Expediting the start of trade under the AfCFTA
The African Continental Free Trade (AfCFTA) Agreement is in force since 30 May 2019. The required number of twenty-two ratifications have been deposited thirty days earlier. Several additional ratifications have since been deposited with the Chair of the African Union (AU) Commission and now stands at 43.
All AU Member States, not only the State Parties, are participating in the negotiations on outstanding matters. Those that have not yet ratified the Agreement (which is defined as a single undertaking and includes all the AfCFTA Protocols and Annexes) are allowed to do so as Non-State Parties. The technically correct thing would have been to allow only State Parties to participate in these negotiations, but that seems to be politically unacceptable.
Why is it not yet possible to trade under AfCFTA preferences? The short answer is that the AfCFTA is incomplete. Tariff reductions and rules of origin, as well as conditions for trade in the five priority services sectors, must still be agreed. This has turned out to be a tough and very complicated exercise. Fifty-four African nations at different levels of economic development must, based on reciprocity, agree on tariff phase down periods, individual tariff schedules (in customs unions additional negotiations among the relevant member states must also be conducted), on the identification of their sensitive products and the goods to be excluded from liberalisation. Essential aspects regarding trade in services in the AfCFTA and the coordination of domestic services regulations must also be finalised.
The absence of final outcomes has to do with the fact that the AfCFTA is based on reciprocity. The State Parties undertake to open their domestic markets in exchange for market access elsewhere. The applicable terms and conditions must be agreed through concessions. The issues under discussion must be aligned with domestic and regional interests and existing economic development and industrialisation policies.
Most of these countries belong to Regional Economic Communities (RECs) where the same issues have already been negotiated. Conditions and facts have been created for regional supply chains and services networks closely connected to the interests of the firms doing business in these arrangements. This includes the rules of origin dispensations designed for local conditions. The SADC rules of origin, to mention one example, are product specific rules. It is simply not possible to elevate such bespoke arrangements to the continental level; they must be negotiated from scratch to accommodate a much wider audience and different needs.
Several of the AfCFTA State Parties have liberalised trade in services and allowed commercial presence based on unilateral decisions. When they must now make concessions with direct implications for how national businesses will compete with firms from all other African states, they will think carefully about what they can offer by way of additional concessions. They have their own plans for how they want to industrialise and have invested heavily in localisation initiatives and national master plans.
The delay in the implementation of the AfCFTA as a preferential trade regime is not the consequence of mala fides. It reflects how a member-driven trade arrangement is negotiated. This signifies an important reality and implication; expectations about the AfCFTA might have to be lowered to acceptable and manageable levels in order for trade under AfCFTA rules to start.
Decisions with far-reaching political and practical consequences still need to be taken. One of them appears to be to lower the agreed level of ambition for tariff liberalisation from the 90% of all trade in goods, which was agreed by the AU member states in the negotiating modalities. After many rounds of negotiations, there is now agreement on rules of origin for 87.7% of tariff lines. This was confirmed by the AU Assembly at the Summit, 5-6 February 2022. The rules of origin negotiations have proved to be the Gordian knot in the trade in goods negotiations, effectively holding back offers of tariff concessions beyond the scope of the agreed rules of origin.
Liberalising tariffs on 90% of tariff lines is an ambitious target, given the enormous diversity of the negotiating countries, the dependence on tariff revenue, especially by smaller and least developed countries, and importantly the use of rules of origin and tariffs to protect domestic industry from import competition. The latter is particularly important in the context of the explicit links now drawn between the AfCFTA and Africa’s ambition to industrialise. The aim to develop continental value chains, starting with a focus on the automotive value chain, enjoys the support of, amongst others, Afreximbank which announced a one billion US dollar facility to contribute to achieve these objectives.
What could be the benefits of slightly lower level of ambition? It will hopefully make it possible to decide, at last, on a final date to start trade under AfCFTA rules and to have a solid legal basis for doing so. Investor interest could focus on firm undertakings and legal certainty. There will be tangible benefits regarding preferential trade between SACU, the EAC and ECOWAS, to start with. The Tripartite Free Trade Area (TFTA), although not yet in force, has prepared COMESA, the EAC, and SADC for preferential trade in goods, with firms eagerly awaiting opportunity to do so. Notably the level of ambition for tariff liberalisation in the TFTA is 85%
It is unlikely that there would be legal issues under Article XXIV GATT (or the Enabling Clause) in the sense of not meeting the threshold for liberalising substantially all trade in goods in the AfCFTA. This initiative enjoys wide-ranging support, including in the WTO. In any case, notification to the Committee on Regional Trade Agreements (CRTA) does not involve a policing function. The CRTA considers individual regional agreements and is mandated to hold discussions on the systemic implications of the agreements for the multilateral trading system.
What is the downside? A 90% liberalisation result would have been more impressive and more meaningful. However, it seems to be beyond the grasp of what appears to be politically feasible. The political and reputational cost of no deal (or an unduly delayed one) must be factored in, given the AU’s repeated promises regarding continental trade liberalisation, economic integration, and solidarity. The political leaders who promised support for these ideals in the Preamble of the AfCFTA Agreement are confronted by other limitations and appear unable to deliver.
A slightly lower level of liberalisation will not be meaningless. It is true that the exclusions will be the acid test and that all the previous decisions about compliance with the modalities that have been adopted for these negotiations, will have to be revisited. But the required decision could be adopted by the Council of Ministers of the AfCFTA and be confirmed in terms of Article 22 of the AfCFTA Agreement. Offers of tariff concessions consistent with the new threshold would have to be expeditiously verified and confirmed by the AfCFTA Secretariat, so that preparations for the start of trade can be made at national level. This includes tariff book amendments. Much preparatory work has been done on AfCFTA certificates of origin, and other trade documentation. Implementation at national level must be expedited and supported.
Delaying the implementation of this ambitious deal has consequences. The private sector and investors are becoming skeptical, and the reputation of Africa is at stake. Negotiation fatigue may be setting in. Many starting dates for intra-continental preferential trade have come and gone. The latest one (to start with commercially meaningful trade) was made in February this year. It may well now be time to take a bold decision for trade in goods under the AfCFTA to start.
 This is the entry into force requirement under Art 23 of the AfCFTA Agreement.
 See tralac’s Ratification Monitor, https://www.tralac.org/resources/infographics/13795-status-of-afcfta-ratification.html
 See the Decision on the African Continental Free Trade Area (AfCFTA) of the AU Assembly, 5-6 February 2022, https://au.int/sites/default/files/decisions/41583-Assembly_AU_Dec_813-838_XXXV_E.pdf
 For the terms of reference of the CRTA, see WT/L/127.
 AfCFTA legal instruments must be adopted by the AU Assembly.
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