Role of the Bank of Industry in Nigeria's Industrialization

Nigeria's Trade Policy Reforms

Bilateral Investment Treaties Entered Into by EAC States

EAC Partner States have entered into various Bilateral Investment Treaties (BITs) some of which are in force. This information is based on the UNCTAD Investment Database and it is noted that some of the BITs may no longer be in force. Hence for most current updates it is best to contact the Partner States themselves.  

Burundi has 5 BITs, Kenya 3 BITs (all EU), Rwanda 3 BITs, Tanzania 9 BITs (all European Economic Area (EEA) while Uganda has the most at 13 of which 8 are with EEA countries.  

As indicated most of the BITs are with EU countries notably Germany, UK, Belgium and the Netherlands.  Of the 34 BITs identified, 25 are with the EU region (almost 75%). Rwanda is the only country with a BIT with the US. Uganda has BITs  with other African countries e.g. Mozambique, Egypt, Sudan and Eritrea and is the only country with a BIT with China.  Burundi is indicated as having BITs with Mauritius and Comoros.

Below is an overall compilation of the BITs and the Parties. 

Burundi: Belgium, Germany, Mauritius, UK, Comoros and Netherlands
Kenya: Germany, UK, Netherlands
Rwanda: Belgium, Germany, US
Tanzania: Denmark, Switzerland, UK, Belgium, Finland, Germany, Italy, Netherlands, Sweden
Uganda: Denmark, Egypt, France, Netherlands, Switzerland, UK, Sweden, Germany, Belgium, Mozambique, Sudan, Eritrea, China

On global trends, its useful to note that the US and Germany are the top home sources of outflows of FDI while the US and China are the top host destinations for inflows of FDI (2010 data). Meanwhile the EAC and the US have concluded a Trade and Investment Framework Agreement which is a cooperative agreement. However, as a region, the EU is the world's leading host of FDI as well as the world's biggest source of FDI outside the EU. Consequently, the EU Member States together account for almost half of the investment agreements currently in force around the world (almost 1300).  See previous related post here on the new EU approach to investment and the EPA investment negotiations.

While international investment agreements have traditionally been negotiated by the relevant government ministry, there is now an emerging trend of inter-ministerial or inter-agency coordination. This process is particularly prominent at the European level and in EU member States. To the extent that countries are reviewing their BITs or that BITs need to undergo domestic ratification processes, the call for increasing transparency and inclusiveness of BIT-related decision-making is gaining additional traction.  Sectoral investment agreements are also a viable option where there is compelling justification to consider a BIT however using a more targeted and conservative approach.

Rwanda-US Bilateral Investment Treaty and the EAC Common Market Protocol

The Rwanda-US Bilateral Investment Treaty (BIT) was signed in Kigali in 2008 and the United States Senate unanimously approved the treaty on September 26, 2011. Meanwhile, the EAC-US Trade and Investment Framework Agreement (TIFA) was signed in July 2008 between USTR and the EAC.  In addition, the EAC Common Market Protocol (CMP) to which Rwanda is a member came into force into force on 1st July 2010. 


The Rwanda-US BIT is the first to be concluded between the US and a sub-Saharan African country since 1998 (when a BIT was signed with Mozambique). Although there are over 40 BITs in force to which the US is a Party, this Treaty with Rwanda is only the second concluded on the basis of the ambitious 2004 U.S. model BIT. Other African countries with BITs currently in force with the US include: DRC, The Congo, Morocco, Senegal, Egypt, Cameroon and Tunisia. The BIT with Rwanda will remain in force for ten years after its entry into force and will continue in force unless terminated by a Party by providing one year’s advance notice to the other Party. 

The BIT provides investors with legal protections which include non-discriminatory treatment of investors and investments and the right to freely transfer investment-related funds.  Unlike the EAC CMP however, the BIT also provides for prompt, adequate, and effective compensation in the event of an expropriation; freedom from specified performance requirements, such as domestic content or technology transfer requirements; and provisions to ensure transparency in governance. The BIT also gives investors in all sectors the right to bring investment disputes to neutral international arbitration panels.  

In comparison, EAC CMP Article 29 on the Protection of Cross-Border Investments, undertakes to protect investors and their returns in a non-discriminatory manner however the modalities for doing so are not yet finalised. Article 29:3 proposes that within 2 years after the coming into force of the CMP, Partner States will take measures to ensure necessary protections in the Community.


In contrast, the EAC-US TIFA establishes a EAC-US Council On Trade and Investment to monitor trade, identify and remove impediments to trade and investment.

The BIT contains provisions on National Treatment and Most-Favoured-Nation Treatment whereby it protects investors of a Party and their covered investments from discriminatory measures by the other Party during the full life-cycle of an investment, including the establishment phase. Each Party commits to provide to investors of the other Party and to their covered investments treatment no less favorable than that which it provides, in like circumstances, to its own investors (National Treatment) or to investors from any third country and their investments (MFN Treatment). In this instance, Rwanda has committed in the BIT to give US investors similar treatment it is providing to EAC Partner States, in like circumstances, under the Common Market Protocol. 

In contrast however, the EAC CMP Article 13 on the Right of Establishment, EAC States have committed to the principle of MFN but not the principle of National Treatment. However in Article 16 on the Free Movement of Services, the principles of MFN and National Treatment are addressed. Hence National Treatment is applicable in the EAC CMP for investment in the services sectors but seemingly not investment in industrial sectors e.g. agriculture, manufacturing, hunting, and forestry, mining and quarrying, energy production/transmission and distribution. 

On Transfers, the BIT has free transfer obligations which require that a Party permit capital and other transfers related to an investment be made freely both into and out of its territory. Additionally, a Party must permit transfers to be made in a ‘‘freely usable currency,’’ as designated by the IMF, at the market rate prevailing at the time of the transfer. Parties may however prevent transfers through the equitable and non-discriminatory application of certain laws. The EAC CMP on the other hand has provisions on the Free Movement of Capital Articles 24-28 which corresponds to the CMP Schedule on the Removal of Restrictions on Free Movement of Capital (Annex VI).

On Performance Requirements, the BIT prohibits the imposition by the Parties of several requirements relating to the performance of investments, including a requirement to achieve a given level of exports or domestic content or requirements linking the value of imports or domestic sales by an investment to the level of its export or foreign exchange earnings. The Article also prohibits Parties from offering advantages, such as tax holidays, in exchange for a more limited set of performance requirements. In the WTO context, the Agreement on Trade Related Investment Measures (TRIMS) takes a similar prohibitive approach however only in the context of trade in goods. 

So as not to place U.S. and Rwandan investors at a competitive disadvantage, the disciplines on performance requirements also apply to all investments in the territory (non-discrimination) of a Party, including those owned or controlled by host-country investors (domestic investors) and those owned by non-Parties. The EAC CMP does not impose performance requirements however it would seem that by virtue of the BIT, Rwanda cannot impose such measures even in the services sectors vis a vie any third Party. In practice, Rwanda may want as a policy to impose some performance requirements e.g. the technology transfer in targeted sectors, vis a vie more developed countries and justifiably so, in order to meet key development objectives.  This provision is therefore not in the interest of Rwanda given her level of development. It should be mentioned that the development of China is linked to performance requirements (local content) the Chinese government put in place for foreign investors. See related piece here. Fortunately however Rwanda has exempted performance requirements in her Annex II on non conforming measures (discussed below).

On Senior Management and Boards of Directors, the BIT prohibits measures requiring that persons of any particular nationality be appointed to senior management positions in a covered investment. A Party may require that a majority of the board of directors of a covered investment be of a particular nationality, or that a director be a resident of the host country, so long as such requirements do not materially impair an investor’s control over its investment. This provision would prevent Rwanda from implementing broad-based local empowerment policy to foster development of its own nationals into senior management positions and fortunately Rwanda exempted this in her list of non conforming measures (discussed below). Meanwhile in this context, the EAC CMP does not discipline the composition of Boards of Directors and the nationality of Senior Management by virtue of the principles of free movement of workers and right of establishment. The CMP only requires that juridical persons be established in accordance with the national laws of a Partner State.  

In the Publication of Laws and Decisions the provisions in the BIT seek to promote transparency in the legal framework governing investment. It requires the Parties to ensure that laws, regulations, procedures, administrative rulings of general application, and adjudicatory decisions that relate to any matter covered by the Treaty are promptly published or otherwise made publicly available. The EAC CMP contains a mildly similar provision in the Free Movement of Services chapter Article 19 whereby notification is required but not publication and the notification only applies after the introduction of the measure. 

In the BIT, each Party is obligated, to the extent possible, to publish in advance any laws, regulations, procedures, or administrative rulings of general application with respect to matters covered by the Treaty that the Party proposes to adopt, and to provide interested persons and the other Party a reasonable opportunity to comment on the proposed measures. In the EAC CMP, provisions on advance publication and comments are not addressed.  In practice this means that the US would have the opportunity to view, comment  and make recommendations in advance, on Rwanda's proposed laws and regulations however EAC Partner States would not.

On the rules of origin (Denial of Benefits) the BIT establishes that a Party may deny the benefits of the Treaty to an investor of the other Party if persons of a third country own or control the enterprise and the denying Party either (1) has no diplomatic relations with the third country; or (2) adopts or maintains measures, such as foreign policy sanctions, with respect to the third country or to a person of the third country that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of the Treaty were accorded to the enterprise or to its investments. This provision impacts on third Parties that are on sanctioned lists of either Party.

The provisions on Denial of Benefits also establishes that a Party may deny the benefits of the Treaty to an investor of the other Party if the enterprise has no substantial business activities in the territory of the other Party and persons of a third country, or of the denying Party, own or control the enterprise. 

The Agreement also lists Non-Conforming Measures (equivalent to negative lists) and in these Annexes, each Party lists existing measures to which any or all of four key obligations of the Treaty do not apply, and sectors or activities in which each Party reserves the right to adopt future measures to which any or all of those obligations will not apply. Annex III of the BIT is reserved for financial services NCMs. 

Annex I:

Rwanda: Exemption from MFN and National treatment in all sectors to allow for differential minimum capital requirements for investment registration. Here Rwanda identifies "local investors" to include Rwandese and COMESA investors who are entitled to a lower capital threshold (USD 100,000) than "foreign investors" (USD 250,000). While EAC is not mentioned in the BIT given the common market was not yet in place, one can argue that the EAC falls in the "local investor" category since the common market is technically working towards a single market.

United States: Atomic Energy; Mining; Air Transportation; Customs Brokers; Radiocommunications Licenses; and restrictions on securities registration and OPIC insurance eligibility. 

Annex II 

Rwanda: Preferences for socially or economically disadvantaged communities and differential treatment pursuant to existing international treaties. Here Rwanda reserves the right to adopt  measures in all sectors that are not consistent with the provisions on National Treatment, Performance Requirements and Senior Management and Boards of Directors in order to accord rights or preferences to socially or economically disadvantaged communities. 


Rwanda also reserves the right in all sectors to deviate from MFN provisions in order to adopt or maintain any measure that accord differential treatment to countries under any bilateral or multilateral international agreement in force or signed before the BIT. For agreements signed or in force after the date of entry into force of BIT, Rwanda reserved the right to deviate from MFN treatment with regard to: (a) aviation; (b) fisheries; and (c) telecommunications.  

United States: Radio/Satellite Communications, Cable Television, Social Services, Minority Affairs, measures relating to U.S.-flagged maritime vessels, and differential treatment pursuant to existing international treaties. 

Annex III 

Rwanda: On insurance, Rwanda states that the entry shall cease to have effect on the earlier of: (i) the date that Rwanda enacts an insurance law that eliminates the non-conforming aspects of the measure as set forth above;' or (ii) September 1, 2009.

United States: Financial Services/Banking, Insurance, and general Financial Services. 

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Overall the US has more detailed sector specific Non Conforming Measures than Rwanda especially in the services sectors (transport (maritime, aviation), communication (audio visual, telecom), financial services (banking, insurance and other financial services). However Rwanda also made useful exemptions but at a sectoral level made general carve-outs in insurance, aviation, telecommunications and fisheries.  

The key take away from this comparison is the Rwanda-US BIT is highly asymmetrical and is more ambitious than the EAC CMP. Theoretically it can prejudice the regional processes given its objectives of MFN, National Treatment, Dispute Settlement (including Expropriation, Compensation), Intrusion in Law Making Processes (governance) and broad-based elimination of: performance requirements, empowerment measures including elimination of legitimate development oriented requirements for foreign investment and repatriation. 


Whether such comprehensive coverage is desirable for African countries is an important question, the answer to which is highly context- and situation-specific, and needs to be assessed against the overall objective of ensuring that investment treaties promote investment that actually exists or has the compelling potential to exist and that fosters sustainable development. The propensities to invest and hence the need for protection through an ambitious BIT is an important consideration before signing BITs as such needs may change over time. In closing its important to note that several countries receiving high FDI receipts in Africa e.g. Angola, Sudan have very few BITs and in a previous post we found that strict FDI provisions in BITs do not increase investment.

National Treatment and Kenya's Land Reform Following the New Constitution

Kenya has over time proved to be the preferred investment point in the East African region due to its strategic location and free market economy which places no significant restriction on the movement of foreign currency in and out of the market.  However there is one important change to the investment environment since the promulgation of the new Constitution of Kenya (the 'Constitution') found in Chapter Five Part 1 on Land and Environment.

The Constitution was brought into law on August 27 2010 and inter alia sets the reform agenda for better governance. In general the new Constitution will lead to the creation of new institutions that will promote good governance and in turn boost investor confidence. 

However, in one aspect, the Constitution contains articles that now limit the period that a foreigner may hold land to 99 years (Article 65 (1). This includes any company which has any element of foreign shareholding.  The Constitution also provides that any interest in land that is currently held by foreigners which is in excess of 99 years will have the term reduced to 99 years and freehold land will be converted to 99 years leasehold interest (Article 65(2)). Investors have indicated to Government that limiting the interest period to 99 years will not be conducive to foreign investors looking to invest in Kenya. There is also no provision for compensation to foreigners in the Constitution. The Constitution gives Parliament a time frame of eighteen months for the enactment of legislation relating to land and it will be interesting to see the impact the legislation will have on the business environment.

In the WTO Trade in Services context, Kenya made horizontal commitments in the Uruguay Round on market access in Mode 3 requiring that for commercial presence investors should establish their business locally.  There are however no horizontal limitations on national treatment to which limitations on foreign ownership of land would be reflected. In the sectors where Kenya has undertaken specific commitments, Telecommunications services, Financial services (including banking and insurance), Tourism & Travel related services and Transport services (air and road), mode 3 national treatment commitments are in some cases left unbound. However in the hotels and restaurants category, arguably a sub sector to which land is a determinant, Kenya has completely liberalised mode 3 both in the WTO GATs context and the EAC Common Market Services Schedule (Annex V).

Additionally, in the EAC Common Market Protocol, Article 13 on the Right of Establishment and Article 14 on the Right of Residence are relevant to the land question.  To the extent that they relate to access to and use of land premises, these provisions are subject to Article 15 which provides that land issues shall be governed by the national policies and laws of Partner States. Hence even in the common market, one could say that national treatment has not been extended to the land issue especially as it relates to establishment (investment).  

Bileateral Investment Treaties (BITs) Coming Back To Bite

Published by TIA

See related blog post on ICSID. 

African governments once rushed into signing Bilateral Investment Treaties (BITs) to encourage FDI. Lawyers are however now calling for new models.

With much of Africa’s investment coming from abroad, how governments manage complaints from foreign companies is a vital determinant of the business environment. For decades, foreign investors depended on diplomatic protection from home governments in their overseas adventures, which occasionally gave rise to “gunboat diplomacy”. The US, for example, sent troops into Latin America 34 times to settle commercial disputes.

Since the 1960s, and spiking in the 1990s, a more formal investment approach was attempted in the form of bilateral investment treaties (BITs). These state-to-state agreements establish how governments handle investors from each other’s country, covering fair and equitable treatment, security, and compensation for expropriation, in assets but also, in some cases, in shares, stocks, bonds and other modalities. While BITs infringe sovereignty, in that disputes are settled in international tribunals and not domestic courts, many developing countries saw them as a way of signalling their attractiveness for foreign investment.

The number of treaties has grown exponentially, to around 2,500 today. The number of claims is growing too. Philip Morris, Total, Mobil, Shell, Siemens and Cargill have all taken states to arbitration, with Sri Lanka suffering the first award against a developing country in 1990. Twenty-six percent of new claims in 2010 had an African or Middle Eastern state party involved. In Africa, Zimbabwe, Tanzania, Namibia, Liberia, Algeria and Senegal have all faced actions. There are likely to be more disputes in areas such as mining, water and agriculture, according to Mahnaz Malik, an investment arbitration lawyer at the Chambers of Arthur Marriott QC at 12 Gray’s Inn Square. She warns that events such as the Arab Spring can generate a flood of claims.

But so far, South Africa is arguably the most prominent in the African context. Pretoria signed 30 BITs post-1994 to attract private investment. The new government had inherited a society that was among the most unequal in the world, where the vast majority of black South Africans had been excluded from meaningful economic activity under apartheid. As part of a set of initiatives to redress this inheritance and to meet the government’s constitutional obligation to create a more open and equitable society based on human rights, Black Economic Empowerment (BEE) programmes were initiated.

In 2007, a group of investors from Italy and Luxembourg filed a claim at the Convention of the International Centre for Settlement of Investment Disputes (ICSID), arguing that South Africa’s 2002 Minerals and Petroleum Resources Development Act (MPRDA) contained provisions that amounted to expropriation of their mineral rights, thus violating the BITs South Africa had signed with both countries. The MPRDA, a separate piece of legislation from BEE that aims to transform the minerals industry in South Africa, requires that holders of mineral rights undertake equity or equity-equivalent obligations; requirements emerging from consultations between the government and relevant parties, including representatives of the claimants. The South African government defended the MPRDA by arguing that it protected existing mineral rights and allowed for their uninterrupted use so long as companies also met the government’s wider transformational obligations in some accepted combination. In a punitive judgment, the Icsid tribunal dismissed the claimant’s case, ordered them to pay the legal costs of the South African government, and prevented claimants from bringing any such action again in future.

On the basis of similar reviews conducted internationally, notably, in the US, Norway, and certain Latin American states, South Africa launched a lengthy BIT review, the conclusion of which is that the country will not enter any new treaties unless there are “compelling economic reasons”, says Xavier Carim, deputy director general of the international trade and economic development division of South Africa’s Department of Trade and Industry. “The very fact that narrow, shortsighted commercial interests can subject progressive and laudable government policies to international arbitration, the outcomes of which are unpredictable, creates unacceptable risks that can have a chilling impact on legitimate public policy making,” he says, noting that there have been inconsistencies in the rulings taken by tribunals over similar cases.

It would be simplistic to characterise BITs as simply giving rise to clashes between progressive government policy and corporate interests. In some cases, such as a SOABI v. Senegal dispute, the problem was a largely technical disagreement over terms and conditions of a low cost housing programme.

In Zimbabwe, cases have been brought in objection to the ruling Zanu-PF party’s arbitrary and at times violent land reform programme. Broad and ambiguous terms have been a central problem of many agreements, says Jansen Calamita, senior research fellow in international trade and investment law at the British Institute of Comparative and International Law. “BITs are an agreement by the host state to accept the application of external standards to determine the legality of its actions – standards above and beyond the state’s constitution and national law. If the standards agreed are not clear – as they largely are not – it will be left to tribunals to give meaning and effect to those standards.”

Some lawyers believe the first wave of BITs were signed too fast, with text penned by a closely-knit group of Western lawyers. The majority of BITs reflect the texts developed to promote the 1960s anti-communist, post-decolonisation protection agenda for European investors, says Ms Malik. She believes capacity to understand complex investment law issues is not always present in developing country negotiators. She notes that the imbalance becomes more acute as negotiations are often based on the developed country’s model. In a speech at the London School of Economics, Randall Williams of the South African Trade Department claimed to have seen negotiators making agreements without the presence of a lawyer.

Latin American governments have come out strongly in opposition to prevailing norms. In 2009, Ecuador’s vice minister of foreign affairs, Lautaro Pozo, said BITs reflected a “fifty year old ideology” and that many countries signed them without sufficient understanding of their implications. BITs did not, in his reckoning, reflect the objectives of developing states, especially on issues of the environment and human rights.

In one case, Philip Morris tried to sue Uruguay for copyright infringement when it ruled that cigarette packets needed to carry health warnings. Bolivian President Evo Morales claims that international arbitration offends state sovereignty, with Bolivia, Ecuador and most recently Venezuela denouncing Icsid, the Washington-based arbitration body, part of the World Bank Group, which settles nearly half of claims. India and Mexico have both refused to be party to the Icsid Convention, and Brazil has not ratified any BITs.

Others are more upbeat. “I think the backlash against investment treaties is overstated,” says Anthony Sinclair, a partner at law firm Allen & Overy. “Countries continue to sign these treaties at a rate of about 50 a year.” Mr Sinclair acknowledges there is “fine-tuning and recalibrating” of text, especially in terms of public interest regulation. “At the same time, countries are in search of growth, for which foreign investment is key.”

There is no credible analysis proving the effect of BITs on investment, which would be very hard to quantify. Furthermore, BITs are not the sole determinant of investment. China is a prolific signatory, but continues to invest in countries without BITs – in contrast to Germany, where risk insurance is only issued to companies if they are operating in a country with a German treaty. Yet whenever governments and investors are discussing major cross-border investment, “everybody” on both sides is talking about investment treaties, Mr Sinclair claims.

The focus on treaties should not draw attention away from domestic reforms which could lessen the investment risk. Guinea-Bissau has undertaken domestic reform, turning a single court system dealing with everything from divorces to commercial disputes, into a more differentiated structure with commercial courts run by appropriately trained legal teams and judges, says Raimundo Pereira, speaker of the Parliament of Guinea-Bissau. Nonetheless, bilateral frameworks do appear to be of growing importance to investors.

Despite the frustrations, there is little that can be done about existing treaties until they expire, at which point clearer text can be negotiated, or countries can withdraw. Pulling out of active treaties altogether is unlikely. Even South Africa has not done so, given the diplomatic downsides. The goal of African legal teams is to improve the text in future agreements.

To date, many African governments employed international law firms to advise on treaties. While this helps buffet their expertise in negotiations, capacity-building of African government lawyers is needed. Rukia Baruti recently founded the African International Legal Awareness (AILA) programme, which in late 2011 organised a week long BIT training workshop. Participants included lawyers from Liberia, Ghana, Uganda, the Gambia, Egypt and South Africa. Baruti organised the workshop, held in London, after attending an investment conference in Mauritius, where many African attendees were unfamiliar with investment treaty arbitration.

“By building capacity and increasing awareness of the consequences of concluding investment treaties, African states will, before signing such treaties, carefully examine the meaning and consider the provisions. This would go a long way to avoiding disputes involving African states.”  Mr Sinclair speaks approvingly of AILA, in which his firm participated. “There is no shortage of good will on the part of international lawyers to contribute on a pro bono basis. The issue is whether there are enough people with sufficient inspiration and energy, like Rukia, to organise these activities. Otherwise busy lawyers in firms or chambers, or in academic careers, may not be able to produce something like this themselves.”

Aila has since been approached by African governments to deliver training in-country. Similarly, the International Institute for Sustainable Development has conducted training courses for African government officials in country and at a regional level.  It is important to note that while bilateral treaties have been overwhelmingly North-South in the past, that is changing in reflection of growing South-South economic interaction. Current BITs between developing countries include Mozambique-Indonesia, Djibouti-China and Eritrea-Uganda. South-South deals provide a platform to create more development-orientated texts, but often the European template is copied over. Regional treaties on the other hand tend to create more bespoke texts.

“I have found that debate is healthier in regional dynamics compared to a bilateral context,” says Ms Malik. A recent COMESA Agreement treaty contains more nuanced obligations than those found typically in bilateral treaties, she claims, including provisions to allow tribunals to take greater account of the development status of the host state. The COMESA treaty also omitted the full protection and security standard, a controversial feature in many BITs which puts hefty responsibilities on states. Algeria was taken to tribunal to pay damages related to civil unrest during the civil war. Similarly, Congo faced a claim for riots on the streets of Kinshasa.

The COMESA treaty, and new model texts, exhibit the potential for designing modern templates, says Ms Malik. “It shows African countries that they are not tied to the old European model. It paves the way for innovation in terms of making the treaties better balanced.”

Published by TIA : 05 March, 2012

A Look at Turkey's Trade Policy and FTA with Mauritius

Turkey concluded an FTA with the first Sub Saharan African country, Mauritius, on September 9th 2011 and is expected to initiate negotiations with other EPA and EC FTA signatories.  This is because the customs union between Turkey and the EU, which entered into force on 1 January 1996, has been the main factor shaping Turkey's foreign trade policy.  In addition, the EU opened accession negotiations with Turkey in October 2005 and guidance on reform priorities is provided through the Accession Partnership, adopted in February 2008.

In the EU-Turkey customs union, the EU unilaterally eliminated all customs duties and equivalent measures for industrial products and processed agricultural products when the trade-related provisions of the Interim Agreement of the Protocol entered into force in September 1971, whereas Turkey as a developing country was accorded a transition period of 22 years.  

The EC-Turkey customs union also provides for a common external tariff for the products covered, and foresees that Turkey will align its trade-related legislation with the EU acquis in several areas essential for market access, e.g. with respect to product standards.  The customs union covers all industrial products as well as the industrial component of processed agricultural goods, TRIPS, and competition policy, but does not extend to agricultural commodities, services, or government procurement.  The EU however offers Turkey a preferential regime on imports of certain agricultural products. Negotiations on services and government procurement were launched in 2000, but are now part of Turkey's accession process. 

The customs union also provides provision for:

• free movement (elimination of customs duties and quantitative restrictions) 
• alignment of Turkey on the EC common external tariff, including preferential arrangements (even GSP), and harmonisation of commercial policy measures;
• approximation of customs law, and
• approximation of other laws (intellectual property, competition, taxation, etc.)
• the adoption by Turkey of measures equivalent to the EU's common commercial policy

The European Union remains Turkey's most important trading partner and investor.  For instance, the EU accounted for nearly 70% of total FDI inflows into Turkey during 2005-10.  Nearly 40% of its imports come from the EU, and just over 50% of exports go to the EU. Machinery and transport equipment dominate EU imports from Turkey followed by manufactured articles which account for 24.3%. Main EU exports to Turkey are machinery and transport material (45.1%), chemical products (17.1%) and manufactured goods (15.1%).Globally,  Turkey ranks 7th in the EU's top import list and 5th as an export market.  However, the dominance of the EU in Turkey's foreign trade has declined markedly over the last five years, reflecting a notable shift in Turkish exports towards growth markets in its neighbourhood, in North Africa, certain CIS countries, and in Asia. 

Other main Turkish export markets in 2010 were Iraq (5.3%), Russia (4.1 %), USA (3.4%), United Arab Emirates (2.9%) and Iran (2.7%). Imports into Turkey came from other key markets include: Russia (11.7%), China (9.4%), USA (6.7%), Iran (4.2%) and South Korea (2.6%). 

Turkey currently has about 17 FTAs in force which include one with the EFTA countries, Israel, Macedonia (FYR), Croatia, Bosnia-Herzegovina, Palestinian Authority, Tunisia, Morocco Syria, Egypt, Albania, Montenegro, Serbia, Georgia, Chile, Jordan, Lebanon and Mauritius.

The Mauritius-Turkey FTA provides enhanced duty free access on most industrial products.  All Mauritian industrial products will enter Turkey duty free with the exception of some 70 lines related to textiles which will be phased on four years.  Mauritius in return will offer duty free access to more than 80% of its tariff lines to Turkish industrial products.  In any case Mauritius is a duty free island with over 80% of applied tariffs at zero. 

Why the exclusion of agricultural products? Turkey, even though a member of the G-33 , ranks amongst the largest agricultural producers in the world and the main crop is wheat of which the country is over 90% self-sufficient. With corn, Turkey is about 80% self-sufficient and is a net-exporter of barley. Other major crops include fruit and vegetables, nuts, tobacco, cotton, and sugar. Turkey is also one of the major milk producers in the world, predominantly for domestic consumption of cheese and yoghurt.  While Turkey has specialized feed lots and dairy farms, and large-scale commercial poultry farms, livestock production is mainly extensive and small-scale.  

Useful to note that Turkish agricultural policy was adopted with a view to aligning it more closely with the EU Common Agricultural Policy.  Turkey's main policy objectives are food security and food safety, and raising the self-sufficiency level for selected net-imported products;  improving productivity and competitiveness;  ensuring sustainable farm incomes;  rural development;  and improving institutional capacity.

For comparison, by the end of 2007, the 6 ESA EPA States: Comoros, Madagascar, Mauritius, Seychelles, Zambia and Zimbabwe agreed an interim EPA with the EU. Mauritius in that agreement submitted an individual schedule which is annexed to the interim EPA and liberalises 96% of EU imports into Mauritius compared to a liberalisation of 80% with Turkey, possibly due to the inclusion of some agricultural products in the EPA.

What appears unfortunate in the Mauritius-Turkey FTA is that Turkey seems to have offered market access predominately in industrial goods, where Turkey is competitive. However few SSA African countries are neither productive nor competitive in industrial manufacturing. With Turkey being an emerging industrial exporter, the loss of revenue on the import side for African countries could be an area of concern. In agriculture, Turkey provides subsidized support which is equivalent to the EU Common Agricultural Policy.  

The EU Single Market Services Directive

The Directive on Services in the Internal Market (the Services Directive 2006/123/EC) was adopted in December 2006. The Directive liberalises the internal EC services market in that it requires Member States to abolish discriminatory requirements, such as nationality or residence requirements, and particularly restrictive requirements, such as “economic needs” tests (requiring businesses to prove to the authorities that there is a demand for their services). It also requires the review of other burdensome requirements which may not always be justified (such as territorial restrictions or minimum number of employees).

The EU member States were provided a three-year transitional period to transpose the Directive into national legislation. However, several member States missed the end-2009 deadline, and work to implement the Directive continued throughout 2010. The Directive requires the Member States to simplify procedures and formalities that service providers need to comply with. In particular, it requires Member States to remove unjustified and disproportionate burdens and to substantially facilitate: the establishment of a business, i.e. cases in which a natural or legal person wants to set up a permanent establishment in a Member State, and the cross-border provision of services, i.e. cases in which a business wants to supply services across borders in another Member State, without setting up an establishment there. 

During 2010, the Commission was monitoring the implementation by the member States, of both the new legal frameworks adopted in order to implement the Services Directive as well as their efforts to establish operational "Points of Single Contact" (PSCs), notably the online portals providing businesses with information about the requirements and procedures to be complied with, and the "Internal Market Information Systems" facilitating administrative cooperation between the authorities of the member States. The PSCs are certainly the most visible benefit of the Services Directive for businesses. They are meant to become fully fledged e-government portals allowing future entrepreneurs and existing businesses to easily obtain online all relevant information relating to their activities (applicable regulations, procedures to be completed, deadlines, etc.) with the ability to apply online and across borders. 

Although the vast majority of the member States have chosen to implement the general principles and obligations of the Directive through a single act, implementation of the general principles has been carried out through several acts in France and Germany. In addition, all member States have had to amend or abrogate existing legislation to ensure conformity with the provisions of the Directive.

The Services Directive does not harmonize national legislation applicable to the services sector, but obliges member States to screen their authorization schemes to ensure that they are maintained only if non-discriminatory, justified by an overriding reason relating to public interest, and proportionate.

The Services Directive applies to the provision of a wide range of services – to private individuals and businesses – barring a few specific exceptions. For example, it covers: 

distributive trades (including retail and wholesale of goods and services) 

the activities of most regulated professions (such as legal and tax advisers, architects, engineers, accountants, surveyors) 

construction services and crafts 

business-related services (such as office maintenance, management consultancy, event organisation, debt recovery, advertising and recruitment services) 

tourism services (e.g. travel agents) 

leisure services (e.g. sports centres and amusement parks) 

installation and maintenance of equipment 

information society services (e.g. publishing – print and web, news agencies, computer programming) 

accommodation and food services (hotels, restaurants and caterers) 

training and education services 

rentals and leasing services (including car rental) 

real estate services 

household support services (e.g. cleaning, gardening and private nannies). 

The Services Directive does not apply to the following services, which are explicitly excluded:

financial services 

electronic communications services with respect to matters covered by other community instruments 

transport services falling into Title V of the EC Treaty 

healthcare services provided by health professionals to patients to assess, maintain or restore their state of health where those activities are reserved to a regulated health profession 

temporary work agencies' services 

private security services 

audiovisual services 

gambling 

certain social services provided by the State, by providers mandated by the State or by charities recognised as such by the State 

services provided by notaries and bailiffs (appointed by an official act of government). 

The Commission has not drawn up concrete plans to cover the other excluded services. Services activities are in any event always subject to the EC Treaty provisions, notably the fundamental freedoms of establishment (Article 43) and free movement of services (Article 49). The Services Directive applies only to EU (EEA) citizens and legal entities established in the EU (EEA), and does not oblige member States to consider changes applicable to non-EU services suppliers. 

COMESA-EAC and SADC Launch Climate Change Intitiative

The East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA) and the Southern Africa Development Community (SADC) have launched a joint five-year Programme on Climate Change Adaptation and Mitigation. The focus of the Programme is increasing investments in climate resilient and carbon efficient agriculture (climate-smart agriculture) and its linkages to forestry, land use and energy practices by 2016. The programme has received $20 million funding from the Royal Government of Norway, the European Union Commission and UK’s Department of International Development (DfID), signifying an exemplary partnership between Africa and Europe on climate change.

The three RECs comprising the Tripartite will synergize on their respective comparative advantages that include: main-streaming climate change in national and regional policies and strategies; climate resilient and climate smart agriculture; vulnerability assessment and disaster risk reduction approaches; and climate change policy negotiations to provide African solutions to climate change.

EAC’s key achievements in the area of climate change over the last few years include: approval of the EAC Climate Change Policy and issuance a Declaration on Food Security and Climate Change by the EAC Summit; the establishment of the EAC Climate Change Fund and Climate Change Coordination Unit at the EAC Secretariat; as well as the development of a Regional Climate Change Position as input to the African Common Negotiating Position on Climate Change.

See full article here and previous articles on climate change here.

Legal constraints on the EU’s ability to withdraw EPA preferences

Dr Lorand Bartels provides useful and timely advice on the legal constraints behind the EU's ability to withdraw EPA preferences from ACP States and he identifies various problems with the EC Commission’s proposal.   These include steps taken towards ratification i.e. progress to date and the mechanism of provisional application. 

He concludes by stating that EC Council Regulation 1528/2007 can only be terminated in accordance with Article 25(2) of the Vienna Convention on On the Law of Treaties. This provision lists three ways in which this can be done: by agreement between the parties; according to the treaty itself; and when the party seeking to terminate notifies the other party or parties that it does not intend to become a party to the treaty. Where these conditions are not satisfied, the provisions of the treaty being provisionally applied are treated as applicable for that party.

While the EU can still remove ACP countries from the list of beneficiaries, if it wishes to do this, it must notify them of its intention not to become a party to the respective agreements. What it cannot do is remove beneficiaries from Annex I of the Regulation as the Commission is proposing to do - not, at least, without violating Article 25(2) of the Vienna Convention on the Law of Treaties, and thereby also EU law itself.

Assess full article here and see previous EPA posts here.