Africa’s Ambitious Continental Free Trade Agreement: Updates and Challenges

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A conceptual illustration of trade within the African continent. Courtesy of Youth-Centric.

As early as 2012, various African heads of state began discussing the establishment of a Continental Free Trade Agreement (CFTA) at the 18th session of the African Union (AU) . This free-trade area would create the largest-free-trade area in the world by number of countries. The CFTA will combine 54 countries with a GDP of more than $3.4 trillion collectively. It has been compared to the well-known Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), two other free-trade areas considered mega-regional trade agreements. The CFTA is intended to create jobs, boost income and prosperity, as well as put Africa on the world stage. Its primary goals are to boost intra-African trade and pave the way for the future establishment of a continental customs union. It also aims to double intra-African trade from 12% (in 2012) to 25% (in 2022).

 

Negotiations for the CFTA officially began in June 2015. African states plan to finalize the negotiations by the end of this year. The next milestone in the agreement is the submission of tariff offers by Member States and the submission of restrictive measures lists affecting trade in services by Member States to be adopted in October 2017. Given the ambitious agenda of the CFTA, there are a number of challenges that are worth considering and exploring.

 

How will the CFTA properly incorporate existing regional economic communities (RECs) around the continent into its agreement?

 

There are various RECs that have been moving at different speeds with different priorities. The CFTA builds specifically upon three FTA negotiations: the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). In addition to using the FTA’s associated with these three RECs as its starting point, the CFTA plans to incorporate all other African RECs too, including the Economic Community of West African States (ECOWAS), the Economic Community of Central African States (ECCAS), the Intergovernmental Authority on Development (IGAD), the Community of Sahel-Saharan States (CENSAD) and the Arab Maghreb Union (AMU). However, such incorporation will require careful planning, as the needs, desires, and abilities of the various countries will not always be the same. Within SADC’s Free Trade Agreement alone, some countries are having trouble meeting the expected FTA levels, and are seeking derogations.

 

Certainly, this is a problem that will have to be addressed as countries find themselves economically restricted in the coming years. The CFTA will have to make sure it allows for frameworks and processes that can address such problems as they arise. A helpful framework would provide time for states to enter integration. The Abuja Treaty (also known as the “Treaty Establishing the African Economic Community”), which came into force in 1994, is a separate agreement that has tried to address these integration concerns. It has designed a six-stage integration process to be achieved within 34 years. It begins with strengthening existing RECs in a way that makes expansion easier, moves toward more harmonization and coordination at a continental level, and ends with the establishment of a continental monetary union among other Pan-African Economic structures. The CFTA negotiations are said to work “within a broader framework” of the Abuja Treaty, but the treaty’s integration agenda has not been explicitly mentioned as something they are utilizing in their integration goals.

 

What role should various parties/organizations have in the negotiations?

 

So far, civil society organizations, the private sector, and academia, among others, have been effectively excluded from the consultation process. The exclusion of civil societies and ordinary people are the most concerning because they will definitely be affected by the decisions of those in authority, yet are lacking adequate notice about the CFTA while it was still being crafted. These groups are in a unique position to address key policy concerns – most especially when it comes to ensuring that marginalized groups reap the economic benefits of the agreement. The trade agreement should seriously address the implications for gender and the environment as well as for African Least Developed Country (LDC) economies. In addition to providing this insight at the negotiation stage, the agreement should also provide procedural frameworks where these same groups can address any grievances they may face as a result of trade activities in the coming years.

 

What do Western institutions stand with regards to the CFTA?

 

Africa has approximately 30% of the earth’s remaining mineral resources. The Continent has the largest reserves of precious metals with over 40% of the gold reserves, over 60% of cobalt, and 90% of platinum reserves. Given the resource-rich position of virtually all African countries, many countries around the world have economic interests in Africa’s trade practices, and naturally the construction of the CFTA. As it currently stands, western states and institutions do not appear to be involved in shaping the CFTA. This does not seem to be the desire of African states, however. Many African trade ministers have urged for support for the CFTA by the United Nations. Indeed, recent articles have also urged the World Bank and large trading partners (the US, EU, China) to work closely with the African Union to advance the negotiations and implementation of the CFTA.

 

There has been little news reporting or announcements about where other countries and intergovernmental organizations stand on the development of the CFTA. However, general contemporary views on trade tend to provide some insight. The US has had a longstanding trade relationship with Africa through the African Growth and Opportunity Act (AGOA), which was approved during the Obama administration to be fully implemented until 2025. A recent World Bank paper argues that countries should not only be liberalizing trade within their geographical regions, but globally. In sum, Western institutions would not appear to have a fundamental problem with the CFTA, but may prefer if its structure did not impede on their participation in trade with the continent as well.

 

Conclusion

Intra-African trade is low compared to African trade with other states. Africa’s regional integration is not growing at a rate many would like it to be, and the African RECs do not equally pursue integration. Trade facilitation measures such as removal of non-tariff barriers, simplification of customs procedures and documentation, and flawless operations of Africa’s transport and transit corridors are fundamental to developing Africa’s internal trade.

 

 

The CFTA stands as a historic move for African countries in advancing their own agenda for trade and development. As the CFTA negotiations have started, the integration process of the different RECs has reached different levels of advancement. Since one of the aims of the CFTA is to resolve the challenges of multiple trade regimes and to expedite the continental integration processes, a political decision is required for the CFTA negotiations to be prioritized over all other intra-African trade negotiations. Civil societies may have to leverage their social capital in order to effectively achieve a seat at the table – either before negotiations end or in order to address any consequential grievances later. Western institutions should also provide a more active position in the development of a trade agreement of this size.

The development of Africa’s CFTA is worth continuing to watch, as it could turn into one of the biggest trade systems affecting the modern global economy.

 

Tola Oyeyemi is a second-year student at Columbia Law School. She studied International Economics with a certificate in African Studies at Georgetown University’s School of Foreign Service and graduated in 2016. She studied abroad in Tanzania in 2014, focusing on development challenges. She is interested in International Trade Law and Business and Human Rights.