Building capacity to help Africa trade better

The AfCFTA in a global Context


The AfCFTA in a global Context

The AfCFTA in a global Context

There are high expectations locally and internationally about the prospects of the African Continental Free Trade Area (AfCFTA). The benefits for integration and rules-based trade governance in Africa will depend on how this new regime will be implemented over time and how the Regional Economic Communities (RECs), which will continue to exist, will contribute to this process.[1]

How could the AfCFTA serve as a platform for strategies to advance Africa’s prospects in a global context? How to do so? The AfCFTA is an African Union (AU) flagship project under Agenda 2063. Herein lies a connection with continental structures. Shared policy stances could be developed (as in the past) about new negotiations in the World Trade Organization (WTO), which will soon have its first Director General from an African member state. However, the WTO is a member driven organization, takes decisions based on consensus and has 164 Members. It has become very difficult to agree on new WTO agreements, despite an urgent need to do so in areas such as e-commerce, investment facilitation, the economic empowerment of women and the enhanced participation of smaller enterprises in international trade. There is a problem tough. Africa is committed to the Doha Development Agenda (DDA) and wants to see progress on that front before committing to discussions on new disciplines. In other quarters there is a different view; that the world has moved on since 2001 when the DDA was adopted. There are more urgent matters to be tackled now, according to this view. This amounts to an impasse.

And then there are serious obstacles to be addressed in how the WTO will deal with the fallout of COVID-19, trade in essential medicines and medical equipment, climate change and dispute settlement.

US-China rivalry has resulted in serious disagreement about the adequacy of WTO rules about state aid and fair competition. The new US administration is expected to adopt different modalities for re-engaging allies and participating in international fora, but the tensions between Washington and Beijing run deep. It will not be business as before in Geneva. The WTO (and Africa) will not escape the fundament realignment issues which the world economy faces. To participate in these debates, the African leadership will have to develop adequate responses, while keeping an eye on China’s prominent presence in Africa. Beijing’s recent punitive measures against Australian exports of wine and coal show that it will not shy away from using its considerable political and economic muscle.

Is there now an opportunity to speak with a collective voice when engaging the European Union (EU), the United States (US), the United Kingdom (UK) and other partners such as China, India, and Japan? They are all prominent players in Africa and have plans for increasing and consolidating their presence on the continent. It will not, however, be easy to develop joint strategies on how to do so. Kenya’s decisions to start negotiations with the US on a bilateral trade deal and to conclude its own post-Brexit agreement with the UK[2], have met with considerable opposition. There is an application pending in the East African Community (EAC) Court of Justice to review the Kenyan decision on a bilateral trade deal with the US. The argument is that intra African integration and the rules of the EAC (which purports to be a Customs Union) will be undermined.

The Kenyan decisions are important indications that individual African governments face difficult choices about advancing national economic development priorities. Only 15% of Africa’s exports of goods go to other African destinations. Kenya’s exports of cut flowers and other agricultural products are destined for global markets. Local integration plans also pose a challenge when the member states of a particular REC are at very different levels of economic development. All EAC member states, except Kenya, are least developed countries (LDCs) and benefit from arrangements such as the EU’s Everything bur Arms (EBA) scheme. Since Kenya does not qualify, it must make other plans.

What does the AfCFTA Agreement provide for in terms of trade deals with third parties? The answer is in Article 4 (2) of this Agreement: Nothing in this Protocol shall prevent a State Party from concluding or maintaining preferential trade arrangements with Third Parties, provided that such trade arrangements do not impede or frustrate the objectives of this Protocol, and that any advantage, concession or privilege granted to a Third Party under such arrangements is extended to other State Parties on a reciprocal basis.

In an FTA (which the AfCFTA is) the member states retain policy space over tariffs. There is no common external tariff. Bilateral trade deals with external parties are in order. The more serious problem is to align such deals with REC rules when a customs union exists. The common external tariff demands that joint deals should be worked out.

Trade in services and investment are often overlooked when it comes to assessing the impact of trade agreements with third parties. It is very likely that the US would want to discuss investment, intellectual property rights, competition issues and trade in services too when negotiating with Kenya, or other African nations. Washington has strategic interests which it would want to advance. At present trade between the US and Sub-Saharan Africa is conducted under the African Growth and Opportunity Act (AGOA). This is not a trade agreement and will expire in 2025. It is unlikely that the US will stick to non-reciprocal grants when the EU is pursuing reciprocal Economic Partnership Agreements (EPAs) such as the SADC EPA.

Where do these considerations leave the African “one voice” approach regarding global trade arrangements? The brief answer is that there is not a final and clear platform for doing so. This is a space where individual AfCFTA State Parties develop and defend their own policy choices.

It is noteworthy that relations with China do not seem to generate the same debates and questions. China does not have formal trade agreements with African states. Unilateralism seems to be acceptable. For how long this will remain a happy relationship remains to be seen.

[1] This particular aspect is discussed elsewhere in this Newsletter.

[2] See for example: https://www.tralac.org/blog/article/15008-the-kenya-uk-post-brexit-trade-agreement.html

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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