  countries face the highest challenges in achieving open trade and intra-trade. The main reasons are due to the high costs of trading which prevent African exporters to compete on both regional and global markets. These costs are not necessarily higher tariffs but barriers behind the border along the value chain in responding to various bottlenecks. There are still issues with policy integration across borders and some pro-intra-trade reforms to facilitate trade have yet to be

But there are fears that the benefits of the free trade area could be unevenly distributed

Poor  infrastructure, weak governance, pervasive insecurity, corruption are several potential drawbacks that may negatively impact government revenue, historically strategic sectors, and vulnerable smallholder farmers.

Sylvester Bagooroo, a programme officer at Third World Network Africa, thinks the treaty focusses too much on cutting tariffs, without sufficient consideration of the varying production capabilities of African countries.

Countries such as Kenya and Ethiopia  are at an advantage with their more strongly developed manufacturing capabilities. Allowing them to sell their goods and services to the Somalia  could undercut industrial development.

“If you don’t build on productive capacities, when you liberalise you are only going to be trading imported goods across Africa, and that will be a big blow to domestic manufacturing across the continent,” Bagooroo said.

“We need to pay attention to the big economies against the small economies. We need to pay attention to the dominant sectors against the weaker sectors.”

Eyerusalem Siba, a research fellow at the Brookings Institution’s Africa Growth Initiative, is concerned with the domestic policies “which need to be in place to assist workers and also businesses when competition increases”.

“It’s a good idea to integrate eventually, but are we ready for it? Not every expert I have spoken with agrees with it.” Said Mr Siba.

“Governments will need to develop a more skilled workforce adaptable to the demands of globalisation and at the same time create social policies for those who will lose jobs due to increased competition”

Eyerusalem Siba

“Competition tends to have a detrimental impact on wages in low-cost jobs, so countries need to think about how they’re going to address that situation.

In Kenya, the opening of window for the importation of taxfree sugar from member coiuntries has crippled the development of the local millers, with arguments that countries such as Sudan and Zambia with better capabilities are using their advantage to dump cheap sugar in to the country.

Somalia and Tunisia now join Burundi, Comoros, D.R. Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe in the economic block.

Somalia is now bound by the provisions of the Treaty and shall within six months of admission, deposit the instrument of acceptance of the terms of admission with the Secretary General. This is done together with an instrument of accession pursuant to Articles 194 and 195 of the Treaty with regard to a State admitted to full membership.

On paper, COMESA places the member states at an advantage of adopting a common custom scheme that abolishes non-tariff barriers to trade between themselves. Furthermore, member countries are in a position to establish conditions regulating the flow of goods from third party countries within the Common Market.

According to the Article 46 of the treaty, member states have the advantage of enjoying non-tariff goods and services within the Common Market. The states enjoy custom exemptions on all imports of products originating in member countries with value additions amounting to 45 percent.

COMESA member states benefit from cooperation in the field of industrial development because the treaty provides stable investment opportunities. Member states have the advantage of providing high quality goods and services in the Common Market because COMESA treaty recommends elimination of rigidities in manufacturing and production.

COMESA promotes member cooperation in financial and monetary matters and establishes convertibility of their currencies through the Common Monetary Union. Additionally, the members can harmonize their macroeconomic activities and remove the obstacles to the free movement of capital and services within the Common Market.

In the field of agriculture, the member states can easily cooperate in agricultural development and adopt a common agricultural policy in addition to enhancing a food sufficient region. Consequently, the countries have the benefit of cooperating in agricultural research and extension, enhancing rural development and export of agricultural commodities.

COMESA states have the benefit of making regulations to facilitate movement of goods and services within the region and adopting a Third Party Vehicle Insurance Scheme. Additionally, they are in a position of fostering cooperation in transport and communication among themselves; this facilitates the production of goods and services and movement of people.

COMESA accords members the advantage of adopting a regional policy that puts checks on all possible economic and social problems faced during the implementation of the treaty. Furthermore, the states have the benefit of free movement of labor, services, persons, attraction of investors and the right of residence within the COMESA region.

Somalia was formerly a full member of the Preferential Trade Area for Eastern and Southern Africa (PTA), the predecessor to COMESA. However, it failed to make the transition due to lack of government following a long civil war. Tunisia first applied for observer status in COMESA in 2005 but the matter was not concluded.

In 2016, Somalia and Tunisia formally wrote to the Secretary General making enquiries on joining. Applications from the two countries were communicated to the member States, and then tabled before the Council of Ministers to make appropriate recommendation for the attention of the Authority of the COMESA Heads of State and Governments.

Article 4 of the Treaty provides that the COMESA Authority may admit a country which is an immediate neighbour of a member State upon fulfilling conditions set forth including acceptance of the COMESA aims and objectives, compliance with the general undertakings and fundamental principles and wishing to co-operate with the regional bloc.

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