A New Dawn on the Horizon? The CFTA in Context
Africa might become a whole lot smaller in 2018 – or certainly more connected – as African Union (AU) members gather in Kigali, Rwanda, to sign the African Continental Free Trade Area (AfCFTA). The mammoth free trade agreement seeks to bring the 55 AU Member States into the AfCFTA. The signing ceremony is scheduled to occur at the upcoming AU Extraordinary Summit (17-21 March, 2018) and marks the conclusion of the first phase of negotiations on the AfCFTA that aims to create a single continental market for goods and services, free movement of business persons and investments.
At the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union (AU) held in January 2012, parties resolved to establish the AfCFTA. This entails creating a single continental market aimed at integrating the regions and boosting intra-African trade. This is in line with the mandate of the Abuja Treaty of 1991 that envisioned the creation of AfCFTA through a linear integration process to be undertaken in six stages, with the end goal being the creation of a common monetary union. This is one of the first flagship programmes envisioned by the AU’s Agenda 2063. Within this linear integration process the AfCFTA was launched to achieve,
“…a comprehensive and mutually beneficial trade agreement among the Member States of the African Union…within the broader framework of the Abuja Treaty Establishing the African Economic Community…to pave the way for accelerating the establishment of the Continental Customs Union”[1]
The AfCFTA will not create a customs union immediately, but rather will emphasise the establishment of a free trade area to pave the way through a gradual process of tariff elimination. The AfCFTA’s mandate includes,
- the creation of a comprehensive and mutually beneficial trade agreement;
- the creation of a customs union
- a single continental market for goods and services with free movement of business persons and investments.
- to overcome dependency on primary goods;
- to enhance competitiveness and boost intra-African trade;
- via regional integration – to resolve challenges with overlapping memberships; and
- to promote regional value chains.
The full scope of the agreement will cover Trade in Goods, Trade in Services, Investment, Intellectual Property Rights and Competition Policy. Negotiations for the AfCFTA commenced in 2015 with the date for concluding the agreement initially set for 2017 but, will only be concluded with the signing on 21 March, 2018. The AfCFTA is one of the first flagship programmes to be launched by the AU outlined in the AU Agenda 2063.
The AfCFTA relies on the 8 Regional Economic Communities (RECs) as building blocks. This is in line with the 8 RECs formally recognised by the AU following the Protocol on Relations between the African Union and the RECs. The idea is to facilitate the harmonisation of policies, deal with the challenges relating to overlapping RECs, regulate the proliferation of RECs and ensure compliance with the Abuja Treaty.[2]
The negotiations are being conducted in two phases. Phase One focused on trade in goods, trade in services and dispute settlement. Phase Two, which will commence only after the final conclusion of Phase One, will focus on Competition Policy, Intellectual Property Rights and Investments.
However, it appears that Phase One of the negotiations has been concluded, since African leaders are expected to sign the agreement on 21 March 2018 at the Extraordinary Summit of the AU. Yet, there are some contentious outstanding issues that still need to be concluded, such as the compensation mechanism (for states whose revenues will be impacted by import liberalisation), dispute settlement and rules of origin.
Therefore, many questions have come to the fore. First, what exactly are the leaders signing?
Will the AfCFTA go the TFTA route and proceed with the agreement under the auspices of an umbrella clause, with negotiations continuing beyond signature? It was to be expected considering the size of the agreement and wide variety of economies that are participating. We can only speculate until the AfCFTA is unveiled on the date of signing.
Second, what is the relationship between the TFTA and the CFTA, and the many other RECs on which the framework agreement was built?
Specifically, will the AfCFTA supersede all these pre-existing RECs or will it be complementary? What role do the pre-existing RECs play in the broader agenda of the AfCFTA and the Abuja Treaty, considering one of the many challenges of the RECs in Africa is the continual overlap of members between the different RECs?
The conclusion of the AfCFTA brings with it many expectations from different stakeholders. The main areas of interest in the agreement is on trade facilitation, technical barriers to trade, sanitary and phytosanitary measures, non-tariff barriers, trade remedies, customs cooperation and rules of origin. Other key aspects include provisions on protection of infant industries and rules of origin (cumulation of origin).
Africa faces trade challenges relating to the limited trade between states (low intra-African trade), import-dependence and a heavy reliance on primary commodities exports. Thus, the above mentioned areas of interest are crucial in tackling some of these challenges through developing regional value chains and boosting intra-African trade. If the agreement is implemented properly,[3] it could provide an enabling environment to improve regional value chain formation, contribute to achieving the Sustainable Development Goals (including poverty, jobs creation, etc.), boost intra-African trade by creating a single continental market and promote regional integration.
The introduction of the AfCFTA raises many expectations with the hopes that it will bring a new dawn for Africa’s trade and economic community. At this stage the jury is still out on whether the agreement, to be signed on March 21st, will live up to the media hype, considering the number of known unknowns.
Photo credit: Embassy of Equatorial Guinea on Visual hunt / CC BY-ND
[1] Executive Council: Twenty-Seventh Ordinary Session, Johannesburg 2015. http://archive.au.int/collect/oaucounc/import/English/EX{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}20CL{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}20907{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}20(XXVII){fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}20_E.pdf. Accessed 14 March 2018.
[2] These RECs include the Community of Sahel-Saharan States (CENSAD), Intergovernmental Authority of Development (IGAD), Economic Community of Central African States (ECCAS), Economic Community of West African States (ECOWAS), East African Community (EAC), Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) and Arab Maghreb Union (UMA).
[3] Members state implement the measures by removing all NTBs, tariff liberalisation and implement trade facilitation measures to open up borders.