AfCFTA: The long, hard road to one African market
Last week, the African Union published the consolidated text of the agreement establishing the African Continental Free Trade Area (AfCFTA), launched in Rwanda on 21 March this year. Most of us who hailed the launch of the AfCFTA and praised those behind it, as I did in this column last week, had not seen the full text of the agreement, but were simply impressed by the emergence of a long-hoped-for intra-Africa free trade zone. But we can now go beyond the symbolism and consider the substance of what was achieved.
The consolidated text is 253-page long and, like all trade agreements, it’s dense, written in specialised language with, for the uninitiated, recondite clauses. Yet this is an important, if somewhat dreary, subject. So, I want to examine the instruments within the bounds of what can be achieved in a newspaper column rather than an academic journal.
For context, the AfCFTA has its root in the Abuja Treaty of 1991, which established the African Economic Community (AEC). Yet, it also marks a diminution of the Abuja Treaty, because under the treaty’s six-stage roadmap to Africa’s full economic integration, there should have been harmonisation among the regional economic communities (RECs) by 2007. There should also be a continental Customs Union by 2019, a continental common market by 2023 and an African economic and monetary union by 2028.
Of course, the multiple and overlapping RECs are not harmonised. There is no Africa-wide Customs Union, and the Single Market remains an aspiration under the “Agenda 2063”, adopted in 2013. Africa had always tried to mimic Europe’s model of economic integration, but while the EU turbocharged its integration agenda, with the creation of a Single Market 25 years ago, making it the world’s largest economy, Africa has largely paid lip service to the idea of integrating its economies.
But the tide, it seems, is now turning! AfCFTA is hailed as the tool for achieving the Single Market objective. But to what extent does it lay the foundations for a future African Single Market? Well, let examine the agreement.
The consolidated text consists of: the agreement establishing the AfCFTA; three protocols, each on trade in goods, trade in services and the rules and procedures on the settlement of disputes; and eight annexes, each on rules of origin, customs cooperation, trade facilitation, non-tariff barriers (NTBs), technical barriers to trade (TBT), sanitary and phytosanitary measures (SPS), transit, and trade remedies. There are also appendixes.
Yet, despite the seeming comprehensiveness, AfCFTA is work in progress. The schedules of tariff concessions and the schedules of specific commitments (for services) are not yet concluded. Phase 2 of the negotiations on competition, investment and intellectual property rights will not start until August this year, with the draft legal texts expected in January 2020. Importantly, however, Article 8 of the AfCFTA Agreement states that all the current and future protocols, annexes and appendixes will be part of the single undertaking, that is, they will form an integral part of the agreement as a single treaty instrument. This will ensure consistency and coherence across the AfCFTA Agreement and its components.
But, key question remains: Is AfCFTA a credible forerunner of a Single Market for Africa? Well, Yes and No! Yes, because many aspects of the instruments point in the direction of a single market. No, because some aspects don’t. First, on the former. The comprehensiveness of the annexes on trade in goods, particularly those relating to rules of origin, trade facilitation and non-tariff barriers, would, if fully implemented, support the integration of Africa’s markets. For example, the annex on rules of origin recognises cumulation of origin within the continent, treating Africa as “a single territory”. Furthermore, the harmonisation, as envisaged, of customs tariff nomenclatures, valuation laws and practices, and customs procedures across Africa would boost its economic integration. What’s more, the elaborate provisions on the mechanism for identifying, reporting, monitoring and elimination of non-tariff barriers, set out in the annex on NTBs, indicate a serious attempt to tackle the difficult issue of NTBs across Africa, which is a critical step towards creating a single market.
Yet, despite the above, there are some aspects of the AfCFTA instruments that appear to undermine the goal of a future single market. For space constraint, I will briefly discuss three potential obstacles inherent in the agreement.
The first is the contradictions between the stated aims of AfCFTA and some of the principles set out in the AfCFTA Agreement. It is stated in Art 3 that the objectives of AfCFTA are, inter alia, to “create a single market” and to “lay the foundations for the establishment of … a Continental Customs Union”. Yet, one of the principles under Article 5 is “variable geometry”, that is, differentiated integration. Of course, this is designed to recognise the heterogeneity and diversity in Africa’s economies. But you cannot talk about creating a single market and yet at the same time explicitly recognise and encourage an a la carte approach. Special and differential treatment, flexibility and technical assistance in relation to the implementation of obligations would be the best way to address the issue of diversity in an integrated market. In any case, how is variable geometry, which suggests a multi-speed integration, consistent with consensus in decision-making, another principle of the AfCFTA? Surely, if countries are going to integrate at different speeds, decision-making cannot be based on consensus to avoid some holding others back!
Another critical issue is the legal relationship between the RECs and the AfCFTA. The agreement describes the RECs as “building blocks for the AfCFTA”. But Article 20 states that “In the event of any inconsistency between this Agreement and any regional agreement; this Agreement shall prevail to the extent of the specific inconsistency”. This suggests that AfCFTA rules take precedence over the rules of the RECs, although that seems to contradict the principle, under Article 5, of “preservation of the acquis”, presumably REC acquis. It’s a mistake that the RECs, which are separate legal entities, are not signatories to the AfCFTA agreement. This means AfCFTA state parties that are members of RECs would be expected to bring their REC’s inconsistent rules into conformity with AfCFTA rules. It’s wishful thinking, a tall order! Expect regular clashes between the RECs and the AfCFTA!
The second disincentive to the emergence of one African market is the unwillingness of African countries to embrace economic and trade liberalisation. The depth and breadth of the AfCFTA would be measured by the binding obligations that the parties accept in their individual schedule of tariff concessions and schedule of specific commitments. But this would be contentious, and the countries would have to be dragged kicking and screaming to submit their schedules. Unfortunately, for a free trade deal that is expected to evolve into a single market and a customs union, the AfCFTA treaty contains many references to sensitive products, exclusion list, priority sectors, MFN exemption list, market access conditions and limitations etc. All of these would be difficult to dismantle once established, thus creating obstacles to, rather than laying foundations for, establishing a single market or a Continental Customs Union. What’s more, free movement is a prerequisite for a free trade area. Yet only 30 African countries signed the Protocol on Free Movement in Kigali.
Finally, the third limitation is that the AfCFTA agreement is based almost entirely on the WTO system. In fact, the AfCFTA can be described as a continental version of the WTO. The texts of the protocols and annexes, including the rules and procedures on dispute settlement, virtually replicate the corresponding WTO instrument. One must, indeed, wish that AfCFTA does not suffer the curse of the WTO! Of course, there is an argument for not reinventing the wheel. Replicating WTO provisions also means that AfCFTA state parties, being WTO members, should be familiar with their AfCFTA obligations. But regional trade blocs are often created to achieve deeper and more comprehensive integration than is ever possible under the WTO. And for a region that aims to become a Single Market, like the EU, its level of ambition should be greater. But AfCFTA shows a continent approaching economic integration gingerly.
The AU’s strapline for AfCFTA is “Creating One African Market”. Well, as an FTA, the AfCFTA is great, but it can’t usher in a single market in its present form. That’s not even mentioning concerns about implementation, a subject for another day!
Olu Fasan