Building capacity to help Africa trade better

Can the ACFTA deliver urgent Outcomes?


Can the ACFTA deliver urgent Outcomes?

Can the ACFTA deliver urgent Outcomes?

During a recent webinar on the African Continental Free Trade Area (AfCFTA), some of the participants asked specific questions about how the AfCFTA will deliver concrete outcomes in terms of improved market access gains, industrialisation, and infrastructural development for the continent. Others wanted to know more about the accommodation of women and the youth as part of the AfCFTA agenda. And then the wish list grew…

There are high expectations about the AfCFTA and a sense of urgency. Are the expectations realistic? Should certain aspects be prioritised? Has COVID19 derailed the implementation plans?

The high hopes as to what will change once the AfCFTA is implemented are not without substance. In January 2012 the Assembly of Heads of State and Government of the African Union (AU) adopted a decision to establish a Continental Free Trade Area by an indicative date of 2017. Since that time many public statements and studies here and abroad have not only welcomed this initiative, but also predicted how the AfCFTA would unlock a massive market of more than a billion consumers. We will apparently produce all the new goods ourselves and outcompete the Chinese. Investors have expressed their keenness to become involved in the new business opportunities that such a market will offer. After all, the aim seems to establish a continental free trade area.

Some commentators have qualified their predictions by adding an important proviso; the AfCFTA could deliver much needed growth and development outcomes if properly implemented. This condition holds the key and shifts the responsibility to the State Parties. They must implement the obligations (and essential ones are still being negotiated) accepted as part of the AfCFTA Agreement. The relevant Governments must act, refrain from doing certain things, adopt the required policies, and enact new laws. They must pull in the same direction and gradually deepen integration on a continent-wide scale. This will require that they give up their policy space to act unilaterally. Are they prepared to do so?

Many commentators seem to believe that the AfCFTA is akin to a customs union (CU) with a single internal market and a common external tariff (CET). This is not the case. This is a Free Trade Area (FTA) in which the individual State Parties retain their freedom to conclude new trade agreements with third Parties (only 18% of Africa’s exports are destined for other African countries) and to use the import tariff for national industrialisation purposes. This is a member-driven arrangement.[1]

The AfCFTA does not create a supra-national institution such as e.g. the European Commission. It cannot act as if it is an independent authority with powers to implement continent-wide infrastructural schemes like transport networks and new power plants. It cannot adopt its own policies about industrialisation and then implement them. And it does not have the resources for doing so.

Implementation is the responsibility of the individual State Parties. They reduce tariffs on goods, agree on suitable rules of origin, remove non-tariff barriers, and improve trade facilitation. Trade facilitation is particularly important. It covers the full spectrum of border procedures, expeditious customs clearance, the electronic exchange of data about a shipment, the simplification and harmonisation of trade documents, to the possibility to appeal administrative decisions by border agencies. For each of these disciplines there are detailed Annexes in the AfCFTA Agreement. These are not obstacles in the way of realising the AfCFTA objectives, they contain rules about removing existing obstacles. For the AfCFTA to achieve what African Governments have been struggling with for decades will be a massive challenge.

The AfCFTA Agreement provides for new institutions. The State Parties will be in control and will, in their role as members of the Council of Ministers, take decisions (based on consensus) on implementing the AfCFTA instruments. The Council of Ministers will normally meet twice a year. The AU Assembly will provide “oversight and strategic guidance on the AfCFTA”.[2] It will be the forum where the long-term ambitions to “deepen the economic integration of the African continent[3] will have to be kept alive. But the very same States are involved; respectively as AU and AfCFTA Members.

There will also be a Committee of Senior Trade Officials and a full-time Secretariat. The latter is based in Accra, Ghana and is expected to perform numerous administrative and support functions, building capacity where needed, and disseminating official information and notifications about national measures. It could play an important role in launching new initiatives and getting the State Parties to implement them.

Continental trade liberalisation will take place through the simultaneous pursuit of the AfCFTA agenda and those of the RECs. The REC FTAs are the building blocks of the AfCFTA.[4] Article 8(2) of the AfCFTA Protocol on Trade in Goods says that “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”.[5] It means only firms in AfCFTA State Parties that are presently trading with other State Parties under MFN rates, are likely to use the AfCFTA trade in goods regime.

Overlapping REC membership will require choices about preferences and about rules of origin and technical standards. By way of example: Most East African Community (EAC) member states also belong to COMESA, while Tanzania is also a member of SADC. South African products can be exported to Tanzania under SADC’s preferences, but not to Kenya. Once the AfCFTA is in operation, preferential trade in goods between South Africa and Kenya may become possible but in terms of separate rules of origin and tariff schedules.

The AfCFTA Agreement is in force (since 30 May 2019) but at the time of writing (November 2021) no trade under AfCFTA rules has yet been possible. Preferential trade under AfCFTA rates will only commence once the new tariff schedules, rules of origin and conditions for trade in services in the five priority areas have been agreed and adopted.[6] The AfCFTA Guidelines to Annex 9 of the Protocol on Trade in Goods are also outstanding.

Article 18(1) of the AfCFTA Agreement explains how further liberalisation can be achieved: 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. The General Objectives of the AfCFTA mention the creation of “a liberalised market for goods and services through successive rounds of negotiationsand the intention to “lay the foundation for the establishment of a Continental Customs Union at a later stage”.[7]

The AfCFTA will not usher in sudden changes; it takes time to establish an FTA, particularly if a continent-wide market is envisaged. The AfCFTA Agreement says the State Parties “shall progressively eliminate tariffs and non-tariff barriers” and “progressively liberalise trade in services”.[8]

Public awareness about the implementation of the AfCFTA may turn out to be particularly important. More webinars about these issues are necessary. The questions should be directed specifically at the Government of the State Parties. Their first and most urgent task now is to complete the negotiations on the tariff schedules, rules of origin and liberalising trade in the priority services areas. Then we can start to monitor the process on achieving the AfCFTA goals in a more focused manner. The AfCFTA State Parties should be kept aware of the ambitions inherent in the AfCFTA.

[1] Art 5 AfCFTA Agreement.

[2] Art 10 AfCFTA Agreement.

[3] Art 3(a) AfCFTA Agreement.

[4] Art 5(b) AfCFTA Agreement.

[5] See also Art 19(2) AfCFTA Agreement.

[6] The priority services areas in the AfCFTA are tourism, transport, communications, financial and business services. Other services sectors will apparently be added. Art 23 AfCFTA Agreement allows for other instruments “within the scope of this Agreement deemed necessary”.

[7] Art 3 AfCFTA Agreement.

[8] Art 4 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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