The African Continental Free Trade Area (AfCFTA) is Africa’s most ambitious integration initiative. This free trade area will add to the existing regional economic community customs unions, free trade areas and other trading arrangements, including bilateral trade agreements. It is designed to liberalise trade between countries that are not trading under trade preferences, addressing not only tariff but also non-tariff barriers (NTBs).
Negotiations were launched in 2015 and much progress has been made, both for trade in goods and trade in services. Meanwhile there have been important additions to the negotiating agenda, including a Protocol on Digital Trade and Protocol on Women and Youth in Trade. These are important and necessary for effective contemporary trade governance.
There is no trade in goods yet under the AfCFTA regime. The reason is that negotiations of tariff concessions and preferential rules of origin (RoO) - the minimum requirements for a free trade area (FTA) – are still underway.
The import tariff remains an important source of revenue, especially for least developed countries (LDCs) in the AfCFTA negotiations. RoO, while serving to assure the integrity of a free trade area by preventing trade deflection, can also effectively restrict market access to protect domestic industry from import competition. Given especially the importance of industrial development for all African countries, it has proven difficult to reach the necessary compromises on tariffs concessions and rules of origin that comply with the agreed negotiating modalities. While political support for the AfCFTA remains strong, countries have become more reticent, especially in the tariff and RoO negotiations.
Who is negotiating with whom? Article 5 of the AfCFTA Agreement contains the principles governing the AfCFTA. The preservation of the acquis confirms that the AfCFTA will build on what has already been achieved in the regional economic communities (RECs) and acknowledges the 8 RECs recognized by the African Union (AU). The Preamble to the Agreement confirms the REC FTAs as the building blocks of the AfCFTA. There are of course more than 8 RECs, including the oldest functioning customs union in the world, the Southern Africa Customs Union (SACU). They exist in terms of their own legal instruments and trade between their respective member states will continue under existing trade regimes. They may also expand, as the East African Community has recently done with the accession of the Democratic Republic of the Congo, and deepen their trade and integration agendas. The AfCFTA tariff negotiations are among those AU Member States which do not currently trade with one another under preferences.
The announcement to launch trade under the AfCFTA on 1 January 2021, by the Assembly of the African Union on 5 December 2020 , proved to be premature. At that point, RoO for 83.3% of tariff lines had been agreed. Not surprisingly, some countries had, at that time, submitted tariff offers only for products with agreed RoO. These offers fell short of the level of ambition to liberalise tariffs on 90% of tariff lines, agreed upon in the negotiating modalities. And some had not submitted any offers. Given the reciprocity requirement, and that the domestic processes to become “customs ready” were not all in place, trade under the AfCFTA could not begin.
Preparing for “commercially meaningful trade”
Concerted efforts are now underway for the start of “commercially meaningful trade” under a provisional arrangement, while negotiations continue to achieve a complete AfCFTA. The start of more significant trade in goods was prepared by the Decision on the African Continental Free Trade Area adopted by Heads of State at the 35th Ordinary Session of the AU Assembly, 5-6 February 2022.
This Decision derives from the Report of the 8th Meeting of the AfCFTA Council of Ministers responsible for Trade which was held in Accra, Ghana, 28-29 January 2022. For decisions by the Council of Ministers to become binding, they must be adopted by the AU Assembly. The Assembly Decision confirms that 43 tariff offers have been submitted by the Member States of respectively the Economic and Monetary Community of Central Africa (CEMAC), East African Community (EAC), Economic Community of West African States (ECOWAS), and the Southern African Customs Union (SACU), as well as ten individual countries. Twenty-nine of these have been technically verified by the AfCFTA Secretariat, as compliant with the modalities for tariff liberalisation. The modality-compliant offers are by:
- CEMAC Member States: Cameroon, Chad, the Central African Republic, Equatorial Guinea, Gabon, and the Republic of Congo.
- ECOWAS Member States plus Mauritania: Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo, Mauritania
- Individual country offers: Democratic Republic of Congo, Egypt, Madagascar, Malawi, Mauritius, Seychelles, and Zambia.
These State Parties are encouraged to proceed with domestic implementation processes so that “commercially meaningful trade” under the provisional arrangement can begin. The Assembly confirmed the Ministerial Directive for trade to start, “directing the Application of Provisional Schedules of Tariff Concessions in order to ensure the provisional application of the tariff offers on a basis across the state parties amongst the 29 Member States, pending the conclusion of all outstanding issues.” The Council of Ministers (CoM) is to submit the final Schedules of Tariff Concessions “as required by the AfCFTA Agreement by xxx”. This date is expected to be decided at the next CoM meeting scheduled for June 2022.
The Assembly noted that negotiations should continue so that zero rates of duty on 90% of tariff lines will be achieved, within the phase-down time frames agreed in the negotiating modalities, and that the principle of reciprocity must be complied with. The AfCFTA Secretariat is to support the negotiations of the remaining 10% of tariff lines; 7% of which can be designated “sensitive” and the remaining 3% can be excluded from liberalisation, provided that this 3% does not exceed 10% of the total value of trade.
By February 2022, RoO for 87.7% of tariff lines had been agreed. The outstanding RoO are for sugar, textiles and clothing and automotive products. The Assembly has urged the expeditious conclusion of the RoO negotiations, but this remains a very sensitive issue, closely linked with industrial development strategies, especially for some larger countries.
Completing the AfCFTA - trade in services and Phase II issues
The Assembly decided for the trade in services negotiations, specifically the specific commitments for the five priority sectors – financial, communication, transport, professional services, and tourism – to be completed by end June 2022. A framework for regulatory cooperation will also be concluded; this is a necessary step towards regulatory cooperation and perhaps even, regulatory harmonisation.
The scope of Phase II negotiations covers issues that can contribute to make the AfCFTA a progressive instrument for Africa’s integration and development. Draft texts for the negotiations on Investment and Competition Policy have been prepared, following stakeholder engagement and preparatory work programmes. The Protocol on Investment is expected to promote, facilitate, and protect intra-African investments, and establish a harmonised continental investment regime. Stakeholder engagement on Intellectual Property Rights (IPR) in preparation of negotiations, has begun. Expectations are that the Protocol on IPR could be a framework instrument, with a set of Annexes focusing on trademarks, patents, copyright and other IPRs. Stakeholder engagement on the agenda for the Protocol on Digital Trade have also begun; this agenda has been expanded from the Protocol on e-Commerce initially tabled.
The Assembly recognised efforts to establish an inclusive AfCFTA “through interventions that support women, young Africans, small and medium-sized enterprises as well as integrating small informal traders by implementing simplified trade regime” and in Paragraph 37 of the Decision on the AfCFTA decided to include the Protocol on Women and Youth in Trade in the scope of the AfCFTA Agreement. These are important not only to promote inclusion and economic justice, but given Africa’s demographic profile, they are integral to the success of the AfCFTA. Deadlines for concluding Phase II negotiations are tight. The aim is to adopt these Protocols by end September 2022.
The AFCFTA is a complex and ambitious undertaking. It is necessary to support incremental improvements in trade governance and Africa’s economic environment. This will be achieved incrementally by addressing specifically NTBs, improving trade facilitation and regulatory reform, cooperation and eventually harmonisation. These governance improvements together with agendas for trade in services, investment, competition, IPR, digital trade and trade and gender hold significant promise. For now, though, it is the basic requirements for a free trade area – tariff concessions and preferential rules of origin – that hold back the start of trade in goods under the AfCFTA. Hopefully, this gridlock will soon be resolved.