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Regulating business in the Tripartite FTA

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The historic Tripartite Free Trade Area (TFTA), an idea which was conceived through the 1981 Abuja Treaty when African states committed themselves to the 34-year phased creation of an African Economic Community, is slowly becoming a reality.

Stretching from Cape to Cairo, the Tripartite encompasses Africa’s three regional trading blocs; the Common Market for Eastern and Southern Africa (Comesa), East African Community (EAC) and the Southern African Development Community (Sadc), making it Africa’s largest trading economic bloc.

The TFTA covers a population of 632 million with a combined GDP of US$1.3 trillion. The area spans 17.3 million square kilometres, which is nearly twice the size of China or the United States.

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The bloc is a much larger market whose free flow of goods and services will help to maintain economic growth in Africa at six to seven percent per year. At this rate, the combined GDP of Africa is projected to reach US$29 trillion by 2050, which would be equal to the current combined GDP of the EU and the US.

With additional policies, such growth will contribute significantly to spreading prosperity and reducing poverty. Also, the TFTA will serve as an impetus for investment in Africa’s cross-border infrastructure. It is estimated that Africa needs to invest nearly US$100 billion annually in infrastructure over the next decade.

But, while the Tripartite FTA is hoped to become a major boost to intra-regional trade, stimulating the level of economic activity across the region, reducing poverty through employment and wealth creation, it also stands out as an opportune platform for the flourishing of anti-competitive behavior at the expense of consumers and weaker economies.

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For Africa, the tripartite is perhaps the best indication of the role that competition policy plays in creating conditions of governance for both the national, regional and global market places.

And according to the Executive Director of the Comesa Competition Commission (CCC) George Lipimile it is unlikely that members of the TFTA can enjoy the benefits that comes with regional integration in the absence of a supranational competition body to police the activities of the market.

“An active regional competition policy is needed to discourage business practices which have the effect of restraining trade between member states. It is an essential element of an open market economy where markets need to be protected against the creation of dominant positions, cartels and abuses of market power,” he said.

Lipimile said the purpose of competition law is to facilitate competitive markets, so as to promote economic efficiency, thereby generating lower prices, increasing choice and economic growth, thereby enhancing the welfare of the general community.

‘‘Competition promotes innovation as firms facing competitive rivals innovate more than monopolies. To achieve this goal, competition law must be enforced effectively,’’ he said.

The globalisation of the world economies has brought many challenges to national competition authorities to curb multinational anticompetitive behaviours given jurisdictional and practical limitations of their enforcement powers.

But, the impact of anticompetitive behaviour often goes beyond national borders. And according to Comesa Legal Affairs Officer and a member of the Tripartite Legal Committee Gabriel Masuku, establishing a supranational competition body is an important step towards protecting weaker economies in the Tripartite from abuse arising from dominancy of stronger economies.

Speaking on the sidelines of a sensitisation workshop on competition matters organised for business journalists in Comesa that took place in Livingstone Zambia, Masuku said the discussions around the establishment of the competition policy are expected to be held under phase II of the tripartite negotiations.

“The EAC, Sadc and Comesa through that negotiatiating forum will have to be negotiating and agreeing on having a common tripartite competition policy that will provide guidance on how to deal with anti-competitive practices.

“Fortunately as Comesa, we have our own competition instrument that has been successful in dealing with competition cases. All we have to do as Comesa is to sensitise member states about what we have right now because one of the negotiating principles right now is building on what you have,” he said.

Masuku said will package and sell its competition policy to Sadc and EAC so that it can be accepted as the Tripartite initiative to offer guidance on issues of competition policy.

So far, 16 tripartite member states signed the TFTA agreement out of 26 but the agreement will only enter into force after ratification by at least 14 member states.

Although the the signing of the agreement is a significant milestone towards achieving a common accord between the three trading blocs, the agreement still needs to be approved and ratified by 26 national parliaments—a process that could take up to two years.

South Africa, Zambia, Mozambique, Madagascar, Mauritius, Libya, Lesoth, Eritrea Ethiopia and Botswana are yet to sign the agreement. Malawi signed but is yet to ratify it.

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