The
African Continental Free Trade Area (AfCFTA) has wrapped up its first Quarter of
trading, having kicked off at the start of the New Year. The nascent and
wide-reaching trade area will be watched closely given its scope, size, and
potential development impacts, along with what it means for existing regional
communities and trading ties with other partners.
While the agreement and Phase 1 protocols were adopted in
early 2018, the process of securing the necessary signatures and ratifications
for entry into force continued through 2019. To date, 35 of the African Union’s
(AU) 55 member States have ratified the agreement, meaning that the
AfCFTA is in effect for those countries but not for the others. Fifty-four AU
member States have signed the AfCFTA, with the exception of Eritrea.
“Now, we are about to witness the realization of one
of the flagship projects of Agenda 2063,” said AU Chairperson and
President of South Africa Cyril Ramaphosa in December, when the AU Assembly
confirmed that trading under the new accord would kick off in January 2021.
Agenda 2063 is the continent-wide policy roadmap
that includes among its objectives “inclusive growth and sustainable
development” and an “integrated continent.” It is currently undergoing its first
implementation plan, due to wrap up in 2023, which included the AfCFTA’s
completion and a series of other trade-related goals. Among these is the target
of increasing trade within the continent twofold by next year, relative to
2015.
The AfCFTA’s secretariat is headquartered in Accra, Ghana, with Wamkele Mene (South Africa) serving as the first Secretary-General. The AfCFTA is also a stepping stone to an African Economic Community and Customs Union, as envisioned two decades ago under the 1991 Abuja Treaty.
future provisions
The AfCFTA has been designed as a multi-stage
process, meaning that the agreement will continue to evolve over
time, and more negotiations are planned. The first phase, covering goods and
services trade, took effect this year, though talks to finalize tariff
schedules and the rules of origin provisions for Phase 1 is still ongoing.
Officials say that, given the rules of origin
talks cover approximately four-fifths of tariff lines, the AfCFTA’s terms will
already apply to trade on those products. Rules of origin, in trade parlance,
refers to how much content must be produced locally to be treated as being from
that country. According to the UN Conference on Trade and Development (UNCTAD), simplified
and flexible rules of origin are vital for the region, which lags behind
the levels of intra-regional trade seen across most other world regions. The UNCTAD’s
report on Africa’s economic development notes that the impact of
preferential rules of origin could be muted if these are too complex and if
improvements are not seen in industrial production capacity, among other
factors.
Negotiators will now undertake Phase 2, which
involves developing protocols on investment, competition policy, and
intellectual property rights (IPR). A third phase will involve the negotiation
of an e-commerce protocol.
As trading continues under the AfCFTA, the delay in
talks on schedules and rules of origin has fueled concerns among trade watchers
and officials that full implementation is still some way off. Moreover, some
experts have noted that the agreement’s success in making trade
operate more seamlessly across the continent will also hinge partly on
developing better infrastructure, especially transport.
Another factor is the impact of the COVID-19
pandemic, which the World Bank and others warn will lead to a
recession in Africa, even as the full extent of the damage is not yet known.
The delay in obtaining the necessary vaccines to inoculate people
against the virus is another concern, with a recent study suggesting that the economic
impact is likely to be felt globally. Another effect of COVID-19 was the
late launch of trading under the new agreement, which was postponed from July
2020 until January 2021.
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