After a year of discussions, is the AfCFTA losing momentum?

Twelve months after the official start of trade under the African Continental Free Trade Area (AfCFTA) agreement, some commentators fear the project may run out of steam.

Despite the “surprisingly fantastic speed” of progress in 2020, “the AfCFTA appears to be losing the momentum it has gained among African leaders just as its importance is being recognized elsewhere,” said Carlos Lopes, professor at the Mandela School of Public Governance at the University of Cape Town.

“This apparent paradox must be dispelled quickly,” he warns.

Lopes argues that while the Covid-19 pandemic is responsible for slowing progress in the establishment and operation of the AfCFTA, the real stumbling blocks lie in three elements that erode the consensus:

  • the endless discussion on rules of origin, which is the intersection between trade and possible industrial policy;
  • interference from external partners pushing their divide-and-conquer agenda (with Kenya-United States Free Trade Agreement a specific case);
  • a lack of capacity within the Secretariat to move the agenda forward, given its launch in the midst of the pandemic.
Rwandan President Paul Kagame signs the agreement establishing AFCFTA at the African Union summit in Kigali, Rwanda, March 21, 2018 (AFP photo)

In this article, we take a look at the background to AFCFTA, catch up on progress towards its full implementation, and examine whether it is really going astray.

What is ZLECAf?

the ZLECAf is an ambitious trade pact aimed at forming the world’s largest free trade area by connecting nearly 1.3 billion people in 54 African countries.

The agreement aims to create a single market for goods and services in order to deepen Africa’s economic integration. The trade zone could have a combined gross domestic product of around $ 3.4 trillion, but realizing its full potential depends on significant policy reforms and trade facilitation measures in African signatory countries.

The AfCFTA aims to reduce tariffs between members and covers policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical barriers to trade.

The deal was negotiated by the African Union (AU) in response to a growing awareness that trade integration across the African continent has long been constrained by outdated border and transport infrastructure and a patchwork of different regulations. in dozens of markets.

The low level of intra-African trade compared to that between the countries of other continents reflects in particular the continent’s position as an exporter of raw materials to the rest of the world. It is hoped that the AfCFTA will significantly boost African industry and agriculture.

The first progress in the development of AFCFTA has been relatively rapid and an agreement was signed by 44 of the 55 AU member states in Kigali, Rwanda on March 21, 2018. The only country not yet to sign the The deal is Eritrea, which has a largely closed economy. .

Trade under the deal began in limited form on January 1, 2021, after a sixth month delay due to the impact of Covid-19. Although trade has officially been launched, negotiations on many issues need to be resolved before the deal can fully work.

Progress update

Talkmore Chidede, investment expert at the AfCFTA Secretariat, provided participants with an update on the progress of the negotiations during a webinar held to mark the launch of the PAFTRAC CEO Trade Survey Report: Assessing the Impact of AfCFTA on African Trade.

“Our main priority is to ensure that significant trade starts to occur across the continent under the AfCFTA regime,” Chidede explained.

“For trade to happen, we have some fundamental issues that we need to finalize. In terms of negotiations, we have rules of origin, tariff schedules, commitments on trade in services and non-tariff barriers.

Rules of Origin

Rules of origin are important because they determine which goods will receive preferential treatment under the AfCFTA, Chidede explained.

According to Secretariat website, these are “the criteria necessary to determine the national origin of a product. Their importance stems from the fact that duties and restrictions depend in many cases on the source of the imports.

Chidede said negotiations were 87.3% complete and that the Secretariat is engaging with stakeholders and Member States to ensure they are finalized as soon as possible “because without the rules of origin, we cannot trade under the AfCFTA ”.

Tariff schedules

Negotiations are underway to eliminate 90% of tariffs on goods over a period of five years (10 years for least developed countries or LDCs). From 2025, tariffs on an additional 7% of tariff lines will be eliminated over a period of five years (eight years for LDCs), with the remaining 3% of sensitive products remaining under protection.

It’s a sensitive issue for many LDCs, whose governments depend heavily on import tariffs for their income.

“Countries submit their tariff offers,” Chidede said. “So far, we have received 43 tariff offers from member states and they are undergoing technical verification at the AfCFTA Secretariat, and out of the 43, 29 comply with the modalities and principles of trade in goods, which means that these 29 tariff offers are ready to start trading.

“Member States are ready to start trade because they comply with the trade threshold under the AfCFTA. “

Trade in services

“We have the protocol on trade in services, but for trade in services to happen, member states or states parties have to make specific commitments, which we call service commitments. In service commitments, we received 44 initial offers. They go through the same processes as trade in goods. Malawi was the last to submit its initial offers.

Non-tariff barriers

Non-tariff barriers (BNT) restrict trade using forms other than tariffs, such as quotas, embargoes, sanctions and levies.

They constitute a greater obstacle to intra-African trade than tariff barriers, says the Secretariat website. “One of the main objectives of the AfCFTA is to phase out existing NTBs and refrain from introducing new ones in order to improve and facilitate intra-African trade. The Continental tool will monitor BNTs with a view to their elimination. “

Chidede said that a mechanism for reporting non-tariff barriers was operational.

“We try to make sure that traders and businesses are able to report when they encounter non-tariff barriers when they encounter them in trade or when they are at the border. Then they are resolved by the mechanism.

He added that the Secretariat is working to ensure that companies know how to use the system through awareness raising, with training sessions in collaboration with Member States or other development partners coming the year. next.

Phase 2 issues

Although the above issues relate to Phase 1 of the negotiations, Chidede said progress is also being made on Phase 2 issues, including investment, intellectual property rights, competition policy, trade. digital technology and women, youth and commerce.

Member States have received documents on investment and competition policies and are in the process of conducting national consultations. Meetings are scheduled for early next year on digital commerce, women and youth, and trade and intellectual property rights.

Not dead in the water

While many traders may have viewed the AfCFTA as “dead in the waterOthers remain optimistic.

As Peter Fabricius, a South African journalist and consultant at the Institute for Strategic Studies, points out, the limited progress in the negotiations does not undermine the viability of the AfCFTA. The full target of removing tariffs on 97% of goods is not even supposed to be achieved until 2034.

“Complex trade negotiations undoubtedly take time. But by firing the starting shot almost a year ago when no runner had left the starting blocks, African leaders sowed confusion, especially among traders ”, he writes.

“Rules of origin were a sticking point from the start. Until that is resolved, nothing is resolved, so to speak. And it has to be sequential – you have to solve some problems sequentially, before you can open the floodgates, ”said Omar Ben Yedder, group editor and managing director of IC Publications (editors of African affairs), while hosting the PAFTRAC webinar.

According to Africa report, the AfCFTA secretariat has been authorized to recruit 350 additional staff, including commercial lawyers and economists, who are expected to help speed up the implementation process, which may solve the problem of the weak secretariat. to advance his program raised by Carlos Lopes.

But negotiators should always heed Lopes’ warning: “Without progress on the AfCFTA, Africa will be the target as usual. We need to pick up the pace.

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