Does the AfCFTA have a new formula for regional integration?
The African Continental Free Trade Agreement (AfCFTA) has been launched to boost intra-African trade and industrialisation. For this to happen there needs to be better trade governance and large-scale investments in infrastructural development and regional value chains. This Blog discusses the AfCFTA’s economic integration strategy in terms of which these initiatives must unfold.
Economic integration occurs when countries conclude treaties offering preferential access to each other’s markets. As integration deepens, further adjustments need to be made. The necessary institutions, additional obligations and governance measures must be added.
Economic integration typically starts with the establishment of a Free Trade Area (FTA), to liberalise trade in goods. Tariff liberalisation schedules and rules of origin must be negotiated and adopted. The next stage is a Customs Union (CU), in which the member states address issues of market segmentation and how to do certain things jointly. A CU has a single customs territory and a common external tariff. In some instances, countries go further and form common markets (when trade in services is also liberalised) and monetary unions (with a single currency and monetary policy).
The REC FTAs are the building blocks of the AfCFTA. They will continue to function under their own legal regimes and are able to deepen their own integration arrangements. “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.”
The AfCFTA’s Specific Objectives are about the progressive elimination of tariffs and non-tariff barriers to trade in goods; the progressive liberalisation of trade in services, cooperation on investment, intellectual property rights and competition policy and all trade-related areas. The AfCFTA is, essentially, “an institutional framework for the implementation and administration of the AfCFTA”.
This is a member-driven arrangement in which the State Parties retain policy space over trade related matters. However, the AfCFTA Agreement also mentions, in its provision on General Objectives, the intention to create a single African market for goods and services at some future date. It does not contain a formula for how this will happen. Article 3 of the AfCFTA Agreement says “successive rounds of negotiations” will be necessary and that the State Parties will “lay the foundation for the establishment of a Continental Customs Union at a later stage”. Such a future initiative will also be member-driven. There is no firm obligation here to form a continental customs union.
The Abuja Treaty is based on a different strategy. It does not contain exceptions allowing the RECs to continue and it does not mention CUs or other trade arrangements. Article 6 of the Abuja Treaty provides that the AEC shall be established in six stages over a transitional period not exceeding 34 years. This process had to begin by “strengthening existing regional economic communities” to eventually form one African Common Market and setting up the African Monetary Union.
The Abuja Treaty spells out a step-by-step continental integration process and a strict timeframe, with the additional expectation that existing RECs will dissolve into bigger continental configurations. The AfCFTA Agreement does not repeat this plan. It emphasises the preservation of the acquis (what has already been achieved in the RECs) and says the REC FTAs are building blocks of the AfCFTA. It also contains its own provision on most-favoured-nation treatment. Article 4 of the AfCFTA Protocol on Trade in Goods provides that State Parties extend to one another preferences which aim at achieving the objectives of this Protocol among themselves, provided that such preferences are extended on a reciprocal basis. They shall not be obliged to extend to another State Party trade preferences dating from before the entry into force of the AfCFTA Agreement.
The AfCFTA should be viewed as an opportunity to evaluate economic integration on the continent afresh. Whether it has done so comprehensively entails a debate that must continue.
 Art 8(2) AfCFTA Protocol on Trade in Goods.
 Art 3 AfCFTA Agreement.
 Art 3 (g) AfCFTA Agreement.
 Art 3(d) AfCFTA Agreement.
 Art 5 AfCFTA Agreement.
 The AfCFTA Agreement entered into force on 30 May 2019.
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