The relation between the Tripartite FTA and the Continental FTA
This article is based on the forthcoming publication by Francis Mangeni and Calestous Juma, entitled Emergent Africa – the Evolution of Regional Integration, Cambridge University Press, 2018
In the afternoon of 10 June 2015, in Sharm el Sheikh, Egypt, the Heads of State and Government signed the agreement establishing the Tripartite FTA and the declaration launching the FTA. Out of 26 countries, 23 signed the declaration and 15 signed the agreement. The following signed the agreement: Angola, Burundi, Congo DR, Egypt, Comoros, Djibouti, Kenya, Namibia, Seychelles, Tanzania, Malawi, Rwanda, Sudan, Uganda, and Zimbabwe. Swaziland signed the following week to bring the total to 16, followed subsequently by Zambia and Libya bringing the total to 18 by March 2017. Those yet to sign the agreement are Ethiopia, Lesotho, Botswana, Eritrea, Madagascar, Mauritius, and Mozambique.
The Tripartite FTA covers a combined population of 708 million and GDP of $1.3 trillion – half the continent. It provides a single policy and regulatory regime in an array of trade-related areas such as nontariff barriers, customs cooperation, trade facilitation, health and technical standards, and dispute settlement. This is a sizeable economic space and market by any standards.
In January 2012 the Heads of State and Government took a decision to establish the Continental Free Trade Area by 2017 and the Continental Customs Union by 2019. This decision included also the adoption of an action plan for boosting intra-Africa trade, based on seven clusters: trade policy, trade facilitation, productive capacity, trade-related infrastructure, trade finance, trade information, and factor market integration. The economic case for this action plan was sound. Analytical work done by the ECA demonstrated that intra-Africa trade would more than double from 10.2% to 21.9% by 2022 if the Continental FTA is established by 2017, accompanied by trade facilitation measures such as elimination of nontariff barriers.
Second, there was a glaring gap in the six stages for forming the African Economic Community: that is, there was no provision for a continental FTA, which should be a logical step before the 2019 continental customs union. It should be quickly added though that the a customs union conceptually entails a free trade area, as the former must have free movement of goods among the members and prohibition of non-tariff barriers. It can be added as well as that the continental common market by definition will involve free movement of goods, services, labour and capital; which covers the element of the free trade area in terms of free movement of goods. The implication therefore could be that there is ample basis for formation of the Continental FTA.
Third, the Tripartite FTA, covering COMESA, EAC and SADC (a total of 26 out of the 55 countries of the African Union), would provide a strategic launch pad for a continental FTA. Besides, experience would seem to suggest that progress on FTAs can be faster than operationalising a customs union and in light of the Tripartite FTA, strategists would see absolute sense in leveraging on this achievement and fast tracking the establishment of the Continental FTA. Following a process of consultations with multiple stakeholders including the academia and the private sector, the African Union Assembly adopted the decision.
At an event hosted by President Jacob Zuma in South Africa on 15 June 2015, AU Heads of State and Government launched negotiations for the Continental Free Trade Area. The negotiations, spanning the whole continent, were to be completed and the Continental FTA launched by December 2017. Following closely on the heels of the tripartite FTA, the momentum for regional integration in Africa is palpable.
The Continental FTA will have a combined GDP of about $2.3 trillion and a population of about one billion people, with more than half comprising the youth. It is estimated that in 2016, consumer and business-to-business spending in Africa was at $3.9 trillion and was projected to reach $5.6 trillion within eight years by 2025.3 The Continental FTA initiative therefore injects a new dimension in international relations, building on Africa’s solid record over the last decade of speaking with one voice and engaging the world actively as a united bloc, whether in seeking better representation or rules in WTO, climate change, World Bank, IMF, or UN negotiations.
The template for continental integration has been set out in the Abuja Treaty. The goal is to form the African Economic Community (AEC) by the year 2028 using the eight recognized regional economic communities (RECs) as the building blocs. The eight RECs are the Arab Maghreb Union, Sahara Sahel Community of States, Common Market for Eastern and Southern Africa, East African Community; Economic Community of Central African States, Economic Community of West African States, Intergovernmental Authority for Development, and Southern African Development Community. The economic integration initiative is a core basis for achieving Agenda 2063, which aims for a prosperous and peaceful Africa.
It will be recalled that the AEC will be achieved through six progressive stages that started in 1991 and will end in 2028, subject to the possibility of fast-tracking. The six stages are as follows: the RECs establish and strengthen FTAs followed by customs unions, the customs unions of the RECs merge to form a Continental Customs Union, which becomes an African Common Market, which in turn becomes the African Economic and Monetary Union. The African Union Heads of State and Government are to decide whether and when to move on to the next successive stage.
So far, FTAs have been established in the RECs and need to be continuously strengthened, especially those of Central and North Africa. But above all, the Tripartite FTA now covers half of the continent, through COMESA, EAC and SADC. The East African Community and the Economic Community of West African States have made good progress in establishing and operationalising their customs unions. The EAC is now working on its monetary union after having successfully launched its customs union in 2005 and its common market in 2010. This indicates that the first stage of establishing FTAs in the RECs has been substantially achieved. As indicated in the ECA’s Africa Regional Integration Index of 2016, trade integration has progressed more than other pillars of integration such as movement of persons infrastructure, industrialization and financial and macroeconomic integration – these five are key pillars of developmental integration.
What to watch
Much of the negotiation will be a technical bean counting exercise. Therefore, supportive technical institutions will need to be put in place. There will be a main technical body in which the negotiations take place, but this body will need thematic specific working groups or subcommittees, to take care of the various technical fields such as rules of origin, non-tariff barriers, customs cooperation, trade facilitation, product standards, trade remedies, and dispute settlement. Under a developmental approach to economic integration, parallel work on industrialisation and infrastructure will need to be provided for, to be undertaken by experts in those areas. Then, the overall overarching high level bodies responsible for supervising the negotiations and adopting the final deals, will need to be established.
The decision to venture into a new massive free trade area should be evidence based. A clear case should be made on the basis of demonstrable welfare gains in the context of the quest for social economic transformation. Without such a case, it would be difficult to galvanised the required support and ownership by key stakeholders on the public and private sector required.
The evidence based policy should be formulated within the broader approach of developmental integration, which is based on at least three pillars, namely, open markets, industrialisation and infrastructure development. FTAs in economic integration in Africa are much more than just trade agreements; they are foremost tools for economic development.
Enough time should be allowed for an inclusive consultative awareness creation and consensus building process involving all relevant players in policy formulation and implementation. This process should be designed to result in good appreciation of the issues at stake and understanding of the proposed ways forward in terms of vision, road map, policy thrusts and interventions, Institutional framework, resource requirements, and business processes or roles of stakeholders and drivers.
As broadly explained by Henry Etzkowitz's triple helix, key players include government at Central and local levels as well as parliaments, grassroots organisations covering the private sector and civil society organisations, and thinkers, innovators and knowledge generation and management institutions including universities and embedded research institutes.
The secretariats of regional organisations must rise to the occasion by providing technical and analytical input. This involves initiating and explaining studies and proposals to facilitate the negotiation and engagement processes, convening and organising the inter-governmental events that bring governments and other stakeholders together to transact business, as well as in-country events that contribute to the regional level outcomes.
In performing this critical role, secretariats should work closely with other relevant intergovernmental or peer organisations, including other secretariats, regional and international knowledge institutions, the media and shapers of public opinion, individual scholars and thinkers, and supportive people of good will.
The rule of thumb is ensuring adequate preparations for the negotiation sessions on the part of the negotiators and secretariats, and to get the logistics and documentation right.
There will be mundane things like choosing a convenient venue that is easy and friendly to travel to and from in terms of duration and connectivity air or surface transportation as well as the quality of the carriers, entry requirements including immigration and health, foreign exchange rules, and the hospitality infrastructure and culture. The point is to avoid having irritated or exhausted negotiators who will be destructive or eager to postpone matters.
During the negotiations, a number of challenges are bound to crop up and if not carefully addressed can fatally derail the process and lead to an outcome that misses vast opportunities for social economic transformation.
Then there will be the need to have technically adequate and user-friendly working documents for the negotiations. Having such documents good technical expertise and analytical skills in the secretariats; but also comparable skills on the part of the negotiators or at least the capacity to internalize the issues and engage in a relevant and constructive manner in line with given negotiation objectives.
Working documents have to be presented and explained in an easy manner and here is where the secretariat can greatly facilitate the negotiations. In addition, negotiators will need to have adequate national consultations before going to the negotiation sessions, and even then to have rapid response mechanisms for adjustment of positions in line with the dynamics of the negotiations. The ability to consult and get quick instructions from capitals by email or social media can come in handy and unlock last minute stalemates. In addition, the mandate given to the negotiators should be reasonably flexible or have the elbow-room to allow a negotiation to happen. Or better still, the mandate should have fall-back positions that anticipate and accommodate priorities of other parties. Working documents can indicate such Priorities and other pertinent considerations that can come into play.
The CFTA negotiations could indeed benefit from lessons learned in negotiating the Tripartite FTA. Some of these lessons included: (1) avoiding wasting time on procedural issues and giving priority to substantive negotiations regarding rules of origin, tariff elimination/reduction offers, and the text of the Agreement; (2) ensuring good analysis and working documents on key issues arising from the negotiations are complete and negotiators receive them in a timely manner well before the negotiation sessions; (3) strong political oversight at ministerial and presidential levels exercised through regular meetings to review progress, resolve sticking issues, and to maintain a high momentum; (4) drafting the emerging text early to make it usable to incrementally build up the Agreement as negotiations unfold; (5) leveraging partners that can provide technical backstopping of the negotiations such as the Economic Commission for Africa, UNDP, and UNCTAD; and (6) ensuring adequate financial resources for governments and the African Union Commission.
Other lessons included the following: (1) There should be proactive engagement with member states during the preparatory phase, to assist ensure that the time is actually used for preparations. (2) Clear political direction given upfront can assist the technical negotiators in not getting stuck in a labyrinth of their own making. (3) Meetings should allow enough time for negotiators or ministers to complete their work. (4) There should be a degree of standardization in the editorial policy, referencing, and racking of the various versions of documents, to assist record keeping and use. (5) Imagination and resourcefulness in finding the phrases and words that satisfactorily capture the varying positions and priorities in the negotiations are critical for negotiations to advance to a conclusion. (6) Technical hands-on assistance from the secretariat and other partners can enable government officials to undertake the extensive technical work required in finalizing the negotiation, for preparing the tariff offers and making sense of rules of origin. (7) For very technical areas to be negotiated, such as health and technical standards, a group of technical experts can have working sessions to produce working drafts for the negotiations. (8) Leaders will emerge in the negotiations, and this will be beneficial to the entire region if they represent the best interests of the region. Such leaders can be nurtured early on in the process and supported throughout with analytical work and guidance through the issues up for negotiation at every turn. (9) A precise timetable for the negotiations, indicating what to accomplish at each given session is absolutely critical, and needs to be adhered to. (10) Last but not least, variable geometry is the key to moving ahead.
Just as in the Tripartite, the Continental FTA is complemented by other initiatives to support industrialisation and infrastructure. A comprehensive Action Plan for Boosting Intra-Africa Trade has been adopted and is already being implemented, covering seven clusters, namely, trade policy, trade facilitation, productive capacity, trade-related infrastructure, trade finance, trade information, and factor market integration. This complementary action plan assists to ensure that benefits accrue across a wide range of sections of society and that countries can benefit from the larger market that opens up.
The African Union Commission's Department of Trade and Industry will provide the Secretariat services for these negotiations and has so far demonstrated admirable technical competence and capacity to mobilise and work closely with the secretariats of the RECs and stakeholders as well as technical partners especially the Economic Commission for Africa. Transparency in the negotiations will be key to generating ownership among stakeholders and users of the outcome of the negotiations. The Commission deserves every support.
The author, Dr. Francis Mangeni, is COMESA Director of Trade and Customs. This article has been published with permission.