OPINION: Regional economic communities vital lessons for CFTA

RECs Experience Provides Vital Lessons for Faster Implementation of the Continental FTA

By Francis Mangeni

LUSAKA, Zambia-The presidents of Africa will meet in Kigali Rwanda on 21 March 2018, hosted by President Paul Kagame, in an extra-ordinary Summit, to sign the framework Agreement establishing the African Continental Free Trade Area (CFTA). This follows protracted negotiations over a record period of about two years and two months, since the launching of the negotiations on 15 June 2015 which effectively started in February 2016.

Attached to the CFTA Agreement will be the protocols on trade in goods, trade in services, and dispute settlement. The protocol on trade in goods will have a number of annexes, covering rules of origin, non-tariff barriers, technical standards, health standards, customs, trade facilitation, transit trade, and trade remedies. A few outstanding issues remain to be sorted out, and legal scrubbing has to be done: but there should be enough time up to 21 March to get all this done.

The CFTA will boost intra-Africa trade, creating jobs and incomes and improving welfare. Estimates back in 2014 were that the CFTA would double intra-Africa trade by the year 2022 over the 2014 baseline. With a population of more than a billion people and a median age of 19.3, a combined GDP OF US$ 3.4 trillion, 60 percent of the world's arable land, consumer and business-to-business spending already at US$ 3.9 trillion and projected to reach US$ 5 trillion by 2025, highest returns on investment in the world, some of the largest deposits of strategic minerals, Africa is a growth pole of the global economy and a player in global peace and security. The CFTA is a clear message to the whole world that Africa means business.

At their recent ordinary summit on 28 January 2018, the African presidents launched the Single African Air Transport Market, with 23 countries participating, covering more than 70 percent of air travel in Africa. They concluded also a protocol to facilitate free movement of people in Africa. Together with the CFTA, these three flagships programs represent quick progress under Africa's long-term vision, Agenda 2063. The agenda has 12 flagship programs, which aim to transform Africa into a more integrated, peaceful and prosperous continent by the year 2063. It should now be difficult to doubt that Africa is serious about economic integration.

Integrating 55 countries and disparate polities of the African continent under the auspices of the Organisation for African Unity from 1963 to 2002, and thereafter the African Union, with eight regional economic communities (RECs) as building blocs, is the largest integration project in the history of humankind. It is no mean task. It will require continuous sharpening of technical, diplomatic, mobilizational and organizational skills.

The CFTA comes on the heels of yet another African milestone, that is, the COMESA-EAC-SADC Tripartite Free Trade Area, concluded on 10 June 2015 covering 27 countries. It makes up half of the African continent; which has supported the negotiation and conclusion of the CFTA, through inspiration and motivation, experience and documentation. About half of the CFTA negotiators had negotiated the Tripartite FTA, and brought with them text and insights. A number of CFTA Annexes were drawn from the Tripartite instruments, and were concluded fairly quickly in the negotiations, especially those on non-tariff barriers, technical and health standards, customs, trade remedies, and dispute settlement.

What had been negotiated in the Tripartite was, however, in a number of cases, re-opened and modified. This was part of the experimental learning and subsequent improvement as would be expected when something is done a second-time round. This was indeed in keeping with the long-term strategy for gradual African continental integration.  Under this strategy, RECs are the building blocs for the African Economic Community to be achieved by 2028 and provide valuable experience and lessons that are consolidated at the continental level.

The implications, though, could be that a lot of money and time can be wasted in negotiating regional and inter-REC instruments, while the Continental process lags. Where the continental frameworks begin to take shape, inter-REC frameworks need not be commenced, as they are likely to be reopened and changed. The challenge though is in the guessing involved about whether and when the African Union would actually develop effective instruments in given areas. The implication here is that strategic and effective leadership is required at the continental level to implement the roadmap for continental integration towards the African Economic Community.

Practical application of regional integration programs reveals areas for creativity and innovation, which continuously results in new pathways at REC levels. Realism would therefore suggest that REC policy formulation and programs should continue full blast, for it is unlikely that continental frameworks would move as fast as those of smaller coherent RECs.

The CFTA long transition periods of 10 to 15 years and lower thresholds for market opening of around 90 percent of total product lines, mean that the Tripartite and the RECs, which are more ambitious, have the responsibility of keeping the continental market integration agenda functional; for it will be long before the CFTA regime fully kicks in.

However, under the linear approach to tariff elimination, if initial deeper cuts were agreed, the CFTA would become effective much sooner; rather than if complex and multiple bilateral negotiations were the approach. It would also require confirmation that general rules of origin with clear cross-cutting thresholds, which are much quicker to negotiate, would be used, rather than the long bean-counting exercise of developing product specific rules for each of the 6,000 or so product lines.

Of the remaining 10 percent of the product lines, some will be sensitive with much longer transition periods and possibly some duties, and others will be excluded from the CFTA regime altogether. Computations have shown that intra-Africa trade takes place on a few product lines, about 200 of them. Excluding even one percent of total trade, which could amount to about 600 product lines, could heavily undermine the CFTA, as it would not apply to most of intra-Africa trade. It is well to remember that industrialisation requires many interventions other than protection behind high customs duties for competing imports; especially affordable patient capital, technologies, market information, energy, and telecommunication, as well as management skills.

The Tripartite industrial and infrastructure programs will support the implementation of the continental industrial and infrastructure programs, which need updating in line with the ambition and levels achieved at the national and REC levels and also taking the fourth industrial revolution into account.

Experimental learning has been the ethos of African Economic Integration. Beginning with unique entry points, the RECs got the African regional integration programs off the ground from different vantage points that reflected specific critical developmental challenges at the time in the region. Positioning the RECs as learning organisations remains an important strategic orientation.

ECOWAS addressed peace and security through a standing peace keeping force - ECOMOG. SADC addressed the apartheid legacy through infrastructure and industrialisation programs. COMESA pioneered trade facilitation and the FTA to address the constraints of diminutive markets and thick borders. IGAD addressed the existential threats of drought, desertification and climate change.

The RECs have implemented additional programs to match the increasing complexity of development challenges. This means the pioneering approach of RECs should continue, as they move on into new areas. For example, COMESA has now prioritised digitization of its programs in line with the fourth industrial revolution.

Lessons from these vantage points were consolidated into inter-REC and continental programs, and were replicated across RECs. Multiple membership, and inter-REC and continental frameworks facilitated the learning and replication. This cross-learning and consolidation at inter-REC and continental levels should continue.

When COMESA-EAC-SADC formed the Tripartite, the African Union summits called upon ECOWAS, ECCAS and AMU to form the equivalent. The idea was that the two tripartites would just merge by 2017 to form the CFTA. The other tripartite was never formed, which initially complicated the receptibility of the COMESA-EAC-SADC Tripartite instruments by the West African countries, through fear of being steamrolled and faced with a done deal.

The implication here is the utter need for effective continental frameworks that ensure progress in tandem among the RECs on agreed continental programs and initiatives. Where required or expected continental frameworks are not developed or delay, progress at REC and national levels has gone ahead without harmonisation or coordination. For instance, under the Abuja Treaty, a continental trade liberalisation program was supposed to be developed. It wasn't, and RECs went ahead each with its own trade program.

The new grand consolidation at the Tripartite and now the continental level, however, means that RECs as building blocs are coalescing and having a positive impact on continental integration.

For instance, the Tripartite Arrangement, which started in 2001 and reached its first milestone on 22 October 2008 with the first tripartite summit directing a progressive merger of the three RECs, has inspired the Continental Free Trade Area. Covering half the continent, the Tripartite FTA has provided the launch pad for the Continental FTA. RECs need to continue in this mode of inspiring new continental programs.

The other way around as well, continental frameworks can be implemented faster when RECs champion them. For instance, COMESA implemented the Yamassoukro Decision on air transport ahead of the Single African Air Transport Market launched on 28 January 2018 by the African Union Summit.

The principles of acquis, subsidiarity and variable geometry will inform new pathways as RECs pioneer deeper integration. The RECs can facilitate effective implementation of continental programs at the regional levels; using their institutional frameworks such as their tested technical committees and policy organs. Continental programs can benefit from outreach activities, as well as the more cohesive and effective institutional arrangements at the Tripartite and REC levels.

But this is ‘things as they are’; how about things as they ought to be? The continental organising frameworks for economic integration and social economic transformation are supposed to be in place, and they mostly are, under Agenda 2063, together with the UN's Sustainable Development Goals 2016-2030. Targets have been set under actions plans, spelling out the business processes for implementation. President Paul Kagame has proposed appropriate reforms of the African Union, for a lean, less bureaucratic institution working closely with the RECs and other organisations, and for resource mobilisation to achieve financial sustainability.

What is required now is effective implementation, which can give the African Union the true leadership it is supposed to provide in continental integration. This leadership will have to acknowledge the sheer geographical enormity of Africa and the complexities and specificities at regional and national levels, calling for subsidiarity and variable geometry - which will assist effective governance of economic integration of the continent.

Government, industry, academia and grass-roots and civil society organisations should equally own these programs, through continuous education and mobilisation. The social-political processes that go into achieving change and transformation, should be engaged; for it is not what we do that shapes the future, it is our vision of the future that shapes what we do. The future is not pre-determined; rather, we shape it through our creativity and innovation into new pathways that solve problems. Every individual has a role and leadership matters.

Francis Mangeni, Phd: is the Director – Trade and Customs at the COMESA Secretariat