Building capacity to help Africa trade better

Trade under the AfCFTA may soon start: What must the State Parties still do?


Trade under the AfCFTA may soon start: What must the State Parties still do?

Trade under the AfCFTA may soon start: What must the State Parties still do?

When the outstanding tariff offers, rules of origin and specific services commitments of the African Continental Free Trade Area (AfCFTA) are finally agreed, this new continent-wide trade regime will be ready for implementation. The outstanding negotiations are about complex issues and involve sensitive national policies, but indications are that all legal instruments may soon be agreed. Trade under AfCFTA rules and preferences can then begin, provided certain domestic regulations and measures are adopted by the State Parties.

What are the State Parties required to do in order to ensure cross-border trade under AfCFTA rules becomes feasible? Where will the private sector find the relevant information about the applicable rates and obtain the certificates showing compliance with standards and rules of origin? What role will the AfCFTA Secretariat (as well as the State Parties and the RECs) play in respect of improving trade facilitation and removing non-tariff barriers (NTBs)? How will the RECs and existing customs unions contribute to advancing the objectives of the AfCFTA? Will foreign direct investment be flowing into Africa? Environmental, social and governance concerns have become the buzzwords of investment but how will the new challenges of sustainable development, resilience and climate change be addressed? The answers to these questions are vital for the success of the AfCFTA.

The starting point when discussing possible answers to these questions is to recognise that the AfCFTA is a member-driven FTA. The State Parties will retain policy space over industrialisation (which has become a priority concern for several African governments) and trade relations with third parties. They will also regulate investments, investors and service providers via national rules and domestic regulators when complying with the applicable AfCFTA norms. In respect of investment, competition, and intellectual property rights additional AfCFTA Protocols are still being negotiated. There will also be Protocols on women in trade and for digital trade and e-commerce. Rules and policies for special economic zone are still to be adopted. The AfCFTA architecture is work in progress.

The AfCFTA is not a self-executing legal regime. The Governments of the State Parties must adopt domestic legal and administrative arrangements in order to implement the disciplines underpinning the AfCFTA regime. National tariff books (including those of customs union’s where the applicable common external tariff must be respected) will have to be updated by inserting an AfCFTA tariff column. This requires new domestic legislation; involving a process which takes time. Customs officials cannot charge the new AfCFTA rates on imported goods unless this has been done. The virtual trade portal which the AfCFTA Secretariat plans to launch, will provide useful information to importers and exporters about the new trading environment, but cannot be enforced as a domestic legal instrument. There are important constitutional requirements in the various State Parties about the incorporation of international agreements that must be respected. It this is not done international legal instruments cannot be implemented.

Certificates of origin and those necessary to show compliance with SPS and TBT standards (the AfCFTA Secretariat has already developed templates for this purpose) will have to be issued by the responsible national authorities and Ministries. The required regulations must be promulgated. For trade remedies and safeguards (the AfCFTA contains detailed provisions on these matters) national investigating authorities and legal procedures must be in place. Such investigations and measures must be implemented in accordance with WTO norms, must respect due process requirements and be transparent. For most African countries the required laws must still be passed, institutions be established, and training be undertaken. The relevant technical information must be disseminated to all relevant stakeholders. For trade in services new regulations and codes of conduct are to be developed.

The private sector will have to work out their own responses and strategies. Relationships with customers in new foreign markets involve commercial arrangements, contracts, the establishment of supply networks and compliance with the rules and procedures applicable in such markets. They may find it necessary to establish a domestic commercial presence, incorporate new companies and meet requirements on foreign ownership of services suppliers.

Governments will develop and implement national strategies in order to benefit from the AfCFTA. Some have ambitious plans for exporting manufactured goods to customers in Africa and to develop continental value chains. For this to materialise there will have to be good and effective governance at home, reliable energy supplies, effective transport systems and better trade facilitation.

The AfCFTA will not be the only preferential trade arrangement on the African continent. Customs unions such as the Southern African Customs Union (SACU) and those in the EAC and ECOWAS, existing Regional Economic Community (REC) Free Trade Areas (FTAs) and other intra-African trade arrangements will remain operational.[1] But an important new dimension will be added to intra-African trade in the sense that preferential trade in goods and in the five priority services areas will now be possible among all the AfCFTA State Parties.

Trade under the AfCFTA will actually begin when firms make investments and engage in new cross-border commercial operations. Private sector initiatives in respect of importing and exporting goods and services to and from consumers and producers in other State Parties (where higher multilateral tariffs presently apply) will show how successful this regime will be.

AfCFTA is a major opportunity as well as a challenge. It is an ambitious undertaking and could bring real benefits. But it remains work in progress. Good governance and domestic reforms will to a considerable extent determine its success.

[1] Art 19(2) AfCFTA Agreement and art 8(2) AfCFTA Protocol on Trade in Goods.

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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