Discussions

How will the AfCFTA be established and its Legal Instruments be implemented?

How will the AfCFTA be established and its Legal Instruments be implemented?

22 Mar 2018

Gerhard Erasmus, tralac Associate, comments on the legal arrangements for the establishment of the AfCFTA

The first two legal instruments for launching the African Continental Free Trade Area (AfCFTA), along with the Kigali Declaration, have just been signed. What happens next and when can real trade benefits be expected? What exactly is the AfCFTA? What are the long-terms plans behind this initiative?

This Discussion Note endeavours to answer these questions by examining the text of the Agreement Establishing the African Continental Free Trade Area, signed on 21 March 2018 in Kigali. We will discuss the Declaration, signed at the same occasion, in a separate Discussion Note. There have been changes to these instruments till the last moment and we cannot guarantee that we have captured the very latest formulations. The signed Agreement and Declaration will be published by tralac once released. The full list of signatories is available here.

The following basic features of the AfCFTA can be identified:

  • The AfCFTA document just signed does not establish a continental trade arrangement yet. It is the first legal instrument required for this process. The agreement will serve as the “umbrella” and to it will be added Protocols on Trade in Goods, Trade in Services, as well as on Intellectual Property Rights; Investment and Competition. These instruments are still to be negotiated and concluded. The Protocol on Trade in Goods is well advanced but was not signed in Kigali.

  • Once all of these instruments are concluded and have entered into force (22 ratifications are apparently now required for this to happen) a new and continent-wide African trade arrangement will formally exist for those states which will have deposited instruments of ratification. (Accession is also possible.[1]) It is called a Free Trade Area but will encompass much more than trade in goods. The AfCFTA will be a comprehensive “Partnership Agreement”.

  • The general design indicates that this will be a single undertaking. In Article 1 the AfCFTA “Agreement” is defined as “the Agreement establishing the African Continental Free Trade Area and its protocols, annexes and appendixes which shall form an integral part of it. The objective is to create “a single Market for Goods, Services, and Movement of Persons in order to deepen the economic integration of the African Continent.”[2] The various Protocols shall, upon adoption, form an integral part of the Agreement.[3]

  • The AfCFTA will be built in stages and will use the RECs as the building blocks. The aim is to create a liberalized market for goods and services through successive rounds of negotiations, contribute to the movement of capital and natural persons, and facilitate investments.

  • The ambition is also for the foundations to be laid for the eventual establishment, at a later stage, of a Continental Customs Union and a Continental Single Market.[4] For the moment, however, an institutional framework for the implementation and administration of the Continental Free Trade Area is established.[5] The establishment of more advanced arrangements will have far-reaching implications for loss of state sovereignty and cannot be described as realistic goals for the foreseeable future.

  • The Regional Economic Communities (RECs) will not disappear. In the Preamble the Member States reaffirm their existing rights and obligations with respect to each other under other agreements of which they are members. Article 21 states that “State Parties that are members of other regional economic communities, regional trading arrangements and custom unions, which have attained among themselves higher levels of regional integration than under this agreement, shall maintain such higher levels among themselves.”[6]

  • What will the relationship between the African Union (AU) and the AfCFTA be? This is an initiative of the AU and this week’s ceremony was about the adoption, by the AU, of the legal instruments for establishing the AfCFTA. However, once fully established, the AfCFTA will be a separate entity, but with close ties with the AU. “The CFTA Secretariat shall be an autonomous institutional body within the AU System with an independent legal personality.”[7]

  • The AfCFTA will have its own institutions. They are the Assembly of Heads of State and Government, the Council of African Ministers responsible for Trade, the Committee of Senior Trade Officials and the Secretariat.[8] Additional and specialized bodies will be established via the Protocols still to be negotiated. This is necessary in order to allow the notifications and technical work required for the specialized areas to take place in a transparent and hopefully rules-based manner. A Dispute Settlement Mechanism is provided for and will encompass a separate Protocol.[9]

  • The AfCFTA will also have to be notified to the WTO.[10]

So where does the AfCFTA stand? The “diplomatic” achievements have been quite remarkable. The Agreement was negotiated in a short period of time and the support among Governments for what has been achieved is wide-spread and genuine. The present indications are that a large number of them will sign this Agreement. This does not translate into real trade. A lot of work lies ahead before all the required legal instruments will be finalized, the difficult tariff schedules and rules of origin be worked out (which still delay the final implementation of the Tripartite Free Trade Area[11]) and the institutions are established. The ratification process will be the final phase. Present indications are that 22 ratifications are required for entry into force. This is a relatively small number. We may see the CFTA rather soon!

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[1] Article 24.

[2] Article 3.

[3] Article 8.

[4] Article 3.

[5] Article 4(g).

[6] Article 21(2).

[7] Article 14(1).

[8] Article 9.

[9] Article 22.

[10] This could happen under the Enabling Clause. See further Article 27(2).

[11] Which was launched in June 2015, when its first legal instruments were signed.