Preferential of

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ECA!EULFOC!Lusaka!PT!JVr 2"; Augus-t 1'1'0

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"mNOMIC COMlaSSION FCP AFRICA

Fifth I'eetine of -the Intergovernmen-tal Negotia-ting Team on the Treaty for the Estatlishment of a Preferential Trade Area for Eastern and Southern Ai'rican States

Addis _A~~ta, Ethiopia, _~1~ Oc-tocer ¹⁰7

DRAFT Pl1OTO<Xll ON ClEA''H!G AND PAYHENTS A'PANGEMENTS ~ITTHIN TEF P:1EFERENTlAL TRADE h.RFlI FOR EASTE,,!) Alln OOUTHEilN [.ERICAN STATES

..

ENGII."'!'

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?rear:l'tIe THE HIGH CONT'ACTt~iG PA"TIFS

Convinced that inadenuate or lack of payments arrangements has hampered the expansion of inter-state trade amone the countries of Eastern and Southern Africa;

Determined to faci'itate the expansion of trade amonp themselves ~y providing more convenient and economic methods of payments; and

Recallinr the proviDions of paragraph of ArticJ.e •••••••• ~f the Treaty esta~Hshine the 10referentia1. Trade Area for Eastern and Southern African States to the effect that c'earing and payments arrangements for facilitating trade in goods and services among the memher States sha!.J t·e set out in a Proto co 1. to the

said Treaty; .

!lJ'REBY AGREE as fo'.lows'

ARTICLE 1 Interpretation In this Protocol'

"Council^fl means the Counci:: of r.1inisters estaclished by Article of the Treaty.

"Convertit-!e currency" means "freely uGatJ.e currency" ?l.S defined ty Article' XYJ~(f) of the Articles of A~recment of the International Monetary Fund, that is to sayp " a memcer's currency that the Fund determines (i) i~1 in fact 9 widely used ^to

ma!{e payments for internationaJ transactions, anc

(ii)

is wide1.y traded in the principal exchange marketst~.

ItEligih].e tranc,action.sⁿ meane all monetary and financial transacti.ons 'betwl?en the r.lemrer States relat-in£" to trade in a~.l goods and services covered l-y the

provisions of the Treaty and its re]at~d ProtocolsG

"t1emter State" or " memter States^fl means a mem.1- er State Or meml- er States of the Preferential Trade· Area for Eastern ancl Southern Africa.

"Y'/Ionetary authority" means a Central Ban!:: or any other institution authori..zed ty a memcer State to issue currency within its territorYG

"National currency:l means any currency issued. cy a member State and which is 1ega'. tender within its territory.

"Preferentia' Trade Area" means the Preferentia~ Trade Area for Eastern and Southern African States~

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"Third country" means any country or state which is not a member of the Preferential Trade Area~

"Treaty" means the Treaty esta""ishinr. the Preferential Trade Area for Eastern

anc

Southern African States.

AnnCLF 2

I . The ::>rovLsionsof this Protoco) c.hall apply to all eligilole transactions amonr the rnem~er States.

2. Notwithstandin~the prov1s10n of paragraph I of this Artic)e, the council may at any time extend the application of this ?rotocol to include other transactions for promotine the 0)'jecti ves of thic Protoco1.

AnTIClF 3

gener~: ProvisionG

1. ~Jlem'ber States und_erta~(e to promote trade in poods and services with-in the PreferentiaJ Tra~e Area eyg

~) promoting the use of national currencies in the settl ement of eIiei1"1 e transactions t-etqeen thernsel.ves.

Q::)

provicE'1g a c¹earing mechanicm for the multiIaterc.l settJement of

pa~en~8 amonc theMse~VeG;

(£)

rrinein~ al~ut economiec in the use of foreien reserves hy _mem~er States in their inter-state transactions; and

undertaking regular consuJt2tions among themselves on monetary and financial matters.

2.. In the imp'.ementation of thi.s Protocol, member States aE'ree to progres.sive¹y harmonize and co-ordinate their financial and monetary policies with a view to promoting the ol~.iectivesof the Preferential Trade Area arraneements.

?

r~e!J1r.er States· arre-e to promote monetary and financial co-operation among themselves and other African countries, and in this latter context, the Clearinp

HoU5~ estahlished by t!:is Protocol₁ shal~. co-operate with simi¹.ar institutions in the African rerion.

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FCAllflUlFOC!Lusa'caIPTA!" 10 Pa!'e 3

Ff:,taL~ichment of a r::_earing P;Quse f..:;r Ei1s tern anc1 Souther:} l~:lrican .States

1. :In the impTer..entatJ.on ')f t~:E.. 1'"'r'01:j.Si-Op..s of Artiel e ,? of tt.is Protoco^{1. 1} me.'11t'cr States arree to ta:':e the neces.sary ^otCryC to eE'tal~1.inh a mechanism (hereinafter' referrro to as "tJ::,c C1 earinr HouDe") _~or the r.'1ul tilatera: c.l_earine and settlement of payments in recpect of elipil'le tran.'3actionc anong-, tl)emseJves,

2. The main functions of thE Clear-inc House shall l'e:

~) to undertake c¹.earing operations in respect of eJigit]e transactions among the memr€r Statesj

(£)

to systemize and monitor monet~ry transferG of payments arising from eligitle transactions~

<£)

to facilitate the efficient utilization of cHine: cre~its· exchanged

between memter States; and

(2)

to facilitate the use of national currencies L L.b i"'l'rc'P<"tcntial 'I'rade Area transactions.

3.

The Clearing House shall have such officers and staff as the Council may deem necessary.

4.

The location of the Head Office of the Clearin!, House shall re determined loy the Council. on the advice of the Committee estat¹ished ^1-'), Artic"T_e ]] of this Proto co "_.

Unit of account and exchanee rate puarante r

1. The Council, . on the advice of ttle Com",ittee, shaU ta',e the necessary steps to estatl ish a unit of account for the Preferentia' Trade J\rea (hereinafter referrec' to ar' the "UAPTA") and determine its par va~_ue.

2. Each Fonetary Authority shall. communicate to the Clearinp House the officia~_ par val-ue of its national monetary unit.

3.

Any change in the declared par value of a memt.er ,State's currency shall "e notified immediately loy its I~netary Authority to the C'earinc House, whichsh~IJ.

determine its par value in terms of UAPT/, and advise all. P';onetary Authorities accordinely.

4.

~emloer States shacl guarantee the free convertibility of the amounts due from their Monetary Authorities in respect of e¹.ip,ir-le transactions into any agreed currenc~

or UAPTA at the par value prevailing on the date of settlement as notified loy the Clearing House.

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Clearl_ne and sett1.ement of transaction!:' e.nd out8tanc~inr; t;a 1ances

• }~e~rer States ae:ree th2.t the cJearine ·;-£--:e..~nt.s_a-risinq from eli"giblc transa<;ti~)l"':

al1K>nr themse¹ve.s sha".l be underta>::en on a mu~.ti].atera]. rasis aIter a specified 1?erio~

to re determined ry the Committee.

~. To facilitate the imp~ernentationof paragraph 1 of this Article, member States aeree that t~~.eir rqonet.?ry ,1ut:'orit ieD .sha~1 extene' to ot;.1er r·l'onetary Autr..o!'iti es s"Hing credits in their national currencies, the maximum l_imits of phich credits shall 'be determinet:~, r-y tI-:,.€ Committe" on the t'-asLs of ~ach memcer State's vo1uMe of trade uithin the PreferEntial Trade !~rea.

3.

Not.·1ithstanding the ,!?rovision of paragraph 2. of this Articlej any r"~onetary

Authority may on its own initiativ€j increase the amount of swing credi~ referred to in paragraph ¹ of this Article.

~'. The net balan::es outstandinc on the accounts at the enol of the specified period shall 1:'e settIe[~ by the debtor f/Ionetary Authorities within a specified period.

~. The debit position of each Monetary Authority at any time shall not exce~d a certain limit to be determined by the Co~mittee in respect of each Monetary Authority.

6. Notwithstanding the provisionc of paragraphs 2 and 3 of this ArticJe, any amount exceeding the ae,reed Emit of mdnr, credits at any time shall re paid ry the respect'ive debtor f"onetary Authorities to the creditor Fonetary Authorities in any currency agreed upon by the parties concerned :dthin a sf.)ecified period.

7. r,ltemher States agree tllat the dai1y debit l-'alances after the date notified for sett'.ement shall 1'e subject to payment of interest at pro[ressive rates agreed uoon by the Co~mittee.

~. A ftJonetary Authority lorhich at the end of a specified period fails to make payments in accordance uith the provisions of naragraphs

fr, 6

and

7

of this Article, shall

be subjected to conditions and sanction" to re determined ty the Council on the recommendation of the Cnmmittee.

A~TICl2. 7 ExchanRe controlE

l. Memrer States 1.ln~erta~::eto reduce and propreseiveJy eliminate restrictions on the makinr; of payments and transferE 'relating to e~.igit·letransactions for the

purpose of proMotinc the Preferential Trade (,rea arraneements, provided that nothing in this Protoco~, sha~.! prevent a mernl"'er State from maint'aininp or introducinp

exchange control. measures for a:-leviating acute ba~.ance of payments pror<tems 'arisine from the implementation of the Preferential Trade Area arranp,ements.

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• 2. Membe:r:- .St~t~s ~gree to communicate to other nemter .. ,:tate.s throug~ the Clearinr"

House the exch~n~e restrictionc applied by the~, and to include in their controls provisions to faci:.itate the smootb functioninr. of the Cleari.ng House.

3. r'/emr:er .States aEree to co-oper'att i!1 j;'!easure.s for ma~:::inr; the exchanR:e contra:

r-e[fU!_ations of any ne'Tlr-er State effective, provided that such measures anc re["''-.!:_a~~.onG

are consistent Hith the rrovisions of thi.s Protoco~e

l!.. Exchange control measures F!1ich involvE_ the restriction of monetary transfers Qeti·reen member States and 'Y.rhi.ch are inconsistent with the provisions of this Pro to CO1

sha1.1 not r€ enforceat-J e in other rnemrer States.

r.TITCl.E "

Cc>-operation Hitb. othEr clearinr and payment!; arrangements

1. Memrer States agree that -lith the apnroval of the Council, the Clearinr House may negotiate and sign agreementc on special clearinp.: arrangemeI)ts 01'" monetary

co-opera.tion uith monetary auth.oritie.s or payments union of third countries; provided that such agre~ments do not impe<:!e the olojectives of thir-; ProtocoI and maintain the preferential character .'Jf' tJ:"~e 2.Ereee. trade and other relations betwe:o'n the member

,State~.

2. Nob<1ithstandinr the orovi2ionc of flrtic~.e I:. and f of this Protocol nothinr herein shall prevent any rnemter .State _f~om maintaininr or enterine into 'b:fl,ateraJ.

?ayments or cle~rine arrangement0 ~!ith any third country; provided that sueh arrangemen~~

do not conflict with or attenuate tile or jecti Yes of thic. Protocol.

Relatione _B~~h mecrer States

l . Memrer St-ates 1Hv:lertake to aut:hori'.~e their f!fonetary Authorities +'0 act as ape.nts for the Clearine Youne in their recpective territorieso _I~ such capacitY9 tbe

Eonetary Authorities cha~! deaJ -,rith the Clearinr HOUGf'- ant'". l.rith each other in

accordance with the procedures Drovioe(' Eor in the rules and re{~ul.ation8to re deter:-::i.ne'·'

ry

the Council.

2. The onerationaJ. 'l~c~atj_onshiF'.s bet~'Teen the h'ionetary Authorities and their recru.?c-:-ive denignated. commercia.:. t an>:r- sha.'.~? in so far as the ~rorer functionine of the

Clearinf,' HOUS0 is concernecli 'be Bovernec1 1-1" the interna~. reeu1_ations of each rrtemrer Ctate^j and sha~.I be com::mnicated. to ead-,. Fonetary :I.u.thority t:.'1.rous-h the Clearinr

~-!ou0e.

3.

flTemt-er States agree that in the imp' enent3.tion of the ;1!'ovisions of this ?rotoco:., they or their Lbnetary liut'1.oritiec ::d".2.7.] Eurn:i.sh the Clearinr House llTith such

information a:o', it may rec,uire [or its operations ..

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Memt>er States apree that t!lr:' rro~.~'iri0"'H·~ " f tbis Protocol sha].] 'be ~:-ept' under constant revieH lorith a vieH to rrorre,,:,.c":'vely nvo1vine a f2.}'I7lent.s union lThich COU}.r1 include a mechanicm 'for assic:;;in[ -::-ho,3e me!":1:Or.::r ,'?,::a<;cD uhich are faced loTith ralance of paymentn constraints ari.c-inE frorJ 'the..,,,..-, .. S-"""-'-4:"<:,_t28D of ';il£ Pr€.ferentia:-·

Trade Area arraneements,

MlTICLE II

Institutional arran(7(,i''1cnts

~"--....-...,...,_... ---.,::,.<,- -,...--

1. For the effective ir.rr?ementation of the ^j,)....'}vis~on3 0; this ?rotocol rnemrer States agree to esta.hi.i.c,h. a Clearing.-and FRyments CO;;lr.litt,ee (hereinafter referred to as "the Coml1Jitteen"

?OI THe -Cdtrimitte€ Dha:l1 consist 'of i'e!7resentatiYc:1 0f the MO~1et2:.ry and Authorities of·.the·.rnenit~r·:Statesl' an(~ may estal'li.sh c;t::ch U)t-:~·G:)r:1:::i.-ttAes 2.nd sul:sidiary hodiee, as it may' 'reauire for ··the effect:. ve function:"n[' ci' ::-h8 Clcarinr House.

3.

Sur :.;ect to the proviEJion of till.?, ?:':"Otoc·~~.1 and to such directives as the Council may rive from time to time, the C'..om~itt,_~(:: Dba: I ~.ll r::.'.:"'ticu¹.ar "[.lerform functions t'e.'.atinr b? achievement of the o'!.:ject~.v€~,of tl~.ic P... t"'\col; rUles and repulations for the operationB of the C'.earinc House: dete~irl~.tj.onof the nrocedures on

6~_earine

and.

payments op€ration['.~ anc~ s-1.perVi,'J~0nand (,:or'.?tant r?Vie"'l of tr..e activitipF and operations of the Clearir.p, r-Iouse 'v~.th 2. "~'~'H ·ro :J:::·c(q"ep..sivc}y achievin[' ^CI. paym!:;\ts union for the ?referer..tiaJ Trade Areao

l:. The Clearinc; House shalJ. hav,:: a .secretariat cmrpJc~d :Jf such officers and staff' as shall be determined l,y the CounciJ.<l

•

+-!..., _ ,..-: -,

,,~,~....,...~'..._-;-~;..,=-~

Nemt-er States ae:ree that ti1f:. cost:::: ( ) f UlX~i''l~'_;~['cbe Cl~arinr House shall be shared. among themselves in accordance "ri'::-h <.:.n ':::'Ci"e.,..n co.... iteriono

1\JTJeLF _.~3

The Council on the recof:lmencl.'1tiuil of -'ene CO':~I'1ii..-':ee ,::ay make ruJes and.

reeulations for the better carrying out of tb~ D:,,""Ov~_l?ionof this Protoco~.•

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!lR":'ICLF H

Member States ap:re,c; that upon ei)";:ry into force of this ~rotocoJs parties to existine tilateral clearing or payments arranrements among themselves, shall ae;l"ef.' to channei the re:.ated tr3nc,actioC18 throurb the Clearinp: RoUS€:9 and that the respective acreements r~ha:.l not te :-eneHed upon their eXF'iry.

ARTICLE 2:=

Sett?€f.1ent of disFutes

Any disputes arising in the interpretation or application of this ProtocoL shall be sett~.ed in accordance Hitl'l the provisions of flrtic'e •••••••0. of the Treaty.

f.RTICIE 16

This Protoco:, may 'be amenciec fron time to time in accordance Hith the provisions of Artic~e •••••••••• of the Treaty.

,Sicnature

The Protocol' sha:_l 'be open for Ci['fi&ture t-y a·¹J, mernr-er States until ••••...••

••••••••• 19~O at ••••••••••••••• anc1 surse0Uently, until •••••••••••••••••••

~S~C1 at the head('Uarters of the United NationE; Economic Commission for Africa, Addie Ababa, Ethiopia.

3atification

This Protocol shan be sub,:'ect to ratification. The instruments of

ratification "hal' be deposited ,;ith the !':xecutive Secretary of the United Nations Economic Commiscion for Africa.

hccession

This Protocol Sea11 remain oren for accession hy a 1J memrer States.

instruments of accession .sha~_l. be (~er:x>cited with the Rxecuti ve Secretary United Nations Economic Commission for Africa.

The of the

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fP.TIClr,: ?(

Functions of the denository

The Executive Secretary of the United Nations Economic Comnd.ssiol1 fo\' Africa shan transmit certified true copies of this Protocol to aU memter States, and notify them of the 0ates of deJ.X>2it of instruments of ratification and acc€'ss~_on

and shall register this Protoco' ~ith the Organi~ationof African Unity, the United Nations Orpanizations and such other or~anizationsas the Council shall determine.

Ai'1TICLE 21 Entry into force

(e)

This Protoco'. shaU enter into force on the thirtieth day follo>,;ng- the date of deposit of the seventh instrument of ratification or accession.

(!)

For each State ratifying or accecline to this Protocol after the deposit of the seventh inst~~~ent of -ratification or accession~ this Protocol shall enter into force on the thirtieth day after deposit by such State of ito instruments of ratification or accession.

IN

WITNESS 'rnFREOF the following PleniDOtentiaries from Eastern and Southern Africa have signed this Protocol'

•

J

•

,

~JE at ••••••••••••••• this ••••••••••••• day of ••••••⁰ • • • • • • • • • • • •

EngHsh and French laneuaees, both texts heine ecualJ,y, Authentic.

IOoe in the

• - • • • 10 • ~

Angola Potswana Comoros 'Jjiboub Fthiopia

Kenya Lesotho

~'-adagascar rFa]a~ri

Fauritiu8 f'cozamtiaue ,seychelles Somalia

Swa7"iIand

Tanzania (United p,er. of) IJpanda

'?.amtia