Building capacity to help Africa trade better

Will 2021 see African Governments negotiating with External Partners?


Will 2021 see African Governments negotiating with External Partners?

Will 2021 see African Governments negotiating with External Partners?

The conclusion of trade agreements between African States and third parties is an important matter. Only 16% of the goods produced in Africa are sold in Africa. This indicates that more than 20% of Africa’s trade is with global trade partners. But this is also a controversial topic. Kenya has, for example, been criticized for starting such discussions with the United States (US) and for having concluded its own post Brexit roll-over agreement with the United Kingdom (UK). These decisions were criticized for undermining the continent’s ability to speak “with one voice”.

This is not helpful. The AfCFTA is not inward looking. This point should be clarified at the appropriate level. Discussions about “continent-to-continent” deliberations, as suggested in European Union (EU) circles, are early speculations. Such talks cannot be launched without thorough prior preparation, a clarification of the political objectives and the implications for the Cotonou Agreement, and understanding the legal issues. The AfCFTA does not have supra-national structures and is ultimately a member-driven arrangement.

Earlier trade deals with third parties did not generate any serious criticism, which confirms that the importance of trade with the rest of the world is understood. SACU and Mozambique have concluded an Economic Partnership Agreement (EPA) with the EU some time ago. It entered provisionally into force in October 2016. The SACUM countries also concluded a post Brexit deal with the UK in 2019. SACU has trade agreements with EFTA and Mercosur.

As noted in another tralac Blog, Mauritius recently announced that it has entered into a trade agreement with China. The FTA with China is an important development; it is Africa’s biggest trading partner. But China does not pursue comprehensive trade agreements with African nations such as the EU for example does via its EPAs. Chinese trade in goods is conducted primarily under MFN rules and in terms of arrangements with particular African States. There is no serious debate in Africa to change the status quo as far as China is concerned.

China is a very important investor in Africa. Most of the continent’s Foreign Direct Investment (FDI) originates from outside sources. Mode 3 of the Trade in Services Protocol (dealing with domestic commercial presence of service suppliers) has direct investment implications. Foreign firms, once domestically incorporated, become national entities. They are then governed by the relevant law of the land, including domestic measures in AfCFTA State Parties giving effect to an AfCFTA Investment Protocol. They will make investments under the applicable national legal instruments and procedures.

What do the AfCFTA legal texts say about trade with third parties? The AfCTA Agreement defines a third party to mean “a State(s) that is not a party to this Agreement except as otherwise defined in this Agreement”.[1] It also contains clear provisions about trade agreements with third parties. Article 4 of the AfCFTA Protocol on Trade in Goods says that “[n]othing 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.

This provision confirms the importance of external trade ties for Africa; the opposite would be illogical. The AfCFTA does not promote an exclusive “Africa first” approach. Efforts to do so elsewhere have revealed the folly behind this idea.

Countries such as Kenya may, however, face more serious legal and political challenges in their capacity of Member and Partner States belonging to a specific RECs, especially if the latter has advanced to the level of a CU. The East African Community, to which Kenya belongs, purports to be a CU. In a CU there is a CET; trade in goods agreements with third parties cannot be concluded unilaterally. Tariff changes must be undertaken collectively.

The real issue for Kenya is alignment of its external trade deals with its obligations under the EAC legal instruments. This matter is presently before the EAC Court of Justice.

[1] Art 1 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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