Building capacity to help Africa trade better

The AfCFTA is due for Implementation – what is to be expected?


The AfCFTA is due for Implementation – what is to be expected?

The AfCFTA is due for Implementation – what is to be expected?

The African Continental Free Trade Area (AfCFTA) has been designed to boost trade on the African continent. How and when will new trade benefits for merchandise trade (lower tariffs and the elimination of non-tariff barriers) and services (allowing service providers to compete in the markets of the State Parties) materialize? The brief answer is that some essential matters must still be negotiated and finalized, Governments must put certain structures in place, and the private sector (the ultimate importers, exporters, service providers and investors) must be attracted to the prospects of new business opportunities, while they continue with transactions in those markets where they have been operating.[1]

Who will open their markets and how far? Only the State Parties (AU Member States that have ratified the AfCFTA Agreement or have acceded to it[2]) will be under an obligation to comply. Nigeria, Africa’s biggest economy, has not yet ratified the AfCFTA Agreement. Its decision whether to ratify is unlikely to be taken before the final implications of the AfCFTA’s obligations are known. Some important matters are still being negotiated.

The AfCFTA is a Free Trade Area (FTA) anchored in International Agreements concluded among sovereign States (The African Union is not a party to this agreement.) It means preferential trade under this arrangement cannot begin unless the relevant agreements for Phase I (the AfCFTA Agreement and its Protocols on Trade in Goods, Trade in Services and Dispute Settlement) have entered into force for the states in question. Entry into force has already happened on 30 May 2019, after the 22nd instrument of ratification had been deposited.[3] The number of ratifications now stand at 28 (Cameroon has completed the domestic process, but still has to deliver its instrument of ratification to the depository).[4]

These instruments cannot be implemented before negotiations about all outstanding aspects of Phase I have been completed. The remaining matters are tariff offers, rules of origin and the specifics for trade in services in the priority sectors.[5] This is not an easy exercise when 54 African states at different levels of economic development are involved.

The aim is to commence with preferential trade under the AfCFTA on 1 July 2020, if the outstanding issues are wrapped up in time. There is now an additional danger that COVID-19 may disrupt the scheduled meetings.

The State Parties must also implement the required domestic measures to allow trade under the AfCFTA. For preferential trade in goods it means national tariff books must be updated (which can take time), customs officials must be informed and trained, new rules of origin certificates must become available, and technical information should be shared with business chambers and freight forwarders.

The implementation of trade remedies poses a specific challenge. Most international trade disputes involve trade remedies and safeguards; e.g. when goods are dumped at prices below cost, when exported goods are subsidized, or when new trade liberalization results in an upsurge of imported goods and causes injury to domestic industries. These remedies are important to protect legitimate national and private interests. The AfCFTA has an Annex on Trade Remedies and Safeguards, based on the relevant WTO principles. Investigations thereunder can be complicated. Only about four African countries have the domestic machinery to do so.[6] Establishing national Investigating Authorities will be wise but will require dedicated resources and experts.

Trade in services may need domestic reforms and regulatory structures. New legislation and technical expertise national regulators might be necessary. Disputes about trade in services should not be ignored. Domestic courts often hear cases involving measures taken by national regulators responsible for services such as telecommunication, the energy and financial sectors. In these cases, rules about due process (administrative justice), constitutional rights (e.g. against discrimination) and statutory interpretation apply.

In terms of WTO rules,[7] substantially all trade in an FTA must be free within a reasonable period of time. The implementation of the AfCFTA Agreement will be an incremental process; it is important to understand exactly what the State Parties have undertaken to do. Article 4 of the Agreement explains the nature of the new obligations: The State Parties shall progressively eliminate tariffs and non-tariff barriers to trade in goods; progressively liberalise trade in services; cooperate on investment, intellectual property rights and competition policy; cooperate on all trade-related areas; cooperate on customs matters and the implementation of trade facilitation measures; establish a mechanism for the settlement of disputes concerning their rights and obligations; and establish and maintain an institutional framework for the implementation and administration of the AfCFTA. (Emphasis added.)

The existing Regional economic Communities (RECs) will continue with their trade agendas and regional integration programmes. Trade under REC FTAs will be freer than under the AfCFTA, at least at the beginning. This is a consequence of the principle in the AfCFTA Agreement that the REC acquis shall be preserved.[8] Intra-African trade will continue via multiple tracks. As the AfCFTA advances and becomes more consolidated, there should be more policy convergence and a simplification of rules.

There will be new meetings on the agendas of government officials. The Council of Ministers (consisting of Trade Ministers of the State Parties and meeting twice a year) is an important AfCFTA institution. It will be responsible for the implementation and enforcement of the AfCFTA Agreement and Protocols.[9] Article 11 of the AfCFTA Agreement states that “Decisions taken by the Council of Ministers... shall be binding on State Parties. The Committee of Senior Trade Officials (composed of Permanent or Principal Secretaries of State Parties and meeting at least twice a year) may become the institution responsible for most of the practical measures required for implementing the AfCFTA. It will develop programmes and action plans, monitor and review the functioning of the AfCFTA, direct the AfCFTA Secretariat to undertake assignments, and request Technical Committees to investigate any particular matter.[10]

A new trade agreement does not guarantee trade – but it does change the incentives to make trade with other partners to that agreement more accessible and attractive. The AfCFTA is a flagship project of the AU and has seen high-level political support. It has the potential to put in place mechanisms to address many of the challenges bedevilling intra-African trade. It could do so in a manner which will provide more certainty and predictability. The main responsibility for ensuring that this happens will lie with the State Parties, supported by the new Secretariat, which will be headquartered in Accra, Ghana. A former senior South African trade official, Wamkele Mene, has been appointed as the first Secretary-General of the AfCFTA Secretariat.

[1] The AfCFTA does not affect trade under the existing Regional Economic Communities (RECs). See Art 19(2) AfCFTA Agreement.

[2] Art 23 pdf AfCFTA Agreement (973 KB)

[3] As required by art 23 AfCFTA Agreement.

[4] See tralac’s ratification monitor, with a list of ratifications.

[5] The AU Summit in July 2018 approved 5 priority services sectors: business, communication, financial, tourism and transport services, including their subsectors.

[6] Egypt, Morocco, Tunisia and South Africa.

[7] Art XXIV GATT.

[8] Arts 5(f) and 19(2) AfCFTA Agreement.

[9] Art 11(3) AfCFTA Agreement.

[10] Art 12 AfCFTA Agreement.

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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