Services provisions in regional trade agreements : does the East African community stand to gain more from an integrated market?

Abstract

Services are the fastest growing sector of the economy. With the advent and development of technology, trade in services has grown more rapidly than trade in goods in world production. This has also resulted from ongoing economic reforms and the development of more liberal policies. Prior to the Uruguay Round of negotiations, international trade was confined to the conventional form of trade in goods or merchandise trade. With new developments, especially with the advent of technological changes, trade not only centred on cross border exchanges of goods but was broadened to include cross border trade of services. In spite of this development in trade in services, trade negotiations on services liberalisation have made little progress under the World Trade Organisation (WTO). Because of this, countries have opted for other fora to address their needs under trade in services. One of the ways of doing this has been to enter into regional and free trade agreements providing for liberalisation of trade in services. Such has been the case of the proliferation of such agreements not only Africa but the world over, during the last decade. Services provisions under regional trade agreements (RTAs) follow the same trend as those RTAs that provide for goods. They are largely premised on the elimination of explicit barriers to the entry of foreign service providers in the region. Notably, for services trade under RTAs, two models of liberalisation are largely used. A number of RTAs tend to duplicate the use, found in GATS, of a positive-list approach to market opening, whereas others pursue a negative-list approach. The negative-list approach is modelled along the services provisions in the North American Free Trade Agreement (NAFTA). Much discourse has been advanced on which of the models of liberalisation is better although no conclusive research has been undertaken in support of either one. Proponents of the negative list do advance its attributes while those of the negative list do the same. However, most of them conclude that one cannot say with finality that either one is the better option because the impact of liberalisation is not automatic. Such liberalisation, in order to benefit the regional economy, and also the domestic economies, must be accompanied by related policy reforms and proper formulation of such reforms. Managing reforms of services markets should therefore be done in combination with the proper formulation of both competition and regulatory reforms and policies. In addition, there should be adequate regulation and supervision mechanisms to monitor the functioning of the different services sectors or else the liberalisation efforts of the countries will be undermined. Much of such discourse on the choice of either approach to liberalisation has been undertaken based on the RTAS and free trade agreements in North America and Asia. Notably, not much of the same has been done regarding such agreements in Africa. As such, this research is undertaken focusing on assessing albeit fleetingly, the scheduling approach adopted by the East African countries under the Protocol for the establishment of the East African Community Common market. This research, while drawing from that undertaken in other regions, attempts to explore the likely consequences of the liberalisation approach adopted by the countries of the East African Community.