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African Continental Free Trade Area: Policy and negotiation options for trade in goods
Introduction
Trade has been the motor of economic, social and political integration of African countries for many centuries prior to the establishment of Africa’s first regional body, the Organization of African Unity (OAU), in 1963. The OAU strived towards boosting intra-African cooperation and integration in the economic field at the continental level. It saw the formation of several regional economic communities that were created first with a view to consolidating the economic space of a particular region to harness potential benefits of such integration; and secondly, these would serve as the pillars or building blocks for eventual formation of a continental economic community. In 1980, the OAU adopted the Lagos Plan of Action for the Economic Development of Africa 1980-2000, articulating a regional development plan for Africa that included the formation of an African Common Market.
While several programmes and institutional creation proliferated, the level and rate of implementation of trade integration programmes of many regional economic communities (RECs) faltered. Weak implementation at the RECs level meant that efforts towards building up the continental community also wavered. With a view to reviving and launching the continental integration project, the OAU Abuja Treaty Establishing the African Economic Community was adopted in June 1991. It articulated the formation of a continental free trade area as a stepping stone toward the realisation of the African Economic Community. Momentum towards implementing this objective gathered speed with the formation of the African Union (AU) in 2002, replacing the OAU. AU member States paid greater attention to continental integration. In fact, Article 3 in the AU’s Constitutive Act, establishes that the third objective of the AU is to “accelerate the political and socio-economic integration of the continent”.
Subsequently, the AU decided to concentrate the process of fostering continental economic integration through trade integration. At the 2012 AU Summit, Heads of State and Government adopted a Decision on the Establishment of a Continental Free Trade Area (CFTA) by the indicative date of 2017 and endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven areas of cooperation namely trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration. Then in June 2015, at the twenty-fifth Summit of the African Union, held in South Africa, African Heads of State and Government agreed to launch negotiations on the creation of the CFTA by 2017 through negotiations on the liberalization of trade in goods and services. This initiative presents major opportunities and challenges to boost intra-African trade.
In order to multiply the benefits of the CFTA and promote developmental regionalism in Africa, a comprehensive vision of trade and development needs to be in place. Expanded markets for African goods and services, unobstructed factor movements and the reallocation of resources should promote economic diversification, structural transformation, technological development and the enhancement of human capital. The CFTA must be ambitious in dismantling barriers and reducing costs to intra-African trade and in improving productivity and competitiveness. It must provide for governments to involve nonstate actors, especially private sector, civil society and academia, in the discussions on the intent, content and design of CFTA so that the resulting agreement can create opportunities for businesses to exploit and bring about benefits to ordinary citizens.
Key Considerations for Accelerated CFTA Negotiations
The Negotiating Mandate
Usually the first step to be addressed by States in any negotiating process leading to an FTA is for the countries to secure a negotiating mandate, through national consultative processes, and convey that to their negotiators. This mandate describes the objectives, scope and content of the agreement from the perspective of the country or regional body. In most cases, the initial mandate is defined fairly broadly since economies usually aim for comprehensive FTAs. In any case, the mandate informs the negotiators whether they can negotiate on goods, services and investment, and what their broad objectives in each of these areas should be.
Once the negotiations are under way and the ambit of possible outcomes becomes clearer, these negotiating objectives are then often refined through the repeat of the mandate process. In the course of a complex negotiation, this process may be repeated several times. In this way, the negotiating mandate gets redefined from time to time. Sometimes it gets broader as the negotiations proceed. What seems difficult at the start can turn out to be quite manageable later on. Most countries have processes of this kind, though the details will differ.
The national consultations are particularly important in gathering the views and interests of non-States actors such as the private sector, civil society and academia and workers. The non-State actors are, by virtue of their status, are not included in trade negotiations processes which are mainly intergovernmental (or government-to-government). Hence the importance of national consultative processes to garner the views of non-States actors is a prerequisite for them to own the outcomes of negotiations. Likewise, the negotiations conducted among member States could involve occasions or platforms where non-State actors are informed of progress made and provided an opportunity to provide suggestions on the draft agreement.
The Negotiating Team
The negotiating mandate is promoted by a country negotiating team that is assembled by the Government body responsible for trade negotiations. This can be done in more than one way. However, the overall approach taken by States tends to show many similarities. For example, they usually appoint a chief negotiator, drawn from the department or ministry responsible for that country's trade negotiations. This person then becomes responsible for progress on negotiating the entire agreement. He or she may also be the main conduit for contact with ministers, senior representatives of the private sector and heads of nongovernmental and intergovernmental organisations.
Whether the chief negotiator also takes charge of one or more subject areas, such as market access for goods, will depend on the magnitude and complexity of the negotiations and on the customary way of the country's management of negotiations. It is usual to appoint a deputy chief negotiator, especially when it is clear that the negotiations will be substantial.
The chief negotiator is usually assisted by lead negotiators who will look after one or more of the chapters of the proposed agreement. Services and investment sometimes have separate lead negotiators, partly because of the complexity of the subjects, and partly because domestic responsibility for these areas often does not lie with trade ministries. Services negotiations especially may impinge on the responsibilities of many ministries, such as education, justice, finance, communications and transport. An issue to be considered, however, is that an FTA is an instrument promoting international economic relations, and its contents have to be approached from that perspective.
National ministries in most cases have well-established channels of communication with the private sector which can be used to support the efficient conduct of the negotiations. No two negotiations are the same, and the number of lead negotiators and their responsibilities will depend largely on the substance of the negotiations.
Preparing for the negotiations and ensuring that positions are understood and the right arguments developed requires a major effort. This places considerable demands on the chief negotiator and his or her communications skills. Negotiating teams will need to be arranged around the lead negotiators. These teams usually consist of experts in their areas as well as generalist officers. The number and composition of these teams will probably change during the negotiations. This is because negotiations on some chapters finish early. In other cases, the teams have to deal with quite specific issues which call for the use a different kind of expert.
Regardless of the necessity of such changes, a negotiating party should aim to keep the core members of negotiating teams unchanged as much as possible. This applies especially to leaders. Their ability to recall the negotiating history of the agreement will always be welcome, and at times it will be essential. The chief negotiator’s position should change only when this becomes absolutely unavoidable. Achieving this desirability is made easier by the fact that free trade negotiations are typically concluded within two to four years, or longer.
Another important aspect of assembling a team is the need to ensure that it has funding for the conduct of the negotiations. Money will be required for intensive domestic and international travel by sometimes quite large teams. It may also be necessary to hire negotiating venues and to employ interpreters and translators. The budget cycle in most negotiating parties is, however, usually one year only. If this is the case, the negotiators must therefore ensure that their requirements are included in relevant funding bids.
In the case of regional FTAs, like the CFTA, which is supported by the AUC, there is need within the Commission to set up a CFTA negotiation team with a lead official to support the Commissioner of Trade and Industry in mobilizing the Commission to support member States in the negotiations. Such a structure already exists in the AUC which is an important achievement.
The Negotiating Process
Most negotiating processes consist of plenary (formal) meetings and many informal meetings. The plenary is normally used to adopt decisions and to keep the various teams informed of progress in other parts of the negotiations. Plenaries are not suitable for resolving difficult problems, but they can be used to explain to all participants in the negotiations where difficulties remain and what are the possible solutions to address them. The plenary discussions promote transparency of the negotiations. Plenaries could accordingly be kept focussed and take place as and when the need for arises. Plenaries occur less frequently than informal meetings.
It is usually much more convenient to have the specific of issues of negotiations discussed in small groups of countries with a real interest in resolving them. Many issues in the negotiations will be difficult. Some will arise in the first meeting, and remain till the end of the negotiations.
Adequate time should be provided to negotiators to produce a quality agreement. If the timetable is too compressed, the danger exists that some important issues will not be considered adequately. The other side of the coin is that the expectation of ample time tends to encourage a feeling that there is plenty of time to negotiate hence delays occur. Experience has shown that the important negotiation issues to all parties need to be addressed for negotiations to proceed smoothly to a conclusive end with a balanced agreement.
As noted above, in addition to the formal negotiations process, opportunities need to be provided for involving non-state actors to inform negotiators of their concerns and interest.
The Negotiation Content
The parties to the negotiations usually start with developing a reasonable timetable for the negotiating sessions and a set of principles which will broadly govern the conduct and content of the negotiations. These principles have to be detailed enough to offer genuine guidance. At the same time, they have to be flexible enough to be able to accommodate easily any changes to plans may have been formed and adopted.
Where there is a disagreement over including an issue in the negotiations, it is almost invariably better to start with agreeing that everything is on the table. It may well be that in some cases agreement to complete negotiations on a given issue is in the end not possible, and that the parties then decide to leave things for resolution at a higher (political) level. Such a body is the High-Level African Trade Committee (HATC) in the case of the CFTA. That decision should, however, be made only after other available options have been explored thoroughly. This is where chief negotiators play a key role.
The CFTA as a “supra-regional” agreement
In many ways the CFTA is to be an innovative and ground-breaking supra-national and supraregional arrangement. It is a mega-regional agreement of over 50 countries. It is thus proposed that a more direct approach is applied to the CFTA negotiations; an approach that would, in some ways, start from a clean slate, with a clear directive as to the level of ambition. This is particularly important in view of the results of trade impact studies reviewed previously.
Given the short time available for negotiating and implementing the CFTA, within the indicative date of 2017, it is proposed that:
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The negotiating mandate issued by the AU Heads of State and Government could endorse a comprehensive and deep liberalization agreement covering substantially all the trade in goods, trade in services, and complementary supportive policy areas. The mandate should include the removal of customs/border obstacles, including the adoption of unified customs documentation and clearance process based on the single window approach. It should institute the enhancement of trade facilitation measures as an essential back-up support to liberalization of trade.
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The mandate should also address specifically technical barriers to trade and sanitary and phytosanitary barriers. Greater convergence on these policies will help to mollify their potential trade distorting effects, and instead bring about a positive impact on intra-African exports in agriculture, food and industrial products.
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Services trade in the CFTA has to be included from the start, not only to allow for potential trade-offs in market access all parties in agriculture and industry, but also to allow a more efficient use of the continent’s resources in critical areas such as road building, financial services, transport and logistics, and ICT. It is also important to include services in the CFTA, to facilitate further work on the issue of labour mobility within the continent.
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In order for the CFTA to play a deep economic integration role, African states should look into incorporating investment and competition regimes into the mandate. This will provide not only clarity for the relevant national business communities, but will also provide a safety-net against potential negative abuses of the CFTA by transnational corporations,
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As RECs would form the basic pillar from which the CFTA would be constructed, the inclusion of RECs in CFTA negotiations is necessary.
Inclusiveness and Transparency of Negotiations
Citizens, businesses and organisations outside the government will be affected by the CFTA. It is, therefore, important that in line with best practices in the field, the negotiating mandate should include direction on the processes of inclusiveness and transparency. This is to guarantee the maximum engagement by all parties affected by the negotiation, and minimise potential resistance by them and by parliaments at the conclusion of negotiations. Some of the bodies that will have to be consulted or may wish to be consulted, and who is included in negotiating teams depends on the conditions in a particular country. The following are some, in alphabetical order, that should be consulted:
- Agricultural producer and farming associations.
- Chambers of commerce and industry.
- Consumer bodies.
- Education and training providers.
- Importer and exporter associations.
- Specific-industry associations.
- Intellectual property associations.
- Professional associations.
- Standard-setting bodies.
- Parliaments, their committees and members.
- Media and information resources.
- State/Departmental/County institutions.
- Special-interest NGOs, particularly those working in the field of environment, labour rights, and women/youth.
- Academia.
The range of groups approached in this way will obviously depend on the countries concerned and the type of agreement envisaged. If, for example, the aim is an agreement limited to goods, the range of services providers that need to be consulted is narrower than would be the case in an agreement covering goods and services. But in the case of a genuinely comprehensive agreement, as is the case with the CFTA, the range of possibly interested organisations and individuals will be large, and will require an important effort to manage.
It is also advisable that a public-relations/media/information effort is deployed throughout the negotiation process, with frequent updates to keep interested parties “in the loop”. It also requires that a feedback process is instituted to allow negotiators to have a “feel” for potential pressures from local parties.
Indeed, and in the CFTA context, the African Trade Forum, one of the organs of CFTA architecture adopted by the AU Summit, is already operational. At its Second Session that was jointly organized by the AUC and UNECA in Addis Ababa in September 2012, it made important recommendations on the implementation of the consultative processes within the CFTA that are line with the proposals above.
Leadership Roles and the AU
The AU and its secretariat, the African Union Commission, have been given the role of managing the CFTA process, with little available resources; human, financial and legal. The AUC is thus both the organiser and the arbiter of technical success in the CFTA process, and thus substantial new resources will need to be furnished by member States and development partners to the AUC. The AUC in turn will have to review its current structures to address the expected new load of managing the CFTA negotiations.
This issue becomes of great importance in view of the proposed oversight structure approved by the Heads of State and Government in the “Strategic Framework for the Establishment of the CFTA”. The HATC, being composed of Heads of State and Government, is not expected to be available on a regular-enough basis to resolve expected conflicts in the negotiations. This role will fall, by default, to the AU’s Trade and Industry Commissioner and the secretariat team; the latter requiring substantial support from new, experienced and knowledgeable personnel.
Retaining Policy Space for Regional Development
There is no doubt that intra-African movement of goods and persons have been ongoing for many years, and that they have produced new production and trade structures, built over a period of time. It is also clear that these efforts predate the creation of the current RECs, and that these structures, mostly trans-border in nature and built on traditional relations among families and tribes, are a positive building block for regional integration efforts.
The entry of the CFTA will have to provide some “policy space” and special and differential treatment at the regional level to allow these structures to be accommodated by its rules, but also to allow CFTA-plus regional efforts to continue. Indeed, it is hoped that this extra-REC integration could pave the way for the entry into force of a real economic community of African States. Many of projects at the level of RECs may or may not be fully part of the larger pan-African projects, but can add a critical sub-regional development, integration and peace-making component which benefit the AU.
This may be particularly useful for trans-state agriculture and irrigation projects, as well as industrial and infrastructure ones. The latter must, however, benefit from a harmonisation effort in macro-economic policy reform, so as not to create distortions in the private sector investment markets.
Negotiations Timetables and Targets
FTA negotiations can last from two to four years or more. The WTO Doha Round of negotiations, which includes further liberalization of trade in goods, started in 2000 and has not yet concluded in 2016. The Trans-Pacific Partnership agreement took about 10 years to negotiate and though concluded, it remains to be ratified by all parties. Negotiations on the Free Trade Area of the Americas took over 9 years and ended in failure. The negotiations of ambitious South-South FTA indicate a minimum of 4-5 years of negotiations. So negotiations may take longer due to the level of ambition of the original negotiating mandate, and the number of countries involved.
In the case of the CFTA, the current timetables and time targets may need to be reviewed. This basically stems from the fact that African economies are at such level of variation in terms of development, macro-economic policy regimes, infrastructural development, and others which may not allow the conclusion of the negotiations in 2-4 years. This will certainly require a serious introspection by the Heads of State and Government at their earliest convenience. Given all of the above, it may be more realistic to expect the CFTA negotiation in goods to take about 2-4 years to complete. This time period would be more in tune with experience and best practices from the field.
This report was prepared for UNCTAD by Mr. Magdi A. Farahat under the framework of a Development Account Project on “Strengthening Capacities of African Countries in Boosting Intra-African Trade”. The views expressed in this publication reflect solely the views of the author.
Previous reports in the series are available below: