Continental Level

The African Union member countries agreed in 2012 to create the Continental Free Trade Area (CFTA), building upon the existing African regional economic communities (RECs). Progress towards the EAC-COMESA-SADC Tripartite Free Trade Area certainly was a leading impetus for agreement to negotiate the CFTA, scheduled to be completed in 2017 (USAID 2012).

The CFTA would be one of the building blocks towards the African Economic Community, the long-term vision for the African Union featuring a customs union, a common currency, and many other features of an advanced regional economic integration scheme. The present target date for the African Economic Community is the year 2035.

Negotiations on the CFTA are not yet underway, although the African Union Commission is proceeding with plans for how to structure them. As the CFTA also includes the goal of free trade in services between African countries, there is a great deal of background work such as case studies and explanation needed before countries are ready to make commitments. One of the conclusions regarding the CFTA is that the greatest economic gains will come from consolidation by African countries of the free trade areas already envisioned within their existing RECs (USAID 2012). That is, living up to their existing commitments will bring greater gains than making new commitments. The CFTA of course can be a stimulus for African countries to come into greater compliance within their existing RECs before opening up to new agreements.

As part of the CFTA, the AU member countries also agreed on the Action Plan for Boosting Intra-African Trade (BIAT), which provides direction in terms of how to improve national benefits both from a continental free trade area and during the negotiating period. Seven clusters were identified where member states needed to improve their performance in order to boost intra-African trade:

Trade policy
Trade facilitation
Trade-related infrastructure
Productive capacity
Trade finance
Trade information.

The CFTA would solve the widespread problem in Africa of overlapping membership in RECs, as shown in the “spaghetti bowl” diagram (Figure 1). When countries belong to more than one REC, or have bilateral trade agreements (with just one other country), the national Customs code becomes more complicated, with a special column for imports arriving under the terms of that trade agreement. Overlapping membership requires both border officials and traders to be more knowledgeable about the precise rules of origin and product classification in order to have the correct Customs tariff applied. Fortunately, Mozambique only belongs to one REC, SADC, other than the African Union itself.

The Tripartite Free Trade Area (TFTA) has been in negotiation since 2008, aiming to bring together the 26 countries of the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and SADC in one large free trade area covering half the continent. Mozambique has been part of the process since the beginning in 2008, and plans to join at the opportune moment, but announced in June 2015 that it will not take part in the present phase of the Tripartite FTA negotiations, as described in more detail below.

European Level

Mozambique is party to 3 main agreements with the European Union. Portugal, like all EU members, has transferred authority for external trading relations to the European Commission (EC). While historic links, a common language, and cultural preferences very well may boost trade between Mozambique and Portugal, Mozambique’s trade agreements are Europe-wide commitments.

The EU-ACP Cotonou Convention remains in force, symbolizing the evolution of Europe’s relationship with most of its former colonies and certain other LDCs. The Cotonou Convention covers a total of 28 countries on the EU side and 71 on the ACP side and historically has provided disproportionately favorable access to EU markets for ACP products while requiring little in the way of market access into ACP countries. The Cotonou Convention extends duty-free, quota-free access to most ACP exports to the European Union under the unilateral Generalized System of Preferences (GSP). Some developing countries committing to respect international labor rights and environmental considerations can be eligible for greater access under GSP+.

More than solely a trade agreement, the Cotonou Convention also includes access for ACP countries to the European Development Fund (EDF), a multi-billion Euro fund capable of financing a range of infrastructure and economic development activities. The EU’s common trade policy does not extend to development assistance, so beyond the common EC and EDF assistance, Portugal and other EU countries are free to provide bilateral development assistance to Mozambique as they see fit.

The Everything But Arms Agreement slightly expands access for ACP export into EU markets, including for previously well-protected commodity areas such as bananas and sugar. Unlike the EU-ACP Cotonou Agreement, Everything But Arms does not include a development aid dimension. The main purpose of Everything but Arms, which is essentially a unilateral concession on the part of the EU, is to guarantee the maintenance of the same degree of GSP access to the ACP countries even in the event of the failure to come to agreement on an Economic Partnership Agreement.

The EU-SADC Economic Partnership Agreement (EPA) signed in July 2014 is the primary framework governing the trading relationship going forward between the EU and a group of SADC countries, including Botswana, Lesotho, Mozambique, South Africa and perhaps others.[1] This long-awaited agreement in principle resolves several highly technical WTO-related issues related to the granting by the EU of greater preferences to the ACP countries than to other developing countries such as those in Latin America. Mozambique was one of 5 SADC LDCs that signed an interim EPA with the EU in June 2009, along with Botswana, Lesotho, Mozambique, Namibia and Swaziland, although that interim agreement was never fully ratified.

The EU-SADC EPA only concerns trade in goods, but also continues access by the ACP countries to the European Development Fund. Few if any new trade concessions were opened up in terms of market access into Europe, particularly since “everything but arms” guarantees that most products could already enter the EU duty-free and quota-free. Most of the tariff concessions in the EU-SADC EPA are on the side of the SADC countries, which is in part why the EPA took more than 10 years to negotiate.

In the coming years, Mozambique will need to implement tariff reductions on European imports as part of the EU-SADC EPA and monitor their impact on national revenue and trade flows.

Under the EU-SADC EPA, the Trade Related Facility Programme was agreed upon in June 2014 as a way for the EU to provide implementation assistance to the SADC Secretariat and SADC member countries. Mozambique is eligible for €1.4 million for establishment of an STP Window for monitoring of the SADC Trade Protocol and €1.2 million for the EPA Window to enhance implementation of the EU-SADC EPA. As of this date, it is unclear what effect the Trade Related Facility Programme has had regarding progress on either objective for Mozambique.

Aside from theoretically bringing to an end the long debate within the GATT and WTO regarding the use of GSP to favor certain developing countries over others, one of the most intriguing aspects of the new arrangements with the EU under the EU-SADC EPA is a new EU export promotion facility. The EU has established a help desk (http://exporthelp.ec.europa.eu) to assist potential exporters become familiar with the rules for exporting to the EU. The services of the EU Export Help Desk are available in English, French, Spanish and Portuguese, covering requirements and taxes, import tariffs and other import measures, the terms of preferential arrangements, trade statistics, weblinks, a quarterly newsletter, and a contact point to lodge detailed questions.

Agreements with the U.S.

Mozambique and the U.S. have been cementing their trade relationship on a closer basis since 1998, starting with an initial bilateral investment treaty. The 2005 U.S.-Mozambique Trade and Investment Framework Agreement (TIFA) further reinforced the enabling environment for bilateral trade, such as provisions related to exporters or importers seeking recourse in national court systems, but did not contain specific trade concessions.

The main agreement directly related to trade is the U.S. African Growth and Opportunity Act (AGOA) from 2000, providing duty-free, quota-free access for most Mozambican products into the U.S. market. AGOA essentially is a unilateral concession on the part of the U.S., offered under the Generalized System of Preferences (GSP). While opening a trade opportunity, AGOA does not guarantee that Mozambique can export to the U.S., as meeting product standards and ensuring traceability can be high hurdles in some areas.

Similar to the 1998 bilateral investment treaty, Mozambique’s participation since 2008 in the Millennium Challenge Account (MCA) facility can be seen as part of the enabling environment in which trade occurs, but does not contain specific trade concessions. As with development assistance via USAID, programs under the Millennium Challenge Account can help to increase the competitiveness of Mozambique’s exports, and promote greater export diversification.

Regional Level

The sole regional economic community to which Mozambique belongs is the Southern African Development Community (SADC), whose other members are Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Namibia, the Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe (Figure2).As can be seen in Table 2, all of the other SADC countries belong to one or more other RECs.

The SADC Trade Protocol took many years to negotiate in the 1990s, as the SADC countries found it particularly difficult to agree upon rules of origin, in the end arriving at quite stringent rules of origin above all on textiles and garments. The SADC Trade Protocol was signed in 1996, came into effect in 2000, and the SADC Free Trade Area was declared to be operational in 2008, with 85% of tariffs eliminated amongst its member countries.[2] Mozambique appears to be in full compliance with its tariff reduction commitments under SADC.

In addition to tariff liberalization, SADC also includes a number of enabling environment issues such as competition law, anti-dumping and safeguard measures. In terms of trade facilitation, the SADC Trade Protocol also calls for Customs cooperation, simplification and harmonization of trade documentation and procedures, use of common SADC documents, and other aspects.

Overlapping Membership in RECs by SADC Members (but not Mozambique)

Country	ECCAS	SADC	EAC	COMESA	SACU
Angola	X	X
Botswana		X			X
Lesotho		X			X
Madagascar		X		X
Malawi		X		X
Mauritius		X		X
Mozambique		X
Namibia		X			X
Democratic Republic of Congo	X	X		X
Seychelles		X		X
South Africa		X			X
Swaziland		X		X	X
Tanzania		X	X
Zambia		X		X
Zimbabwe		X		X

Source: Research by author.

Beyond simply a free trade area, SADC countries also cooperate on political issues, taking common positions within the African Union, the WTO and other bodies when possible. SADC aims for a Customs Union (with a target date of 2010), a Common Market (2014), and a Monetary Union (2018), although as with other advanced regional integration schemes elsewhere, these dates are not hard and fast.

Mozambique is not a member of the other large REC in the area, the Common Market for Eastern and Southern Africa (COMESA), but 8 of its SADC partners are (Figure 3). Mozambique used to belong to COMESA, but left in 1998. Each REC requires roughly a half-million dollars in annual membership fees, plus the costs of attending regional meetings and summits. Mozambique has bilateral agreements with its 2 most important transit trade partners, Malawi and Zimbabwe, both member countries of COMESA and SADC, clarifying the precise terms of trading arrangements.

While not a member of the Southern Africa Customs Union (SACU), in which the Republic of South Africa predominates, Mozambique has long trading ties in goods, services, and capital with South Africa.[3] SADC remains the regional economic community in which Mozambique and South Africa collaborate.

Bilateral Level

Mozambique negotiated bilateral trade agreements with Malawi in 2005 and with Zimbabwe in 2004, formalizing long-standing trade preferences that go back to the colonial period before independence (WTO 2009). Malawi and Mozambique agreed on reciprocal duty-free treatment for import products originating in each country, with exceptions for beer, branded soft drinks, chicken, cooking oil, petroleum products, sugar and tobacco. The agreement with Zimbabwe is similar, with exceptions including beer, branded soft drinks, manufactured tobacco, road motor vehicles, and sugar.

As can be seen both Malawi and Zimbabwe are landlocked countries and Mozambique is the most logical port of entry for transit goods. While the SADC Trade Protocol covers transit trade, the bilateral agreements go into greater detail, for example stipulating that goods must enter Mozambique through specified Customs posts.

[1] Angola has an option to join the EU-SADC EPA in the future.

[2] Sugar is one notable exception.

[3] SACU, established in 1910, is the oldest Customs Union in the world. One feature of SACU that no other African REC has achieved is the putting in common of all Customs revenue.

Notícias

Fundo de resiliência para as empresas

Lei das Leis: um quadro transparente para produzir leis em Moçambique

Saiba como a USAID ajudou a aliviar as dificuldades financeiras dos Fiscais em tempos de COVID 19

Jovens aprendem sobre crimes a biodiversidade

“A natureza dos homens e dos animais”

MCC define áreas prioritárias para financiamento nos sectores de Gestão integrada do clima e desenvolvimento costeiro

Pré-lançamento do Projecto Linkar

Jovens desafiados a proteger a biodiversidade

Lançado Manual de Apoio aos Juízes em matérias de crimes contra vida selvagem

Por uma Geração consciente da importância da conservação da biodiversidade

Formandos em Magistratura reflectem sobre crimes contra a biodiversidade

MJACR reflecte sobre metodologias de elaboração legislativa no país

Estudantes de Direito sensibilizados em matérias de crimes contra vida selvagem

Governo lança plataforma disponibiliza informação de biodiversidade de Moçambique

Saiba como a USAID trabalha para desenvolver capacidades profissionais em jovens moçambicanos recém-graduados nas instituições de ensino superior