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Africa: A Clarion Call to Ensure That Trading Under the AfCFTA Begins in 2021 – A Manchester Trade Paper

Washington, DC — In this brief Manchester Trade paper, we argue that unless intra-African trade under the African Continental Free Trade Agreement (AfCFTA) begins on a timely basis, Africa’s credibility as a serious player in the global economy will suffer a demoralizing blow. Specifically, if the current delays and launch dates go beyond January 2021, Africa’s various trade and investment partners may start to doubt if the AfCFTA will ever become a reality. Ideally, the current trajectory of the AfCFTA negotiations thus far should culminate in a tentative 2020 ministerial to announce the implementation of a functional AfCFTA.

An Introduction to Africa’s Clarion Calls

While the world recognizes the activism in Fela ‘Anikulapo’ Kuti’s musicology, many may not know that his mother, Funmilayo Ransome-Kuti, issued some of the most provocative calls for Nigeria’s independence. While we now celebrate the African Continental Free Trade Area (AfCFTA) in the same vein, we may forget the Abuja Treaty of 1991. Signed by 51 African heads of state, that treaty was a clarion call for an African Economic Community to underwrite the continent’s economic fortune. The Abuja Treaty was quite advanced for its time. It evoked some of Africa’s seminal agreements and declarations on regional integration, such as those from 1968, 1970, 1973, 1977, and the Lagos Plan of Action and Final Act of Lagos of April 1980. These pacts espoused the dreams of the forefathers and essence of continental integration, unfettered intra-African trade, and human security. Today, the actual implementation of the forefathers’ objectives is within reach and yet may seem like they are so far away.

Trading under the AfCFTA has been postponed from July 2020 until January 1, 2021, due to a global pandemic. However, any further  delays in implementing the AfCFTA will, no doubt, have a dampening impact on the enthusiasm for unfettered cross-border trade on the continent. The process to meet this deadline will not be easy since 2020 is rapidly coming to a close. But Africa’s negotiators have always had an uncanny ability to work out agreements on short notice. As we understand it, various negotiators work quietly behind the scenes to prepare the groundwork for a possible sprint to finish.

Specifically, based on variable geometry and transition arrangements, AfCFTA trading can commence with available instruments such as the agreed-upon rules of origin. The origin rules set out conditions for products that qualify as manufactured or made in an AfCFTA country. Equally, tariff schedules for the first phase of implementation must be  in place. The AfCFTA dispute settlement mechanisms are currently ready to deal with tariff classification problems

The initial launch of January 1st at least for some trade is important. However, it may be necessary to wait for complete implementation of the initial duty reductions for possibly six months but no longer Time may be necessary to confirm that the tariff schedules submitted by each African country or customs union to confirm the consistency and alignment with WTO nomenclature. And with the liberalization  requirements of the AfCFTA Protocol as well as for national and regional customs officials as well as importers and exporters to become familiar with the AfCFTA regime.

The AfCFTA & COVID-19

Who would have ever thought that a pandemic would have such a disruptive effect on almost all international negotiations? By delaying the launch of the first stage of duty reductions under the AfCFTA from the expected initially July 1, 2020 date. However, a launch by January 1st would still be impressive. . when one considers the COVID-19 dislocations. Africa prevailed when faced with the most disruptive event to the global economy since the Great Depression of 1929 and the worst health crisis since the 1918 Asian flu outbreak. The worst eventuality would be for Africa to relegate the AfCFTA to the back burner. However, whether COVID-19 is an inflection point or not, there is a reputational issue for the continent. We must not underestimate the global loss of confidence in Africa’s capacity to follow through with that which it deems sacrosanct to economic independence. Without the AfCFTA, one could witness a decline in enthusiasm for continental economic integration and see further fragmentation of the continent as third parties like the European Union, the UK, the US, and China would most likely push for special deals.

When the AfCFTA first started to gather momentum, the world held its collective breath – an FTA with 55 African member countries would be one for the record books. An implemented AfCFTA would factor into regional and global investment capital considerations. With a worldwide pandemic scuttling original launch dates for trading goods under the AfCFTA regime, it seems as though the AfCFTA has taken a back seat to national priorities. However, now is not the time to retreat to national boundaries. The African private sector is already primed to take advantage of the AfCFTA. Given the pressing need for AfCFTA to work, we would not be surprised if a special agreement immediately allowing duty-free movement of Personal Protection Equipment (PPE) and other pandemic products is in place by the beginning of 2021.

Also, Africa’s capacity to effectively recover from COVID-19 is positively associated with implementing the AfCFTA. This is especially true given the increased emphasis on in-shoring being opposed to the global supply chains in which Africa expects to participate. Although Africa must rely on its markets in this incidence, this reliance would best be accomplished by implementing duty reductions as called for under the AfCFTA. But that should not be such an arduous task. African countries – especially those operating under customs unions – already give each other similar concessions to those under the AfCFTA.

Here, much credit must go to the African Union and other strategic stakeholders for echoing clarion calls of past activism and achieving the AfCFTA as well as the originators of the regional economic communities (RECs) upon whose foundation the AfCFTA grew. Yes – a trade agreement bringing 55 African countries together was always going to be an arduous task and much more ambitious than any other FTA in history. However, the African Union’s AfCFTA architecture is already in place to allow implementation after AfCFTA tariff schedules are notified and technically reviewed, amongst other procedures. The genius of the program’s architects was that after the 2018 Ministerial approved the AfCFTA protocol, no Ministerial action was required outside the launch of the agreement. Of course, one expected that a sufficient number of Member States would have signed and ratified the AfCFTA and submitted schedules to reduce tariffs while providing market access for certain services.

The architecture is still in place, making it possible to complete the substantive steps for implementation by the end of the year. Actual trade under the AfCFTA provisions can begin anytime between January 1 and July 1, 2021, depending on how long it takes to complete the required verifications and notifications.

The Path to Unfettered Trade in Africa

However, as normalcy returns, the world will expect that implementation of the AfCFTA will happen in a finite period. Unless Africa can effectively deliver a functional free trade agreement, including unfettered access to continental trade networks, some may even argue that our generation doesn’t have the stones to respond to the forefathers’ clarion call. To infuse the world’s confidence into the AfCFTA, we suggest actions that will bring public attention to the quiet progress already underway. One important point to note is that as long as travel limitations continue, virtual negotiations could contribute to earlier implementation. In this case, Africa could do with a dedicated interface to handle various languages and complex encrypted negotiations involving 54 or 55 countries.

Of course, we recognize that AfCFTA challenges go beyond tariff schedules and more general services commitments. Among other factors, Africa must make significant progress in trade facilitation, complementary production, and infrastructure. There must also be exchange specific services and e-commerce commitments. We also recognize the challenges that emerge when ministries of trade neither control national revenue collection nor have the heft ministries of finance have. But when it comes to immediate progress, it is the ministries of trade that have the purview to, for instance, implement liberalization schedules. Other challenges will, unfortunately, remain. Nevertheless, once free trade is in place, the seminal prerequisite will have been put in place.

In this regard, it is hoped that the High-level Committee of experts designed to develop an African Virtual Trade-Diplomacy Platform (AVDP) will lead to a consensus among AU Members states to complete the following steps by the late 2020 Ministerial.

Complete the required ratifications: A prerequisite for the AfCFTA to be considered an effective regime for fostering African integration can be accomplished if all 27 members of the customs unions ratify the AfCFTA – these account for one-half of the 54 countries who signed the AfCFTA. Countries like Nigeria and South Africa account for the largest African countries in terms of GDP. Because they are part of customs unions (ECOWAS & SACU, respectively), they can notify all members of the same tariff schedules. Of the ten customs union countries which have not ratified, only Nigeria and Tanzania have expressed concerns about the possibility of disruptive imports under the AfCFTA. A tweak could remedy this problem to the current safeguard mechanism. The other eight would probably ratify the AfCFTA with a little more external pressure.

Submission of AfCFTA tariff schedules to the AfCFTA Secretariat: Work is continuing on tariff and services liberalization schedules. Such efforts should not be that difficult for most African countries since they already belong to regional groups that have already agreed on free trade. Hence, it should not be too difficult to extend the same privileges to others. Besides, since the most considerable amount of non-petroleum trade on the continent is within regional economic communities, extensions’ impact should not be that great. Technically, customs unions should find it even easier since they operate under a customs external tariff. Here, they only have to make a single notification for all its members.

Completion of Origin Rules & Product Coverage of Pandemic Initiative: Since AfCFTA only covers products with sufficient African value-added, there must be an agreement of origin rules to define the minimum required African content. Origin rules have reportedly already been worked out, covering more than 90 percent of the tariff schedule products, with the number expected to increase once technical work continues. Intra African trade will continue for products where no rules are agreed upon either under MFN duties or under the importing country’s origin rules. Customs officials could also work with tariff negotiators to agree on the coverage of the pandemic initiative;

Agreement to Propose a Ministerial Launch of a 1st Implementation Phase of AfCFTA: Some suggest that an AfCFTA-related Trade Ministerial will be held in December in South Africa;

Vetting of the AfCFTA tariff schedules notified to the Secretariat to ensure consistency with each other, with the nomenclature of the WTO and WCO (World Customs Organization) and with the linearization obligations of the AfCFTA protocol;

Notifying the private sector, regional, and national customs authorities details the first stage of implementation of the tariff and service liberalization. Time is required to prepare the necessary formalities to facilitate the clearance of AfCFTA products and to prepare and distribute the necessary forms applicable to each shipment;

Ministerial agreement to implement the first stage of duty reductions under the AfCFTA protocol and the complete elimination of duties on COVID-19 related products on 01/2021;

Trade under the AfCFTA flows at least for some products under the AfCFTA trade protocol by January 1st with complete implementation for the first scheduled tariff reductions no later than July 1, 2021.

Conclusion

In her book, The Conservationist, Nadine Gordimer issued a paradoxical clarion call for taking things to their most dignified logical conclusion. Gordimer’s book was rife with political connotations and reform within an apartheid South Africa. One of the key messages was that it makes no sense to lay claim to something and yet you already have it in the first place. Africa has the attention of the world. The world wants to do business with Africa. The AfCFTA deserves to be the pathway to spurring further insertion into the global trading patterns and the African Economic Community. A global pandemic is not excusing enough. We must work towards achieving the AfCFTA as if our international trade reputations depend on it.

Erastus Mwencha most-recently served as Deputy Chairperson of the African Union Commission. He currently serves on various global boards and advisory panels. Following over a decade of service at the Common Market for Eastern & Southern Africa  (COMESA), Dr. Francis Mangeni now serves as an Advisor on trade and integration. Stephen Lande has been nicknamed Father of the Generalized System of Preferences (GSP). He is the President of Manchester Trade Limited, Inc, a Washington, DC-based trade consultancy. Dennis Matanda is a trade and investment specialist with a background in both communication and partner development. He publishes the Habari Network, an online publication.

To contact the authors, please email either editor@thehabarinetwork.com, or stepland@aol.com


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