The African Continental Free Trade Area (AfCFTA): Towards Implementation
Upon full implementation, AfCFTA (‘the agreement’) will be a binding force that will significantly impact how member states negotiate trade agreements with the rest of the world. It has a significant potential of creating an enlarged market place for goods and services for over 1.2 billion people.
The agreement seeks to provide a platform for market integration that shall create an equal opportunity market to members states. It is important to understand what the states are undertaking to do. Article 4 of the Agreement explains the nature of their obligations: The State Parties shall progressively eliminate tariffs and non-tariff barriers to trade in goods; progressively liberalise trade in services; cooperate on investment, intellectual property rights and competition policy; cooperate on all trade-related areas; cooperate on customs matters and the implementation of trade facilitation measures; establish a mechanism for the settlement of disputes concerning their rights and obligations; and establish and maintain an institutional framework for the implementation and administration of the AfCFTA.
It is expected to come into force upon ratification and deposit of ratification instruments by 22 member states. So far, 49 out of the 55 African states have signed the agreement. However, only 8 states out of the 49 have ratified and deposited their ratification instruments with the African Union, with Kenya and Ghana leading the ratification brigade.
Challenges to Adoption and Implementation
Most states have been reluctant to ratify the agreement due to the implementational challenges. While the overall concept has been to create a level playing field, some states have strongly expressed their doubts while stating that the gains from the agreement will be unequal depending on a state’s level of preparedness in terms of institutional and developmental priorities.
It has been widely expected that most of the increase in trade shall be felt in the manufacturing sector since Intra-African trade has a relatively higher industrial content than trade of African countries with the rest of the world. Altogether, the share of Intra-African trade in total is very small as compared to the rest of the world. This could be a reason why most non-ratifying states have been hesitant to relinquish the benefits accruing from their local trade policies in favor of the expected benefits to accrue from AfCFTA.
Another major challenge has been the view that trade growth and welfare benefits are likely to accrue unevenly, with the larger portion captured by few countries with stronger supply capacity and competitiveness. According to the calculations by UNCTAD based on UNCTADSTAT, this is reinforced by the fact that presently seven African countries account for 60% of total intra-merchandize exports while the majority account for the remaining 40%.
The conflicting disciplines and benefits of the different Regional Economic Communities (RECs) already in place further affects the progress on implementation. Majority of African countries are parties to more than one REC with sector specific targets and predetermined tariffs that govern their operations. Therefore, in the wake of the adoption of AfCFTA, most states have found themselves in a rather confusing situation with the difficult predicament of conflicting commitments between their respective RECs and those of AfCFTA. The result has been the urgent need and rush to harmonize the multitude and varied trade commitments undertaken by predominantly all African states at the multilateral, regional and bilateral levels.
Member states shall have to go back to the drawing board and restructure their trade agreements and national policies on International trade. The fate of this is uncertain and bound to spur controversy among nationals, especially in view of the provision by AfCFTA to accord imports from other member states similar treatment to the state’s local goods and services regardless of the need by states to promote some of their trade sectors. A case example is Kenya’s commitment to local maize farmers to buy produce at a capped price while excluding cheap maize imports from neighbouring countries from having similar advantages. Upon coming into force of the agreement, what then shall be the fate of such local products as compared to similar products from other member states that are cheaper to obtain?
Recommendations towards Implementation
Being that most states are already parties to different RECs with conflicting provisions to that of AfCFTA, convergence between different RECs need to be strictly adhered to as earlier agreed upon in the Minimum Integration Program of 2009 and the same made compatible with timelines set for AfCFTA.
Further, due to the binding nature of WTO commitments and the pre-negotiated trade agreements with outside countries, a strategic consideration for members states would be to ensure that existing trade pacts act as building blocks towards the implementation, so as not to impede the projected progress intended by the agreement.
Countries like Kenya with relatively larger economic capacity should serve as the locomotive for the integration process by supporting relatively economically weaker member states in integrating into existing regional value chains and developing upgraded production capabilities.
There is also the need to relinquish national priorities in favor of regional priorities advocated by AfCFTA. This shall require firm determination and coordination from political leaders charged with enacting legislations so as to align their long-term national interests with those proposed by the agreement. Commercial and developmental interests of the weaker states need to be addressed in a more inclusive manner to ensure economic coherence within the continent.
While the need to ensure full implementation of the agreement exists, the urgency to create market harmonization among the member states by reviewing national trade policies cannot be underplayed. States need to hasten their trade reorganization strategies to give effect to the intended objectives of the agreement upon its coming into force
14th January 2019 Status list of Countries which have signed, ratified/acceded to the agreement establishing AfcFTA.
UNCTAD, Economic Development In Africa Report 2011; Fostering Industrial Development in Africa in the New Global Environment (UNCTAD/ALDC/AFRICA/2011).
Adopted by the African Ministers of Integration at their Fourth Ordinary Session held in Yaounde, Cameroon, from 7 to 8 May, 2009. The Minimum Integration Programme consists of different activities on which the RECs and parties involved should agree upon to speed up and bring to a successful conclusion the process of regional and continental integration.