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The scope of the AfCFTA is expanding. What are the implications?


The scope of the AfCFTA is expanding. What are the implications?

The scope of the AfCFTA is expanding. What are the implications?

The African Continental Free Trade Area (AfCFTA) has a specific design. The relevant information appears, in the first instance, in the AfCFTA founding Agreement. One should start with the title. This is an FTA (Free Trade Area) of a particular kind. Trade in goods and in services will be liberalised among the State Parties.[1] Other disciplines will be added via new Protocols. Eventually there will be a single market for goods and services and related matters, underpinned by additional legal instruments. A comprehensive and modern trade arrangement is envisaged. And it has been said that it will be a rules-based, suggesting that rights will be enforced, apparently through dispute settlement if necessary.

The AfCFTA is based on founding Principles. Article 5 of the AfCFTA agreement explicitly states that this arrangement will, amongst other things, be member-driven and that the acquis of the Regional Economic (RECs) must be preserved. These important aspects are confirmed in other provisions.[2] In those RECs which have formed FTAs, customs unions or common markets, trade in goods (and where applicable trade in services) will also be possible under their respective regimes. This has an implication for implementation; there will be more overlapping membership complications. When continental trade is fully liberalised, there should eventually be more clarity, provided the rules of origin will also be harmonised.

The fact that this is an FTA is important. It means, firstly, that the State Parties retain the right to conclude trade agreements with third parties.[3] Trade in goods will be liberalised via the four modes also used in the General Agreement on Trade in Services (GATS) of the WTO. Tariff reductions and rules of origin must be negotiated and agreed to liberalise substantially all trade in goods among the State Parties and to remove substantially all restrictive regulations of commerce (NTBs) within a reasonable period of time.[4]

The AfCFTA negotiating modalities aim for 90% of goods to be traded duty free eventually. The tariff schedules will be published as new FTA columns in the national tariff books of the State Parties. In customs unions the common external tariff (CET) applies. National customs administrations will implement the relevant trade in goods instruments. Trade policy space is retained in an FTA, there is no CET.

The tariff reduction and rules of origin negotiations have been going on for several years but are not yet done. The official view is that the AfCFTA was launched on 1 January 2021, but at present trade in goods under the relevant AfCFTA Protocol has not yet started; the tariff schedules and Annex on rules of origin must first be adopted. These are difficult negotiations. Fifty-four countries are participating in these negotiations and have different needs, policies and plans for their own economies and industrialisation. Thirty-three of them are Least Developed Countries (LDCs).

The Guided Trade Initiative of the AfCFTA was launched in 2022 but only 8 State Parties are participating, and a limited range of goods is involved.[5] A similar initiative is planned for trade in services but must first be agreed. This is essentially an interim arrangement, which will fall away once the real deal gets off the ground. The sooner this happens, the better.

The institutional architecture of the AfCFTA is another important matter. The AfCFTA Agreement does not establish a customs union and there are no supranational institutions. The Council of Ministers is the highest decision-making body. Decisions are adopted based on consensus.[6] The only permanent institution is the Secretariat. It receives its instructions from the Council of Ministers. The Secretariat plays an important role during the ongoing negotiations to adopt the Phase II AfCFTA Protocols. It arranges for meetings and prepares proposals and drafts.

The AfCFTA Protocols include detailed Annexes. The Protocol on Trade in Goods has, for example, 9 Annexes. They cover disciplines on matters such as customs administration, trade facilitation, transit, NTBs, trade remedies and safeguards. Important additional AfCFTA Protocols are presently negotiated. They will deal with Investment, Competition, Intellectual Property Rights, Digital Trade and Women and the Youth. They deal with complex legal regimes. It will be a challenge to reconcile new obligations with existing global (e.g. as a consequence of WTO/ TRIPS membership) and regional rules binding on the same countries.

The details regarding procedures and the implementation of obligations appear in the Annexes. They are lex specialis.[7] The AfCFTA Protocols (and their respective Annexes) are an integral part of the AfCFTA.[8] They also establish new institutions of a technical nature where representatives of the State Parties will meet and coordinate national implementation strategies. There are indications now that specialised technical institutions may be formed for some of the new Protocols and be housed in the AfCFTA Secretariat. These developments will add new challenges to how the AfCFTA will be implemented as one continental regime. They may push the AfCFTA in the direction of specialised oversight. How such a development will be reconciled with the original principle of a member-driven arrangement without any supra-nationality, must be seen.

How will all the outstanding Protocols enter into force and who will be the parties thereto? The intention is that the AfCFTA will be a “single undertaking”. All the State Parties must be bound by the AfCFTA Agreement as a whole, which includes the Protocols and their Annexes. Article 8(2) of the AfCFTA Agreement provides as follows:

The Protocols on Trade in Goods, Trade in Services, Investment, Intellectual Property Rights, Competition Policy, Rules and Procedures on the Settlement of Disputes and their associated Annexes and Appendices shall form part of the single undertaking, subject to entry into force. (Emphasis added.)

 Article 23 of this Agreement contains the standard formula for entry into force:

This Agreement and the Protocols on Trade in Goods, Trade in Services, and Protocol on Rules and Procedures on the Settlement of Disputes shall enter into force thirty days after the deposit of the twenty second instrument of ratification. The Protocols on Investment, Intellectual Property Rights, Competition Policy and any other Instrument within the scope of this Agreement deemed necessary, shall enter into force thirty days after the deposit of the twenty second instrument of ratification.

The difficulty lies in the fact that the AfCFTA Agreement (the founding Agreement and the first three Protocols) had already entered into force on 19 May 2019. Certain essential aspects, such as the identity of the State Parties, have been defined at the outset. We know that the State Parties are those African Union Member States that have become Parties to the AfCFTA in terms of Article 23. What happens if some of them refuse to ratify the outstanding Protocols (or some of them) or delay ratification? The danger of a fragmented regime will have to be addressed and a solution be agreed before these negotiations are concluded. There is the additional complication that Phases II and III of the negotiations have now been merged into one. However, the Protocols on Women and the Youth and on Digital Trade are not mentioned in Article 8(2) of the Agreement, quoted above.

The suggested answer will probably be that the present negotiations will continue till each and every AU Member State (including the Non-State Parties participating in these negotiations) agrees with the content of the outstanding texts. This will impact on the nature and extent of the relevant obligations in a very direct manner. Is there enough time for such a strategy? There is considerable pressure for the negotiations to be completed and the AfCFTA to be implemented. The work is not yet done.

[1] The State Parties are those Member States of the African Union that have become parties to this Agreement and for whom it has entered into force. Art 1(v) AfCFTA Agreement.

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

[3] See also Art 4(2) AfCFTA Protocol on Trade in Goods.

[4] These requirements flow from the conditions in the General Agreement on Tariffs and Trade (GATT) of the World Trade Organization (WTO) applicable to the formation of et from FTAs.

[5] The AfCFTA Guided Trade Initiative - AfCFTA (au-afcfta.org)

[6] Arts 11 and 14 AfCFTA Agreement.

[7] This doctrine relates to the interpretation of laws and international agreements. If two legal instruments govern the same factual situation, the one governing a specific subject matter (lex specialis) overrides a law governing only general matters (lex generalis).

[8] Art 1(s) AfCFTA Agreement.

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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