During the extraordinary Summit of the African Union Heads of State and Government held in March 2018 in Kigali (Rwanda), the agreement establishing the African Continental Free Trade Area (AfCFTA) was presented for signature, along with the Kigali Declaration for the launch of the AfCFTA.
On January 1, 2021, trading under the AfCFTA officially started. As of 15 January 2021, 36 of the 54 signatories had ratified the Agreement. The AfCFTA is envisioned to bring together the 55 members of the African Union bloc into a coverage market of 1.3 billion people and a cumulative Gross Domestic Product exceeding US$2.2 trillion.
The AfCFTA is expected to increase investment, strengthen industrialisation and export diversification, promote the development of regional and continental value chains, enhance competitiveness and improve the business climate in Africa.
In addition, the United Nations Economic Commission on Africa estimated that the AfCFTA is poised to increase intra-African trade by 52.3 percent, which would increase economic growth.
However, an increment in intra-African trade could be challenged by the share of the already existing and prospective External Free Trade Agreements (EFTAs) among individual African states. This can manifest in two folds. First, as bilateral trade agreements where African countries agree to reduce trade restrictions to expand business opportunities with a non-African country. Second, as multilateral trade agreements where African countries engage three or more countries.
In an attempt to reduce the multiple trading arrangements, the Tripartite Summit of 22 October 2008 helped to advance how the RECs with diverging trade protocols will be harmonized. In the summit, Heads of State and Government representing the three Regional Economic Communities (RECs) agreed to establish a single Customs Union, beginning with a Free Trade Area.
This culminated into signing the Tripartite Free Trade Area (TFTA) to harmonise trade policies and promote free trade among the Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC) and East African Community (EAC) countries.
Whereas this is the case, several RECs and/or countries are engaged in Free Trade Area Agreements with third parties and more are being negotiated. For example, Uganda and the USA signed Trade and Investment Framework Agreements in 2001, the United Kingdom (UK) Trade (Goods Only) agreement with Uganda in 2004 and with China in 2006.
In addition, Kenya signed free trade agreements such as; the UK-Kenya bilateral agreement. Similarly, the trade arrangement between the United States (U.S) and Kenya is likely to allow duty-free access for Kenya to the U.S and likewise.
While some African RECs have signed the Economic Partnership Agreement with the European Union others are still negotiating. The examples given above provide insight into the interests of existing external trade arrangements highlighting the likely opportunities and challenges of such engagements.
Consequently, the bilateral and multilateral External Free Trade Agreements (EFTA) will provide a parallel market for products. Efforts to promote the alignment of the bilateral and multilateral Free Trade Agreements signed by the AfCFTA member states might reduce the conflict of tariffs, quotas, embargoes, and other trade prohibitions. For example, the failure to harmonize the trade arrangement between the European Union (EU) and the AfCFTA might lead to competition for products from multiple traders.
Focusing on food and manufactured products, these accounted for 51% of Africa’s exports to the EU in 2016, the same products will be of high interest to the new traders emerging from the AfCFTA.
On the other hand, EFTA partners might offer more competitive products as compared to the new traders from within the AfCFTA due to factors such as high technology, low logistical costs and more trade facilitation. Consequently, this will affect the anticipated AfCFTA benefits and thus reduce trade within the continent.
In parallel, there will be a clash of clauses from the double implementation of legal texts for EFTAs and AfCFTA due to the varying trade arrangements. It is therefore important that the quick rectification of the Competition protocol in promoting a combined African competitive market under the AfCFTA is prioritised. It will also reduce the challenges associated with the rules of origin.
In addition, Intellectual Property Rights (IPR) can also catalyse technology transfer, technology diffusion and the economic transformation of Africa’s trade space within the AfCFTA. If a favorable IPR protocol to suit the AfCFTA and the African economic climate is drafted, it could facilitate more trade as envisioned within the AfCFTA agreement.
Governments leaders in Kigali in 2018 to debate the future of Africa trade. Photo/the Africa Report
In view of the above circumstances, there is a need to boost the capacity of countries in Africa to deliver to both the EFTAs and AfCFTA. Such efforts will build the capacity of trade policy implementers to distinguish, implement and monitor any clash in clauses, tariffs, standards and regulations from both external EFTAs and AfCFTA.
This may facilitate the easier establishment of regulations to meet health and safety standards. For the African countries that have already entered into EFTAs with UK, USA, China, among others, they need to develop their capacity to produce. This will increase their flexibilities in providing the EFTA and new AfCFTA participating members’ states easier access to markets.
There is another need for national-based policy makers to track the challenges experienced as a result of having EFTA with individual countries or regions.
Proper articulation on how the AfCFTA implementation might solve such challenges experienced by the EFTA will increase the political will of leaders in respective countries to fully support the AfCFTA at the level of implementation.