Discussions

The legal and institutional architecture of the Agreement Establishing the African Continental Free Trade Area

The legal and institutional architecture of the Agreement Establishing the African Continental Free Trade Area

15 Mar 2018

What is the African Continental Free Trade Area?

In January 2012, the African Union (AU) Heads of State and Government (HOSG) adopted a decision to establish an African Continental Free Trade Area (AfCFTA). The AfCFTA is an important initiative for Africa’s economic integration agenda. Its main objectives include the creation of a single market for goods, services, and movement of persons and investments among 55 African countries, and boosting intra-African trade via better harmonisation and coordination of trade liberalisation and facilitation across African regions and continent at large. In June 2015, negotiations for the establishment of the AfCFTA were officially launched. Since then, there has been a series of meetings under the auspices of the AU towards the finalisation of the AfCFTA.

On 9 March 2018, AU Ministers of Trade approved the Declaration launching the Agreement establishing the AfCFTA, the AfCFTA Agreement, Protocol on Trade in Goods and associated annexes, Protocol Trade in Services and its annexes as well as the Protocol on Rules and Procedures on the Settlement of Disputes. These instruments will be signed by the HOSG during the Extra Ordinary Summit of the AU to be held on 21 March 2018 in Kigali, Rwanda. Once signed, the AfCFTA Agreement and the protocols will be submitted for ratification by state parties in accordance with their domestic laws. These legal instruments will enter into force (become legally binding) 30 days after ratified by 15 state parties. African countries not party to the AfCFTA Agreement will have to accede to the Agreement.

Scope of the AfCFTA Agreement

The Agreement covers trade in goods, trade in services, investment, intellectual property rights and competition policy. The AfCFTA process is negotiated in two phases. Trade in services and trade in goods have been negotiated during the first phase. Some issues of the first phase (i.e. tariff concessions, schedules of specific commitments for services and rules of origin) are still unsettled. On 9 March 2018, the AU Trade Ministers adopted the Transitional Implementation Work Programme for their finalisation. Investment, intellectual property rights and competition policy will be covered in the second phase. It is hoped that the AfCFTA scope will be widened to cover other substantive disciplines such as electronic commerce.

Architecture of the AfCFTA Agreement

Protocols on trade in goods, trade in services, dispute settlement, investment, intellectual property rights and competition policy, form an integral part of the AfCFTA Agreement. Protocols on trade in goods, trade in services, dispute settlement have been finalised, while Protocols on investment, competition policy, and intellectual property rights will be negotiated in the second phase.

The Protocol on Trade in Goods aims to boost intra-African trade in goods through progressive elimination of tariffs and non-tariff barriers, enhanced efficiency of customs procedures, trade facilitation and transit. It seeks to facilitate trade in goods via enhanced cooperation in the areas of technical barriers to trade and sanitary and phytosanitary measures as well as development of continental and value chains. The Protocol contains several Annexes: Schedules of Tariff Concessions; Rules of Origin; Customs Cooperation and Mutual Administrative Assistance; Trade Facilitation; Transit Trade and Transit Facilitation; Technical Barriers to Trade; Sanitary and Phytosanitary measures; Non-Tariff Barriers; and Trade Remedies. Annexes on tariff concessions, rules of origin etc. are yet to be finalised.

The Protocol on Trade in Services aims to create a single services market through progressive liberalisation and elimination of barriers to trade in services across the African continent. It covers all services in any sector except services supplied in the exercise of governmental authority – services that are supplied not for commercial purposes or in competition with one or more service suppliers. Procurement by governmental agencies for governmental purposes and not with a view to commercial re-sale are excluded from the scope of this Protocol. The Protocol contains three Annexes: Schedules of Specific Commitment; Most-Favoured-Nation Exemption; and Air Transport.

Protocol on Rules and Procedures on the Settlement of Disputes deals with trade disputes arising from the commitments undertaken by state parties under the AfCFTA Agreement. It provides for rules and procedures for the settlement of such disputes. The dispute settlement mechanism provided under the Protocol is similar to that of the Word Trade Organisation system. It is inter-state, and administered by a Dispute Settlement Body (DSB). The AfCFTA DSB, composed of representatives the state parties, has the authority to establish dispute settlement panels and an appellate body, to adopt reports of the panels and appellate body. It also maintains surveillance of implementation of rulings and recommendations of the panels and appellate body. DSB decisions are taken by consensus. The Protocol provides that parties to a dispute must endeavour to settle their dispute through consultation, conciliation and mediation processes. If these processes fail, parties must settle their dispute through arbitration procedures facilitated by an arbitration panel established by the DSB.

Institutional architecture of the AfCFTA Agreement

The adoption, signing and ratification of the AfCFTA Agreement is not sufficient for bringing about the intended results of the AfCFTA. Implementation of the AfCFTA Agreement and the associated legal instruments is equally important. Essentially, state parties are responsible for implementing their rights and obligations under the AfCFTA Agreement.

The AfCFTA Agreement establishes oversight and administrative institutions (independent from existing AU institutions) to assist with the implementation of the Agreement. The Assembly of the AU HOSG is responsible for the overall oversight and strategic policy guidance on the AfCFTA. The Council of African Ministers responsible for Trade, established by the Assembly of the AU HOSG, provides strategic trade policy oversight and ensure effective implementation and enforcement of the AfCFTA Agreement. The Council’s decisions are binding on state parties. The Committee of Senior Trade Officials implements the Council’s decisions. The Committee is responsible for the development of programmes and action plans for the implementation of the AfCFTA Agreement. The AfCFTA Secretariat is an autonomous body within the AU System with an independent legal personality. It has a mandate to oversee, coordinate, facilitate and support the implementation and enforcement of the AfCFTA Agreement, and decisions of the oversight institutions.

Protocols and annexes of the AfCFTA Agreement create several committees to assist with the implementation of specific matters under the Agreement. These include the Committee for Trade in Services, Committee for Trade in Goods, AU Sub-Committee of the Directors General of Customs, Sub-Committee on Trade Facilitation, Committee on Rules of Origin, Committee for Technical Barriers to Trade, Committee for Non-Tariff Barriers, Committee on Trade Remedies, Committee on Sanitary and Phytosanitary Measures, and Dispute Settlement Body.