Mugabe becomes chair of COMESA

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

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

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)