Building capacity to help Africa trade better

The ABC of the AfCFTA – as it stands


The ABC of the AfCFTA – as it stands

The ABC of the AfCFTA – as it stands

Trade under the African Continental Free Trade Area (AfCFTA) is set to begin. It has been decided to start implementing aspects of the AfCFTA on 1 January 2021, though certain matters must still be concluded. Interim arrangements will be in place to allow for trade to begin. A brief overview of the AfCFTA regime is hereby provided.

What rules will apply to intra-African trade from 1 January 2021?

In terms of Article 3 of the Protocol on Trade in Goods the new Schedules of Tariff Concessions, Annexes on Rules of Origin, Customs Cooperation, Trade Facilitation, Non-Tariff Barriers, Technical Barriers to Trade, Sanitary and Phytosanitary Measures, Transit and Trade Remedies shall govern trade in goods under the AfCFTA. The lower preferential tariffs are available for goods originating in those State Parties that have till now traded under Most Favoured Nation (MFN) rates. AU Members that have not become State Parties will not have rights or duties under the AfCFTA.[1]

Final tariff schedules have not yet been agreed but lower preferential rates, to the extent available, will govern trade among the relevant State Parties. State parties “that are members of Regional Economic Communities (RECs), which have attained among themselves higher levels of elimination of customs duties and trade barriers than those provided for under the AfCFTA, shall maintain, and where possible improve upon, those higher levels of trade liberalisation among themselves”.[2] Given the high concentration of current intra-Africa trade within the RECs, a relatively small portion of intra-African trade in goods will benefit from trade under AfCFTA tariff rates.

Since the AfCFTA negotiations are incomplete, we will have to wait for the announcements about the precise content of the interim dispensation instruments from the AU Johannesburg Summit which took place on 5 December 2020. These are not yet published. The outstanding negotiations will continue in the new year; these are tariff concessions and rules of origin for trade in goods and specific commitments for trade in services.

The AfCFTA is Member driven and without supra-nationality

The AfCFTA does not create a new international organization and does not provide for supranational institutions. It will be member-driven.[3] It means new obligations can only be added through decisions adopted by the State Parties; and such decisions are taken by consensus.[4] The AfCFTA Assembly, Council of Ministers, Committee of Senior Trade Officials, Committee on Trade in Goods and Committee on Trade in Services (and their sub-committees) are composed of representatives of the State Parties. The Secretariat, based in Accra, Ghana, is a full-time institution with its own technical staff. It is responsible for supporting and assisting the State Parties and other AfCFTA institutions and for monitoring implementation of the AfCFTA.

The RECs are here to stay, with Overlapping Parallelism

The AfCFTA does not abolish the RECs or their internal trade regimes.[5] These are mostly older, more advanced, and more deeply integrated intra-African trade regimes. The AfCFTA adds an additional FTA on the continent but will only provide for new preferential rates with respect to goods previously traded under MFN rates. Customs Unions such as the Southern African Customs Union (SACU) and other “regional trading arrangements” which have attained among themselves higher levels of regional integration than under the AfCFTA regime, will also continue to exist.[6] The AfCFTA will function alongside these existing intra-African trade regimes. The REC FTAs are to be the building blocks of the AfCFTA.[7]

Implementation through progressive liberalization

It takes time to form an FTA, as recognized by Article 4 of the AfCFTA Agreement. This provision mentions the progressive elimination of tariffs and non-tariff barriers, the progressive liberalization of trade in services and cooperation by the State Parties in respect of other trade related disciplines.

The AfCFTA Agreement is not self-executing

Trade Agreements such as the AfCFTA are implemented through the domestic measures implemented in the State Parties. They must change their national tariff books, provide for domestic procedures regarding the issue of certificates of origin and for compliance with technical and health standards. The aim will obviously be to harmonize these procedures, but they will need national legal foundations to ensure officials will give effect to the relevant provisions in the AfCFTA Agreement. Trade remedies and safeguard measures will need national investigating authorities and enabling domestic laws.

Better trade governance (especially regarding customs administration, transit, trade facilitation and the removal of NTBs) holds the key to the success of the trade in goods objectives of the AfCFTA. Access to reliable and up to date information, the applicable rules and trade data are vital further ingredients of sound trade governance.

For Trade in Services it will be a matter of expanding the scope of the relevant Protocol and ensuring regulatory harmonisation. Trade in services is regulatory intensive.

Trade Agreements do not guarantee trade

Trade agreements create obligations between the State Parties. They must respect their obligations and provide the enabling environment for private firms to risk their investments in order to produce and export goods and services to new markets, and to establish a commercial presence in foreign markets to provide services to local consumers and other firms.

Intra-African trade is hampered by low levels of industrialization and technology supported services, as well as poor infrastructural support systems. Governments can do much to tackle these problem areas through appropriate policies and incentives.

How will disputes be settled?

The AfCFTA has a Protocol on dispute settlement. Only inter-state disputes will be heard by the Panels and Appellate Body provided for. This system is modelled on the Dispute Settlement Understanding of the World Trade Organization (WTO).

[1] The State Parties are AU Member States that have ratified or acceded to the AfCFTA Agreement and for which it has entered into force. Art1 AfCFTA Agreement.

[2] Art 8(2) AfCFTA Protocol on Trade in Goods.

[3] At 5 AfCFTA Agreement.

[4] Art 14 AfCFTA Agreement.

[5] Art 19(2) AfCFTA Agreement and Art 8(2) AfCFTA Protocol on Trade in Goods.

[6] Art 19(2) AfCFTA Agreement.

[7] 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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