How can the CFTA facilitate trade in services?

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How can the CFTA facilitate trade in services?

How can the CFTA facilitate trade in services?
Photo credit: Singapore Customs

Regional trade and integration agreements should lead to development outcomes. They are not ends in themselves. The scope and coverage of the these agreements should reflect the collection of substantive disciplines that can serve as pathways to development outcomes.

The fact that trade liberalisation and regional integration will produce both winners and losers, takes on special significance in African. The challenges of integrating unequal partners will also manifest in Africa’s most ambitious integration project, the Continental Free Trade Area (CFTA), just as they have in all other regional integration initiatives on the continent. 

The CFTA has been directly linked to the initiative of African Union member states to Boost Intra-African Trade (BIAT). Indeed, in January 2012 member states adopted BIAT and a decision to expeditiously establish the CFTA to support BIAT. 

The CFTA does have other important development objectives too; these include the promotion of industrial development and diversification, employment creation and poverty eradication. The intent of AU member states to achieve development outcomes via the CFTA, BIAT and other initiatives, is abundantly clear.

The trade in services agenda in African integration, compared to the trade in goods agenda, can be described as nascent. African integration has been characterised by a predominant focus on trade-in-goods disciplines, with the import tariff commanding centre stage. Several regional economic communities (RECs) are, however, currently occupied with trade in services negotiations. And there is growing interest in services sector development and trade in services in many African countries. 

This presents an excellent opportunity to leverage an African services agenda (encompassing services sector development as well as trade in services), to support development outcomes, from the platform of the CFTA.

Services feature prominently as inputs into all economic activities, across the sectoral spectrum as well as across the size distribution of firms, from micro/informal enterprises through small, medium and large scale enterprises. 

Infrastructure services such as energy, transport and communication, and others such as financial services, deserve particular attention. These are a strong foundation for industrial development and diversification; taking into account the fact that the impact of sector specific industrial support initiatives will be decidedly limited, if enterprises do not have access to reliable supply, good quality and competitively priced transport, energy and communication services. They are essential to support competitive enterprises, and essential to facilitate trade in goods. 

In addition, these services and others such as education and health care that are closely linked to the infrastructure services, provide important markers of development. Without access to the infrastructure services, access to education and health care will be compromised. 

In short, services and especially infrastructure services matter for Africa’s sustainable development. How can we start connecting the dots in the CFTA to facilitate trade in services and support development outcomes?

  1. The trade in goods and trade in services agendas are closely connected. As an example, all services sector development (including health care, education, professional services) and trade in services requires inputs of information and communication technology (ICT) goods. 

    This makes the high tech deal in the World Trade Organisation such an important development – a great pity that so few African countries feature in the deal.

    The goods-services linkages make it essential to ensure institutional links (via the technical working groups and the trade negotiating forum) between the trade in goods and trade in services negotiations. 

  2. Movement of persons is necessary not only to facilitate cross border supply and consumption of services, but essential to support facilitation of trade in goods, cross-border value chain development and the establishment of commercial presence in other territories. 

    Temporary movement of persons is covered under mode 4 of the trade in services agenda, but there is no reference to the movement of persons in the CFTA. 

    This should be addressed. In addition linkages to African Union (AU) initiatives such as the recently announced AU passport should be developed synergistically in a rules-based framework.

  3. Trade in services negotiations should be closely connected to and informed by services sector development priorities so that they can support development outcomes from the CFTA. Financial services sector development priorities encompass, amongst others, broadening financial inclusion.

    Despite many innovative developments related to mobile money, transfers and payment systems, many millions of Africans remain outside the formal financial sector. This has important development implications; access to finance is just one example.

    Without access to finance through the formal banking system, individuals remain captive to high interest rates and associated debt servicing costs, their prospects for access to education, health care and entrepreneurial opportunities remain limited.

    In short, they remain on the periphery of the formal economy and its opportunities.

    Access to ICTs has become essential for access to other services including healthcare, education and financial services. ICT developments, for example, make possible the roll-out of distance learning to remote regions. This raises the importance of infrastructure development as well as regulatory reform, cooperation and harmonisation.

    Services sector development priorities should inform this regulatory reform, cooperation and harmonisation agenda for the CFTA. Roll out of infrastructure is absolutely necessary, but not sufficient to ensure access to services for Africa's marginalised population. 

    This is where the CFTA can make a significant contribution.

  4. Given the interconnections between the substantive negotiating issues of the CFTA, it would make sense to dispense with the structure of the negotiations in two distinct phases; with phase one set to cover trade in goods and trade in services, and phase two covering investment, competition and intellectual property matters. 

    Negotiations to conclude an internally consistent CFTA, which leverages the linkages among substantive issues, and to do this expeditiously, makes this imperative.

Trudi Hartzenberg is Executive Director of the Trade Law Centre (tralac). The views expressed in this article are those of the author and do not necessarily represent those of UNCTAD.