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Reciprocity in the AfCFTA Negotiations


Reciprocity in the AfCFTA Negotiations

Reciprocity in the AfCFTA Negotiations

There are two sets of norms governing the negotiations for the African Continental Free Trade Area (AfCFTA) Agreement and its Protocols. They are the guiding principles and the modalities for the tariff reductions/rules of origin for trade in goods, and those for the trade in services commitments.

In June 2015 the African Union (AU) Assembly launched the negotiations for establishing the AfCFTA.[1] The negotiations had to be guided by specific “overarching principles”: AU Member States/RECs/Customs Territories. RECs FTAs as building Blocs. Reservation of the Acquis Variable Geometry. Flexibility and Special and Differential Treatment Transparency and disclosure of information’. Substantial liberalisation. MFN Treatment. National Treatment. Reciprocity. Decisions shall be taken by consensus. Adoption of Best Practices”.[2] These Principles were subsequently incorporated into Article 5 of the AfCFTA Agreement.

The Assembly also decided that the Negotiating Forum would conduct negotiations, develop, and adopt rules of procedure and agree on modalities for these negotiations. In February 2019 the Assembly endorsed the recommended modalities for tariff liberalisation.[3]

Reciprocity is a key element in trade negotiations generally. In the AfCFTA negotiations the elimination of existing tariffs happens via a process based on reciprocity; tariff concessions are made, and the other relevant State Parties reciprocate. The Council of Ministers of the AfCFTA decided that the exchange of tariff concessions between State Parties shall be conditioned by the principle of reciprocity in terms of product line coverage and tariff reduction schedules that are aligned with the agreed modalities.[4] Reciprocity in this sense represents a key instrument of market opening as it creates incentive for overcoming adjustment concerns.

The AfCFTA tariff negotiations are qualified by the principles in Article 5 of the AfCFTA Agreement. Since the existing Regional Economic Community (REC) Free Trade Areas (FTAs) will continue,[5] and because the acquis must be preserved, State Parties that are members of existing REC FTAs or of customs unions will not extend tariff reduction offers to each other under the AfCFTA tariff negotiations. The members of customs unions must, in addition, make collective tariff offers in order to protect the integrity of the relevant common external tariff. Only those State Parties presently trading with each other under WTO most favoured nation (MFN) rates[6], are extending AfCFTA tariff offers now. Once the AfCFTA tariff schedules are adopted and in force, trade in goods on the whole continent will be governed by preferential trade in goods arrangements; in the form of existing FTA and custom union regimes, or under AfCFTA rules. Enjoying these benefits requires that the AfCFTA Agreement must be ratified or acceded to.

The modalities for the tariff negotiations specify the level of ambition that has been agreed. Tariff offers are tabled as an opening bid in the negotiations, and then negotiation process begins with requests and counter offers until agreement is reached. The aim is to liberalise 90% of tariff lines (not trade) over 5 years; least developed countries (LDCs) will implement their agreed tariff reductions over 10 years. The remaining 10% of tariff lines is divided into two categories - 7% of the tariff lines may be designated sensitive products and be liberalised over 10 years (LDCs have 13 years). The remaining 3% of the tariff lines may be excluded from liberalisation. In 2019 criteria for designating products as “sensitive” or “excluded” were agreed. Matters of food security, national security, fiscal revenue, livelihood, and industrialisation may provide reasons for products to be designated “sensitive” or “excluded.”

Preferential rules of origin play a “gateway” role in a free trade area; only if the rules of origin are complied with, will goods enter a market under a preferential rate of duty. Once tariff offers are tabled, the negotiations begin.[7] After COVID an online negotiations portal was launched.

The AfCFTA Agreement also provides for most favoured nation (MFN) treatment among the State Parties. Article 4(1) of the Protocol on Trade in Goods provides that the State Parties “shall accord Most-Favoured-Nation Treatment to one another in accordance with Article 18 of the Agreement”. The latter says that State Parties shall, when implementing the AfCFTA Agreement, accord each other, on a reciprocal basis, preferences that are no less favourable than those given to Third Parties. Third parties are countries (such as the European Union member states) that are not parties to the AfCFTA. (The SADC-EU Economic Partnership Agreement is an example of preferential trade in goods agreement with a third party.) It means the MFN principle of the AfCFTA is not automatic. Benefits linked to the extension of existing third-party preferences will have to be paid for.

[1] Doc. Assembly/AU/11(XXV).

[2] Assembly/AU/11(XXV) Annex I.

[3] Assembly/AU/Dec.714(XXXII).

[4] The Application of Provisional Schedules of Tariff Concessions MinisterialDirective1/2021.

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

[6] African States that are not WTO members apply their own “General Rate of Duty”.

[7] tralac Fact sheet: https://www.tralac.org/documents/resources/factsheets/4398-factsheet-afcfta-tariff-negotiations-july-2021/file.html

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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