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Has the Context changed in which new AfCFTA Protocols are to be adopted?


Has the Context changed in which new AfCFTA Protocols are to be adopted?

Has the Context changed in which new AfCFTA Protocols are to be adopted?

The ideas and decisions to launch the African Continental Free Trade Area (AfCFTA) were developed and adopted about a decade ago. The world looked different then, and the challenges were familiar. There were no signs of the Covid pandemic, climate change was not recognised as the urgent challenge it now constitutes, and the multilateral trade system apparently provided a framework for conducting negotiations and for settling disputes. Food security was less of a problem.

And there was no war in Ukraine. In the United States, Europe and elsewhere massive amounts of money are now being spent on armaments, national security, and access to alternative energy sources. Africa will become, more than before, a theatre of contest for the major powers. To mention one example: The Democratic Republic of Congo accounted for more than two thirds of global cobalt production in 2021, making it the world’s largest cobalt producer by a large margin. Cobalt is an essential mineral used for batteries in electric cars, computers, and cell phones.

The world did not face a new Cold War, an expanding North Atlantic Treaty Organisation (NATO), massive amounts of money being spent on national security, the production of arms and new sources of energy in Europe and the United States. Africa was not viewed (at least not to the same extent) as a theatre for increasing big power competition, strategic influence, and a source of essential minerals. (The Democratic Republic of Congo accounted for more than two thirds of global cobalt production in 2021, making it the world’s largest cobalt producer by a large margin. This is the most lucrative and essential part of the DRC economy. It is its largest source of export income. Cobalt is critical to the renewable energy transition.)

The AfCFTA was conceptualised as an arrangement in which the State Parties (eventually all 55 African Union Members would have ratified the AfCFTA Agreement) would have been bound by the same obligations. This would have provided, so it was believed, a collective voice for Africa to speak about multilateral issues, to attract foreign direct investment (FDI) and to establish a continent-wide Free Trade Area (FTA) for trade in goods and services and additional disciplines. The AfCFTA had to be anchored in a founding Agreement and Protocols on investment, competition and protecting intellectual property rights. and for adopting the required additional legal instruments.[1]

The AfCFTA design seemed, at the time, to encapsulate a sound approach. It would have added an institutional framework for collective action and boosting intra African trade. It had to provide, for the first time, a strategy for industrialisation on a continental scale. In fact, during the subsequent negotiations for tariff reductions and for adopting rules of origin to liberalise trade in goods among the AfCFTA State Parties (less than 20% of the goods produced in Africa are destined for other African markets) the emphasis increasingly shifted to describe the AfCFTA as a framework agreement for industrialisation.

The rest of the world was excited about the prospect of one single African market for goods and services and about the investment opportunities that would have followed. However, they did not study the fine print in the Agreement. The Regional Economic Communities (RECs) are going nowhere and will remain the contexts for most intra-African trade.[2] They also find it difficult to understand why a trade agreement which has entered into force in May 2019 already cannot be implemented.

The AfCFTA scheme of things will not be adequate for dealing with the challenges of the day and to boost intra-African trade and industrialisation. One of the reasons is that AfCFTA is designed to be a member-driven arrangement and a Free Trade Area (FTA). This has important implications for how the AfCFTA will function. It means individual governments retain policy space over trade, investment, and industrialisation policies. The use of the import tariff will be a domestic issue. Services are regulated via domestic policies, laws and regulations.

The AfCFTA Agreement says that the Phase II Protocols (for investment, competition and protecting intellectual property rights) will be based on cooperation among the state Parties. It means these disciplines will be regulated via domestic laws and institutions. The same thinking applies to trade in services, which is by nature regulatory intensive. The AfCFTA formula for trade in services is one based on regulatory cooperation, not harmonisation.

It has subsequently been decided to add Protocols on Digital Trade, Women and Youth in Trade. Is it possible to adjust the design of outstanding Protocols and to establish more suitable institutions? This is one of the biggest challenges to be addressed by Governments and their negotiators.

It is unlikely that the member driven approach will be abandoned; it is ingrained in the approach to economic development and the realities in the RECs. And trade with the rest of the world remains vital. However, some of the problems can be fixed. There are projects underway in several RECs to streamline border management and to modernise customs administration. Infrastructure and transport are receiving priority attention in some of them.

The context in which the AfCFTA has to be completed and be implemented is changing. There will be many new challenges and we do not yet have the instruments to deal with them. For the objectives behind the AfCFTA to be implemented we still need well-functioning RECs, but also more suitable continental institutions, better decision-making, and inspiring leadership. It would be a bonus if the outstanding AfCFTA negotiations for new Protocols could lay the foundation for a different approach to their implementation. Joint decision-making and implementation, and appropriate institutional arrangements should become part of governance and of practice under the AfCFTA.

[1] Art 23 of the AfCFTA Agreement provides for “any other instrument… deemed necessary”.

[2] More than 60% of trade in goods in Africa are governed by the rules of SADC, one of the existing RECs.

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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