tralac contribution to the Inquiry on the UK’s Africa Free Trade Initiative (AFTi)
The Trade Law Centre (tralac) was invited to contribute to the Inquiry on the UK’s Africa Free Trade Initiative (AFTi); which took place on 19 April 2016.
Trudi Hartzenberg acknowledged, along with other contributors to the Inquiry, the importance of the trade and integration agenda for the development strategy of African countries. There was also broad agreement that a practical trade facilitation agenda, and measures to reduce or eliminate non-tariff barriers, can reduce the costs of cross-border trade in Africa and also support Africa’s integration into the global economy.
The following are a selection of issues raised by tralac:
The beneficiaries of Africa’s trade and integration agenda are investors, producers, traders, workers and consumers. These agents require transparency, accountability and legal certainty from the trade and integration agreements that African countries conclude – in short they require rules-based governance.
An important emerging trend is the quest for legal certainty by private sector agents; with firms bringing cases, related to trade and integration agreements, to domestic and regional courts. A recent case involved a Mauritian company, Polytol Paints, bringing a case to the COMESA Court of Justice. The matter concerned a tariff increase on a product imported from Egypt (an input used by Polytol Paints in its production process) after the tariff had been reduced in accordance with the liberalisation commitments that Mauritius had undertaken in the context of the COMESA Free Trade Area. Cases such as these demonstrate the practical importance of rules-based governance, with effective dispute resolution or remedies available to the beneficiaries of the agreements.
Recommendation: support regional courts
- To deliver on the potential benefits implicit in any agreement; it must be effectively implemented. An unimplemented agreement is equivalent to no agreement at all.
Recommendation: support member states to implement agreements
- The capacity to produce tradeable goods and services competitively, is still in short supply in most African countries. It is, therefore, not surprising that industrial development has become an important feature in the trade and integration discourse. This highlights the important linkages between trade and industrial development, and the role of disciplines on the trade and integration agenda for industrial development. These include standards (sanitary and photo-sanitary) and technical regulations. Quality assurance, as well as compliance with standards, are essential to the determination of effective access to export markets. There are success stories to learn from; Namibia, a very small country in Southern Africa, is able to export certain beef products to the European Union markets. This country has managed to develop a beef supply chain, that includes several abattoirs that are accredited, by the relevant authorities in the European Union. The establishment of the abattoirs was on the initiative of the private sector, in collaboration with the Namibian government and with the support of development partners. It is possible to replicate and expand such successful initiatives to enhance the competitiveness of Africa’s agriculture and industry.
Recommendation: support collaborative efforts to enhance quality assurance infrastructure and technical capacity (learning from success stories)
- Infrastructure development is well-acknowledged as a priority for Africa; it is important to recognise that it is the services associated with the infrastructure that are inputs to production and trade facilitation. Energy, transport and communication are essential infrastructure services that are inputs to all economic activities and feature in all trade transactions. Regulation governing these infrastructure services will determine determine quality, price and accessibility for economic agents. Basic regulations, in the case of transport, such as axle load limits, can if they differ across countries, frustrate investment, production and trade. Harmonisation of such regulations can reduce trade costs significantly.
Recommendation: support new approaches to services negotiations focusing on regulatory matters (reform, cooperation, harmonisation)
What does this mean for Africa’s Continental Free Trade Area initiative?
The design and architecture of the CFTA are of critical importance to its success. It will be easier to make progress in some areas – such as non-tariff issues. Since there is much evidence (from the World Bank and other sources) to show that non-tariff barriers have greater restrictive impact on trade among African countries, it makes sense to prioritise negotiations in these areas, and to design the overall CFTA so that ‘agreements’ on such issues can enter into force in terms of their own provisions, while negotiations in other areas continue. The design can also accommodate variable geometry, so that willing partners may proceed, and others join later.
The CFTA thus provides an opportunity to shape a pragmatic integration agenda, to make progress in areas that can make a positive contribution to Africa’s trade, industrial development and integration ambitions. Lessons from the Tripartite Free Trade Area (TFTA) indicate that tariff liberalisation negotiations are very sensitive, and the appetite for further tariff reductions is, among many African countries, very weak. The associated rules of origin negotiations in the TFTA have also proved to be complex and difficult. Progress in other areas such as standards, trade facilitation (including customs and border management) has been much more expeditious. Prioritising these less contentious disciplines in the CFTA negotiations, makes sense.
Recommendations: support smaller member states to prepare and engage effectively in CFTA negotiations; support debate among non-state actors including the private sector, support broad-based access to information on CFTA matters