Treatment of Sugar in the Tripartite
FTA Incorporating COMESA, EAC
and SADC
By
Mike Matsebula (Dr)
CHIEF EXECUTIVE OFFICER
SWAZILAND SUGAR ASSOCIATION
Conference on “New Role for the World Sugar
Economy in a Changed Political and Economic
Environment”; Aswan, Egypt, 10-13 Nov 2012.
INTRODUCTION
 Objective: To outline the case for a special
treatment of sugar in the Tripartite Free
Trade Area (TFTA) which brings together
COMESA, EAC and SADC.
 The TFTA is an important milestone in
attaining deeper economic integration in
Africa as envisaged under the New
Partnership for Africa’s Development (NEPAD).
 The question is: What role can sugar trade
play and what are the conditions necessary
for effectively playing that role? This
presentation will answer this question.
OUTLINE OF PRESENTATION
 NEPAD as Policy Umbrella for Deeper
Economic Integration in Africa.
 Necessary Conditions for Sugar to Deliver
Integration Under NEPAD.
 Beginnings of TFTA.
 Sugar Trade Involving TFTA.
 Case for Special Sugar Dispensation.
 Negotiation Modalities for Sugar in TFTA.
 Negotiation Principles for Sugar in TFTA.
 Conclusion.
NEPAD AS POLICY UMBRELLA
 The New Partnership for Africa’s
Development (NEPAD) is a policy
framework for the socio-economic renewal of
the continent. It was adopted by Heads of
State and Govt on 23 Oct 2001 in Abuja,
Nigeria. It provides umbrella for African
integration.
 NEPAD is itself anchored on the Constitutive
Act of the African Union (adopted by Heads
of State and Govt on 11 July 2000 in Lome,
Togo); some of whose objectives (stated in
Article 3) are as follows:
SOME NEPAD OBJECTIVES
 To accelerate the political and socioeconomic integration of the continent.
 To establish the necessary conditions which
enable the continent to play its rightful role
in the global economy and in international
negotiations.
 To promote sustainable development at the
economic, social and cultural levels as well as
the integration of African economies.
[Note “integration” in all three objectives].
NECESSARY CONDITIONS
 For sugar trade to act as a meaningful
vehicle for deepening integration in Africa,
certain conditions must be fulfilled.
 First, there must be regional diversity in
sugar market structures to generate sectoral
linkages – especially surplus versus deficit
markets at regional and national levels.
 Second, there must be complementarities –
especially a conducive environment defined
by preferential trade arrangements and
adequate infrastructure (communications,
finance, laws, etc).
SUGAR AND NEPAD CONNECTION
 1st Support: ISO/Egypt Sugar Conference
held in Luxor in March 2009.
 2nd Support: FSSP Conference held in
Ezulwini, Swaziland in July 2009.
 3rd Support: FSSP Conference held in
Mauritius in August 2010.
 4th Support: Informal Meeting of TFTA
sugar industries held in Nairobi in Mar 2011.
 5th Support: Nairobi Mar 2012.
 6th Support: Aswan Conference 2012?
POTENTIAL FOR TRADE
 For the NEPAD connection to work, there
should be potential for trade in wholly
originating sugar. This potential has two
independent dimensions. The 1st is existence
of both surplus and deficit areas at regional
and national levels. The 2nd is existence of
formal and informal cross-border trade.
 One aspect of the 1st dimension can be
measured by regional net production. The
2nd dimension can be measured by intraregional trade in Africa.
NET PRODUCTION IN AFRICA
2006-10 (‘000 Tons)
Region
COMESA
EAC
SADC
RoA
TOTAL
Prodn
5 922
1 115
4 866
1 103
13 006
Cons
6 808
1 504
3 350
4 912
16 574
Balance
-886
-389
1 516
-3 809
-3 568
Positive/Negative Balance = Surplus/Deficit
Prodn. Thus, there is potential for trade
under 1st dimension. Cons gap = Overseas Imports.
Sources: ISO Sugar Yearbook 2011, ISO Secretariat, London.
EXPORT PATTERNS
Annual Averages over 2006-10, in Percentages
COMESA EAC SADC RoA EU RoW Total
COMESA 18
9
15
2 46
10
100
EAC
58
16
0
10
11
5
100
SADC
11
7
20
1
35
26
100
RoA
3
0
0
16
7
73
100
Each region in TFTA exports to rest of Africa and
overseas. There is significant intra-regional flows.
This shows 2nd dimension of potential for trade.
IMPORT PATTERNS OVER 2006-10, (%)
COMESA
COMESA 12
EAC
3
SADC
10
RoA
0
Brazil
35
EU
7
India
5
Thailand
3
RoW
26
Total
100
EAC
26
4
31
0
7
1
7
6
19
100
SADC
19
0
34
0
34
1
2
3
8
100
RoA
1
0
1
1
80
9
2
0
6
100
Imports from other regions show 2nd dimension of potential for trade.
There is also room for overseas imports (see Rows 6-9).
BEGINNINGS OF TFTA
 It was agreed by Heads of State & Gov at a
Summit held in Kampala, Uganda on 22 Oct
2008. Its objective is to establish a single CU.
 Negotiations towards this objective were
launched on 12 June 2011 in Johannesburg.
 So far, a number of meetings have been held
to agree on rules of procedure, terms of
reference & negotiation schedule; to
exchange information so as to identify
offensive and defensive interests; and to
elaborate the negotiation principles as well
as negotiation modalities.
TFTA MEMBERSHIP
 The total number of countries in the TFTA is
26. But due to overlapping membership,
COMESA has 19, EAC 5 and SADC 15.
 Two-thirds belong to either 2 or all 3 regions.
 Membership overlaps introduce
inefficiencies in trading arrangements which
end up distorting cross-border flows of
products. The result is a sub-optimal pattern
of trade. Removing the overlaps will create a
platform for deepening integration. Thus,
the potential for improved welfare is there.
SUGAR TRADE INVOLVING TFTA
 Sugar trade in TFTA can be enhanced under
a special dispensation negotiated separately
from all other products. For exporters, net
price within TFTA will rise relative to
overseas markets. For importers, net price
within Africa will fall relative to overseas
markets. The overall result will be improved
welfare for the TFTA.
 Increased sugar trade within TFTA will not
cut out trade with rest of Africa and overseas
countries because of many factors. Next slide
shows ample room for extra-TFTA trade.
SUGAR EXPORT AND IMPORT LEVELS
BY AFRICAN REGION
Annual Averages over 2006-10 in ‘000 Tons
COMESA EAC SADC RoA
COMESA 339
172
297
30
EAC
83
24
0
14
SADC
297
203
536
30
RoA
10
1
1
54
Brazil
1 004
44
541 4 402
EU
189
7
9
506
India
146
47
24
95
Thailand 100
40
50
16
RoW
740
124
130
328
Tot
2 909
660
1 588 5 474
EU RoW
898 199
16
7
959 706
23 239
Total
1 934
144
2 731
327
NOTE:
Read exports
along rows and
imports down
columns.
SOURCE: Yearbook 2011, International Sugar Organization, London.
SPECIAL DISPENSATION
 TFTA sugar industries recognised the need
to collectively consider an appropriate
arrangement for the treatment of sugar.
This was initiated on the side-lines of a sugar
conference in Nairobi, Kenya, on 24 March
2011 where reps from Kenya, Swaziland,
Tanzania and Uganda (the only sugar
producers present) met to exchange ideas.
 The output of this exchange was reflected in
a draft paper on a proposed treatment of
sugar in the TFTA.
SPECIAL DISPENSATION (Cont’d)
 The paper proposes that sugar be treated in
a special dispensation negotiated separately
from all other commodities. The paper was
shared with all TFTA sugar industries, incl
those who were not represented in Nairobi.
 The sugar industries are expected to use the
paper to sell the case for special dispensation
to their respective national governments who
will be involved in the TFTA negotiations.
 The case for special dispensation is based on
arguments summarized in the next 4 slides.
1. DISTORTIONS: TARIFF AND NTBs
 These include production subsidies, price
support systems, export rebates, import
quotas and prohibitive import duties.
 The result is a world sugar market whose
behaviour is not reflective of global supply
and demand conditions. In particular, the
world market price for sugar has historically
not reflected average global prodn costs.
 Allowing for free trade in sugar within the
TFTA under such a second-best environment
would not be an optimal strategy.
2. HETEROGENEITY
 TFTA sugar industries are operating under
different regulatory and market frameworks
which reflect differences in challenges,
opportunities, market structures and policy
responses to global market conditions.
 There are deficit and surplus producers as
well as cross-border trade among countries.
 An optimal framework is required for trade
in such an environment so that no sugar
industry is driven to extinction given its
strategic and multifunctional role.
3. CONSUMPTION GROWTH
 Sugar consumption in Africa is projected to
grow faster than anywhere else in the world
in the next 10-20 years. This growth will
require increased production, diversion of
sugar initially destined for overseas markets
and increased intra-regional trade.
 These results can be promoted through a
special dispensation which provides for: (a)
orderly trade and (b) enhanced productivity
as well as competitiveness through technical
cooperation (research, training, technology
transfer and joint investment efforts).
4. STRATEGIC ROLE
 Sugar industries play strategic and
multifunctional roles in their respective
economies. This is because the sugar
industry is one of the most promising agribusiness sectors for future expansion, rural
infrastructural investment, income
generation and human development.
 Accordingly, sugar industries and their
markets within TFTA must be nurtured and
not destabilised in the light of global
distortions. They must be given time to
become strong and globally competitive.
RECENT TFTA MEETING
 On 2 Oct 2012, TFTA sugar industries met
in Dar Es Salaam, Tanzania to receive
feedback from consultations with national
government on special dispensation and to
propose negotiation modalities. Those who
attended are Malawi, Mauritius, Kenya,
Mozambique, South Africa, Swaziland,
Tanzania, Uganda and Zimbabwe.
 It was noted that some governments are in
support of the special dispensation. Others
had not expressed a view yet because
consultations are still on-going.
NEGOTIATION MODALITIES
 The proposal is that sugar be excluded from
the standard modalities for liberalization of
trade in goods. The approach is to seek
liberalization of trade in sugar under a
structured and disciplined special
arrangement which safeguards the acquis of
all parties. The liberalization modalities
would be an outcome of negotiations.
 The arrangement should be transparent and
support trade flows in sugar without causing
disruption for other sugar producers in the
TFTA region.
NEGOTIATION PRINCIPLES
 The arrangement would cover all types of
sugar under tariff code HS 1701.
 A stand-alone instrument (Protocol,
Regulation, etc) would be needed to
implement this arrangement.
 The arrangement should not destabilise any
or all of the region’s producers. Unregulated
trade can negate the benefit of any
preferences secured and even destroy the
value of sugar markets in the region.
 The arrangement should promote regional
integration.
PRINCIPLES (Cont’d)
 The arrangement should provide that
policies pursued in any of the TFTA
territories (countries or regions or subregions) are in line with the objectives of the
arrangement, i.e. development and
sustainability of the TFTA sugar industries.
 The arrangement must seek to promote and
facilitate technical cooperation between the
region’s sugar producers.
 Preferences already established within the
TFTA through other trade arrangements
should be respected.
PRINCIPLES (Cont’d)
 The arrangement should promote
efficiencies and long-term sustainability of
TFTA sugar industries, taking into account
the existence of surplus and deficit regions.
 The arrangement should minimise exposure
of the TFTA sugar industries to the vagaries
of a distorted world sugar market as well as
provide for a review on the basis of changing
world sugar market conditions and
circumstances (e.g. removal of distortions).
PRINCIPLES (Cont’d)
 The arrangement must address non-tariff
and technical barriers to trade in sugar so
that they do not undermine the achievement
of its objectives.
 The arrangement should be supported by
stringent Rules of Origin. Only sugar
originating in the TFTA should qualify for
preferential trade.
 The arrangement must be transparent to
allow for clarity to investors and traders.
NEGOTIATION PROCESS
 Sugar industries would engage each other
first to agree on the main elements of the
proposed framework and to exchange
information based on a template.
 The standard negotiation permutations as
indicated in the general TFTA modalities
document will be used as a guide, with the
flexibility of pursuing variations which can
achieve a win-win outcome without violating
the agreed negotiation principles. These
elements would be circulated to all sugar
industries and used for briefing govts.
NEGOTIATION PROCESS (Cont’d)
 Thereafter, the proposed framework would
be submitted to a TFTA forum of sugar
industries and governments (i.e., Working
Group or Committee on Sugar). The forum
would then recommend the framework to the
appropriate body in the TFTA institutional
structure for endorsement and finalization.
 The TFTA sugar industries have agreed to
continue meeting through the current
informal forum (called the “TFTA Sugar
Industries Consultative Forum”), even if the
proposal for a special dispensation fails.
CONCLUSION
 The TFTA is a tremendous milestone in the
push for deeper integration in Africa. It has
now given life to the CFTA initiative.
 These two steps are very much in line with
the NEPAD concept. But to make this a
reality requires, inter alia, the following:


Preferential access within Africa under a special
dispensation for sugar.
Improved cross-border infrastructure.
 Since Africa will remain a net importer for a
while, deepening integration does not mean
cutting off extra-continental imports.