Building capacity to help Africa trade better

Preparing for the start of trade under the AfCFTA: Could Medicines be included?


Preparing for the start of trade under the AfCFTA: Could Medicines be included?

Preparing for the start of trade under the AfCFTA: Could Medicines be included?

The African Continental Free Trade Area (AfCFTA) Agreement is in force since 30 May 2019. However, trade under new preferential rules has not yet begun. The reason is that the negotiations are still to be concluded. The African Union (AU) structures have now indicated that trade under AfCFTA rules will begin on 1 January 2021.[1]

The outstanding negotiations have reached a crucial point – for trade in goods, this involves tariff concessions and rules of origin for sensitive products. For trade in services specific commitments for the five priority sectors (transport, communication, financial services, tourism and professional services) are still outstanding. Fifty-four countries with dissimilar needs and at very different levels of economic development are involved.[2] The modalities for these negotiations require that 90% of all tariff lines on goods traded under the Harmonized System (HS) must be liberalized. In a Free Trade Area (FTA) the duties and other restrictive regulations of commerce must, within a reasonable period of time, be eliminated on substantially all the trade between the member states in products originating in them.[3] 

There are additional tasks. The outcomes of the outstanding AfCFTA negotiations must be adopted by the AU Assembly[4], be converted into national legal measures in the State Parties and be implemented by them. This requires changes to national tariff books and enacting procedures to issue certificates of origin and to comply with health and safety standards. In Customs Unions (CUs) such as the Southern African Customs Union (SACU) the Common External Tariff (CET) requires collective follow-up action.

The start of trade under AfCFTA rules will send out an important signal, but the work will have to continue. There will probably be a “built-in agenda” to continue the negotiations and to complete the process. The AfCFTA project cannot afford to lose momentum and legitimacy but the 90% liberalization target is unlikely to be met in time for the 1 January 2021 starting date. The result will be an interim arrangement for a limited number of goods among specific countries. Who will be involved and what is likely to be traded? Would it be possible to include trade in essential medicines to deal with the challenges of COVID-19?

The answers to these questions are not known and detailed contingency plans have not yet been announced. An essential feature of the AfCFTA must, however, be mentioned to put expectations in context. The AfCFTA has not been designed to introduce one, all-inclusive intra-African trade regime and to replace existing African trading arrangements. The Regional Economic Communities (RECs) will continue to exist, and the members of specific Free Trade Areas (FTAs) such as in the Southern African Development Community (SADC), the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and others, will continue to trade under their own rules. Article 19(2) of the AfCFTA says the “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”. Article 8(2) of the Protocol on Trade in Goods repeats the same aspect: 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.

AfCFTA trade provides for new preferences on goods but only for traders in State Parties.[5] A State Party is an AU Member that has ratified or acceded to the AfCFTA Agreement and for which the Agreement is in force.[6] However, not all State Parties will need the AfCFTA preferences. New preferential trade will only replace trade presently being conducted under the MFN (Most Favoured Nation) rules of the WTO. For the rest trade will be conducted under the lower tariffs available in the respective REC regimes. If a State belongs to more than one African FTA, existing preferences remain available. The AfCFTA adds an additional FTA to those already in existence.

The likely scenario is that trade under the AfCFTA will commence on a limited scale and under an interim arrangement. This is not what normally happens. The standard approach is “that nothing is concluded till everything is concluded” and that there will not be premature ratification of an incomplete instrument. But a different approach was opted for in March 2018 when the AfCFTA Agreement was adopted. The AU Assembly strongly encouraged the Members to start depositing instruments of ratification to demonstrate their commitment, while continuing their negotiations.

A detailed plan is necessary as part of a built-in agenda. The commencement of partial AfCFTA trade needs to be announced and be anchored in legal instruments. The relevant State Parties will have to accept interim obligations and give them the necessary domestic legal bases, such as interim AfCFTA columns in their national tariff books. Templates for rules of origin must be activated. The negotiations will have to continue to complete all outstanding matters. Once that happens, the interim arrangement will have to be updated. Legal certainty becomes particularly important when implementation happens in a staggered fashion. Private firms must obtain up to date information. Customs officials should be trained in the detail of the interim option.

Given the fact that not all intra African trade in goods will now be liberalized, the impact of the January 2021 operationalization will be limited. The negotiating modalities provide for a rather traditional approach. Tariff lines (not actual trade) will be liberalized. The boosting of intra-African trade depends more on improving trade governance, better infrastructure, and industrialization. Custom administration needs dramatic improvement to bring true and lasting benefits for trade in goods.

It will enhance the profile and value of the AfCFTA if essential medicines and equipment can be traded in terms of a preferential regime. For this to happen in a comprehensive manner, a special deal is required. It must involve the RECs and other special initiatives. The benefits must be continent-wide and fit for purpose. There need to be tailor-made responses for different needs that are suitable for specific countries. Liberalizing trade in medical equipment and medicines manufactured in African states is one goal and should not be limited to the present pandemic. However, the availability of safe, good quality and affordable medicines is a bigger challenge. Many African countries have weak or outdated legal frameworks, limited capacity, and not enough service providers in the health care sector.[7] And then, of course, there is the challenge to finance the purchase of coronavirus vaccines as they are becoming available.[8]

Article 23 of the AfCFTA Agreement provides for “any other instrument within the scope of this Agreement deemed necessary”. This might be the better route for an arrangement fit for Africa’s needs in respect of the availability of medicines and medical equipment. It will have to go beyond the reduction of tariffs a presently undertaken.

[1] A Summit directive has been issued to fast track the establishment of the AfCFTA. The next meeting of AfCFTA AMOT was held on 23rd and 24th November 2020.

[2] Eritrea is not participating in these negotiations.

[3] Art XXIV GATT.

[4] An Extra-ordinary Summit has taken place on 5 December 2020, but the Decisions are not yet published.

[5] There are currently 34 State Parties.

[6] Art 1 AfCFTA Agreement.

[7] The African Medicines Regulatory Harmonisation (AMRH) initiative works to improve access to quality, safe and efficacious medicines by providing an enabling regulatory environment for pharmaceutical sector development in Africa.

[8] There is, for example, an international financing vehicle Covax under a “committed purchase agreement” that could be used. BusinessLive, 18 Nov 2020.

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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