Building capacity to help Africa trade better

The AfCFTA creates an additional African Free Trade Area


The AfCFTA creates an additional African Free Trade Area

The AfCFTA creates an additional African Free Trade Area

As a legal construct, the African Continental Free Trade Area (AfCFTA) presently consists of a founding Agreement and three Protocols. The first Protocol establishes a new Free Trade Area (FTA) on the African continent. The second Protocol provides for the liberalization, among the State Parties, of trade in a selected number of services sectors.[1] The third Protocol deals with dispute settlement. It provides for inter-state disputes about the interpretation or application of the relevant legal instruments. During Phase II Protocols on intellectual property rights, investment, and competition policy will be negotiated.

The AfCFTA is not a legal person in its own right. The only provision akin to legal status is found in Article 13 of the AfCFTA Agreement. It states that the Secretariat “shall be a functionally autonomous institutional body within the African Union system with an independent legal personality”. It shall be “autonomous of the African Union Commission. However, the “roles and responsibilities of the Secretariat shall be determined by the Council of Ministers of Trade” of the AfCFTA. This has not yet been done. Its funds shall come from the overall annual budgets of the African Union.

The technical design of the FTA to be established by the AfCFTA is rather straight forward. It aims to liberalize trade in goods through tariff reductions (still being negotiated) applicable to goods originating from the State Parties. It is cast in the mould of the MFN exception allowed under Article XXIV(8)(b) GATT:

A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce… are eliminated on substantially all the trade between the constituent territories in products originating is such territories.

An FTA does not have a common external tariff (CET). The members of an FTA retain trade policy space to negotiate trade in goods agreements with third parties. A customs union (CU), on the other hand, has a single customs territory and a CET. This means that the members of a customs union have a common trade policy towards third parties and hence, collectively negotiate trade agreements with third parties.[2] There are several long-standing FTAs on the African continent. They contain all the relevant rules and structures for liberalizing trade in goods among the Parties thereto. Examples are the Southern African Development Community (SADC), the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Economic Community of West African States (ECOWAS). They will continue to exist and operate as before when the AfCFTA finally gets implemented. They will also advance their separate agendas for deeper inter partes integration. Some have launched CUs, but are still consolidating the common customs territory and CET[3].

The FTA brought about by the AfCFTA will not constitute (once operational[4]) a single FTA for the whole continent. Only those African States presently not trading under an existing preferential trading arrangement (FTA or CU) will, once they have become AfCFTA State Parties,[5] trade under the preferential tariffs of the new FTA of the AfCFTA. African States that have become AfCFTA State Parties but belong to existing African FTAs, will continue to trade with each other under the higher levels of liberalization provided for by such arrangements, in, for example, the Regional Economic Communities (REC) FTAs, CUs and other regional trading arrangements of which such States are Members.[6] As an example, the member states of the Southern African Customs Union (SACU) presently trade with the member states of the Economic Community of West African States (ECOWAS) under most favoured nation (MFN) rates of duty. Provided that all member states of both of these customs unions, ratify or accede to the AfCFTA, member states of SACU will trade with member states of ECOWAS under the preferential tariffs of the new trade regime of the AfCFTA. But SACU member states and ECOWAS member states, will for their part continue to trade with the members of their respective customs unions, as they do now.

This means that the AfCFTA will create a new FTA for trade amongst those AU member states that are not trading with one another under an existing FTA, customs union or other trading arrangement. This is clearly stated in Article 19(2) of the AfCFTA Agreement: “… State Parties that are members of other regional economic communities, regional trading arrangements and custom unions, which have attained among themselves higher levels of regional integration than under this Agreement, shall maintain such higher levels among themselves. (Emphasis added.)

Article 8 of the AfCFTA Protocol on Trade in Goods further explains the future de facto and de jure position: “… State Parties that are members of other RECs, which have attained among themselves higher levels of elimination of customs duties and trade barriers than those provided for in this Protocol, shall maintain, and where possible improve upon, those higher levels of trade liberalisation among themselves. (Emphasis added.)

The AfCFTA design clearly provides for the existing African FTAs and other trade arrangements to co-exist with each other. The RECs predate the AfCFTA and most of them are legal persons in their own right. They have different (sometimes overlapping) memberships.

The expectation presumably is that the different African preferential regimes for trade in goods will, at some point, gravitate towards one single continental block. When that might happen is unclear. Separate negotiations in different configurations will be required, and new preferences shall only be extended on the basis of reciprocity. Article 18(1) AfCFTA  Agreement contains the following indication: “Following the entry into force of this Agreement, State Parties shall, when implementing this Agreement, accord each other, on a reciprocal basis, preferences that are no less favourable than those given to Third Parties.”[7] When States enjoy advantages in a particular REC FTA or customs union, they would obviously want to retain the associated benefits. Reciprocal concessions will be demanded when others seek to join such arrangements. If that had not been the case, the present AfCFTA tariff negotiations would have been structured quite differently. It is unrealistic to expect that Governments will turn back the clock on the benefits gained through the consolidation of specific offensive and defensive trade interests over decades within existing African FTAs or CUs.

What then does AfCFTA membership mean and what is the rationale for joining the AfCFTA if existing preferential trade arrangements will, as of right, perpetuate vital aspects of the status quo? The first part of the answer is that the AfCFTA has been designed to bring about a very specific arrangement; a compromise between what exists and what could come about.

It does not invalidate or undo the integration achieved under the RECs and other trading  arrangements. The AfCFTA design reflects a deliberate choice. The negotiating AU Members agreed upon a gradual forward-looking process; not the sudden replacement of what has been built up over a long period of time.

The AfCFTA also exemplifies long-standing continental political ambitions. It is an African Union (AU) project connected to the formation of the African Economic Community promised in the Abuja Treaty adopted in June 1991. One of the AfCFTA’s general objectives is to eventually “create a single market for goods, services, facilitated by movement of persons in order to deepen the economic integration of the African continent and in accordance with the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063”.[8] Meanwhile, the AfCFTA is governed by principles such as being “driven by the Member States of the African Union”, variable geometry, flexibility, reciprocity, consensus decision-making and the RECs’ best practices.[9]

The AfCFTA is not designed to be a rushed job. “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.

[1] Transport, communication, financial, tourism and business services.

[2] The Southern African Customs Union (SACU) exists since 1910 and was, from the outset, founded as a customs union. It was established by Great Britain to manage the fiscal and financial matters of its territories in southern Africa.

[3] The EAC, ECOWAS and COMESA are examples.

[4] The AfCFTA tariff concessions and rules of origin are still being negotiated.

[5] They must first ratify the AfCFTA Agreement or accede to it. See Art 23 AfCFTA Agreement.

[6] These other regional trading arrangements are not identified by name but will include bilateral trade agreements and the Tripartite Free Trade Area (TFTA). The latter will consist of COMESA, EAC and SADC Member and Partner States; once operational. It requires 14 ratifications for entry into force and have 8.

[7] Art 18(1) AfCFTA Agreement.

[8] Art 5(a) AfCFTA Agreement.

[9] Art 5 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.

Trudi Hartzenberg

Trudi Hartzenberg is the Executive Director of tralac. She has a special interest in trade-related capacity building. Her research areas include trade policy issues, regional integration, investment, industrial and competition policy.

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