Industry Insights

The African Free Trade Area – smell the coffee

By Francis Mangeni

“The best is the enemy of the good” is an expression associated with Voltaire. It just might have critical relevance for the relation between the African Continental Free Trade Area (ACFTA), the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) and the regional economic communities (RECs) in Africa.

But on 8 June 2018, Kenya deposited with COMESA Secretariat in Lusaka, the instrument of ratification of the TFTA, having ratified ACFTA as well and deposited the instrument with the African Union Commission. Both South Africa and Uganda were also taking the same approach of ratifying both.

Just a year ago, it all looked impossible to many around the world that Africa could have a Continental Free Trade Area. But for some, this was de ja vu, for it was the same trepidation in 2015 just before the TFTA was launched on 10 June in Egypt. The TFTA was an African revelation, for it demonstrated the palpable possibility of and spurred strategists towards a continental equivalent.

Having missed the deadline of December 2017, ACFTA was duly launched a mere three months later on 21 March 2018 in Kigali, with 44 out of the 55 African countries signing the Agreement on the spot. World history was made, despite entrenched scepticism rooted in pessimistic narratives about Africa but delighting and vindicating optimists around the world.

There was some pending work though. Precise time frames were duly set. Annexes (with detailed regulations) to the Protocol on Trade in Goods were to be cleaned up by lawyers (scrubbed) and adopted at the July 2018 summit in Mali. With a month to go to that summit, this has already been accomplished. The African Trade Ministers meeting in Dakar in Senegal, in the first week of June 2018, adopted the Annexes, which the African Union Summit will endorse in July in Mali.

The African Ministers went further and agreed on five sectors for trade in services, namely, transport, communication and banking as well as tourism and business services. The next step is to negotiate and agree on the levels of market opening in those services sectors, which means Africa can have an integrated services market covering those areas. This is a priority for Africa because services contribute on average to over 50 percent of national outputs and more than 60 percent of value addition on raw materials, create three other jobs for every one job, constitute essential social services, and equip enterprises and economies to benefit from the fourth industrial revolution.

Having put in place a robust continent-wide trade regime through the ACFTA, it is now time for implementation. Fortunately, tested national and regional institutions and instruments can now be mobilised for the effort.

National Tariff Books will now require an additional column indicating the rates of customs duties to be charged on imports from other countries in ACFTA. This can be quickly accomplished by customs experts once policy ministries provide the liberalisation program. Countries in existing regional FTAs such as EAC, COMESA, SADC and ECOWAS have sufficient experience in this.

Once tariff books are done, the bread and butter of a functioning FTA is identifying or reporting and addressing non-tariff barriers (NTBs). Experience in existing FTAs shows that NTBs will keep arising in various areas such lengthy customs procedures, technical and health standards unsupported by science or risk assessment, claims that this product doesn’t meet rules of origin requirements, multiple inspections and documentation, introduction of permits and licensing requirements, or even mundane issues such as traffic flows and border gate opening hours.

The online system for reporting and addressing NTBs in the COMESA, EAC, and SADC region (at www.tradebarriers.org) has been particularly effective. Out of 609 NTBs reported since 2008 in the three RECs, 531 have been resolved, leaving a total of 78 as outstanding at the moment. For COMESA, out of 204 reported over that period, 199 have been resolved, with only five remaining now. This mechanism can be replicated across Africa under AFTA.

At a systemic level, technical committees of the regional economic communities can now be seized with matters that arise under ACFTA. If this is not done to facilitate coherence between ACFTA and the existing regimes of the regional economic communities, the obvious multiplicity will be daunting.

The bigger point though is that the technical committees at the regional level have tested experience through which the implementation and functioning of ACFTA can be channelled. In addition to ACFTA, regional technical committees made up of regional FTA member states will continue to operationalise the much higher levels of integration achieved at the regional level.

The EAC for instance will continue trail-blazing on its single customs territory and common market; COMESA on its Digital FTA, electronic trade facilitation instruments and research and innovation programs; and ECOWAS with its advanced free movement for traders and other persons.

COMESA and the EAC will continue with the Simplified Trade Regime, designed to facilitate small scale trade for the poorest of the poor and border communities, especially women, as a tangible empowerment tool. Small Scale Trade is significant, amounting to 40 percent of total trade, and SMEs account for over 90 percent of businesses and provide more than 50 percent of employment in Africa, generating incomes, and assisting in regional value chains including in agro-industry and extractive sectors.

Another systemic point is that instruments currently used for trade in regional bodies can now be converted into continental instruments, especially customs, trade facilitation and standards documents. There can be room for adjustments and improvements with a view for instance, to further simplification and digitisation. The COMESA Single Administrative Document for instance already collapsed 27 separate documents and 13 regimes into one document.

Just fresh from Dakar where they adopted the complete ACFTA instruments on trade in goods, trade ministers will head to Cape Town in South Africa for a COMESA-EAC-SADC Tripartite meeting on 18 June 2018.

The Tripartite as the tipping point for the recent high momentum in continental integration is not adequately recognised in some circles. What is more, is that negotiating the Tripartite for three years and a half imbued a large number of the very same negotiators with practical experience and insight on issues that came up for ACFTA. Most of the ACFTA instruments, especially the annexes, were in fact derived from the Tripartite versions; the similarities are there for everyone to see.

This backdrop means that the COMESA-EAC-SADC Tripartite Ministers might wish to envisage the Tripartite as a fast-track for the ACFTA. The Tripartite has started formulating tools and instruments for trading under the FTA and continues to use existing mechanisms on addressing NTBs. The Tripartite RECs have already negotiated four priority services sectors, namely, transport, communication, finance and tourism, which could be early harvest for the AFTA. And the robust technical committees and trade facilitation instruments of the Tripartite RECs could provide institutional frameworks for implementing AFTA at the regional levels.

In conclusion then, the trade regime in Africa has changed beyond recognition for the better in terms of regional seamless regulatory frameworks, which will ease the doing of business and create jobs through investment and growth. A prudent thing now is to harness existing regional practices, tools and institutions, and fully deploy them to support the implementation and utilisation of the ACFTA.

To slightly modify Voltaire, there is no need making ACFTA, which is the good, the enemy of the best, that is, the tested regional institutions and tools for running FTAs. By proceeding to ratify both ACFTA and TFTA, Kenya, South Africa and Uganda have shown the clear way forward.

The author is the Director of Trade and Customs at the COMESA Secretariat

Contact: fmangeni@comesa.int