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Continental free trade agreement renews hope for Africa’s prosperity

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AU building. PHOTO: CFR.ORG

Regional integration, by countries within continental boundaries, is often desirable as a means of ameliorating the common geographical and political challenges experienced by individual countries. The European Union (EU), despite the “Brexit” debacle, provides demonstrable illustrations of a success story.

The EU’s core policies, as envisaged by its founders, is perched on the free movement of people, goods, services and capital within the internal market, the enactment of legislation and a common agricultural, fisheries and regional development policy.

Angel Gurria the Secretary General of the Organisation for Economic Cooperation and Development (OECD) in his forward to a recent report titled the European Union: A people centered agenda said “The evidence clearly shows it. Europe was and is a most positive and constructive achievement”.

According to the report, the EU can conveniently boast of achieving considerable milestones. There have been improvement(s), in equality of income, reduction of regional disparity, increased life expectancy of citizens and an increased Gross Domestic Product (GDP). Significantly, the European Single Market (the concept of free movement of people, goods, services and capital) increased GDP, by between eight percent and nine percent, and delivered to its citizenry greater and better choices.

The recent entry, into force, of the African Continental Free Trade Agreement (AfCFTA), appears to bring with it renewed hope for Africa’s prosperity.

The AfCFTA
This is not Africa’s first attempt towards the creation of a common economic market. In this wise, much like the Europeans, the Organisation of African Unity (OAU) was established in 1963 to broadly, amongst other aims, improve human rights, better living standards and settlement of disputes between members, through peaceful and diplomatic means.

The Lagos Plan of Action for the Economic Development of Africa (1980) and The Abuja Treaty on the African Economic Community (AEC), 1991 represented early attempts at the creation of a customs union, a single market and an economic monetary union. However little progress was achieved.

Africa remains the least economically integrated continent. Intra-African trade in goods amounted to USD $ 135.4 billion in 2017, which represents a mere 14.6 percent of overall trade. Where as Intra-European Trade during the same period accounted for 69.8 percent, and Intra-American trade 46 percent, whilst Intra-Asian trade amounted to 59.6 percent, respectively.

With AfCFTA, Africa will host the largest free-trade area in terms of participant nations and by 2022 Intra-African trade is expected to hit 52 percent. Africa’s overall trade with the rest of the world is also expected to increase by USD $17.6 billion.

Naturally, AfCFTA provides clear gains for Africa and its people and they include: the likely increase in competiveness of African firms and the resultant boost in Intra-African trade and investment; improved business and investment climate that attracts foreign direct investment; economic growth and fostering structural transformation; the participation of small and medium-sized enterprises in regional and global value chains; and political stability and peace with consequent economic gains. Therefore this article seeks to shed more light on the provisions of the AfCFTA agreement.

Ratification
The AfCFTA agreement entered into force on 30th May 2019, being a period of 30 days after the deposit of at least 22 instruments of ratification. Thus far, 27 countries have deposited their respective instruments of ratification with the Chairperson of the Africa Union Commission who acts as depository and all but one (Eritrea) of the 54 countries in Africa have signed the AfCFTA Agreement.

In the preamble to the agreement the State Parties refer to the aspirations, set out in agenda 2063 for “a continental market with the free movement of persons, capital, goods and services, which are crucial for deepening economic integration, and promoting agricultural development, food security, industrialisation and structural economic transformation.”

The State parties are equally conscious of the importance of creating an expanded and secure market for goods and services by the use of adequate infrastructure and the elimination of tariff and non-tariff barriers, without forgetting to establish clear, transparent, predictable and mutually-advantageous rules to Trade in Goods and Services, Competition Policy, Investments and Intellectual Policy.

Fundamentally the State Parties recognise the importance of the Regional Economic Communities (REC’s) Free Trade Areas as significant building blocks toward establishing AfCFTA.

Objectives and Scope 
Article 3 prescribes the general objective of AfCFTA, which is centered on creating a single, liberalised market for the free movement of goods, services, capital and natural persons and the facilitation of investments on the initiatives of State Parties and the REC’s. The foundation for a Continental Customs Union is to be set in motion, and whilst this is going on, there are also plans for social economic development, structural transformation, enhanced competitiveness and Industrial development, which it is hoped, will be achieved through diversification, regional value chain development, agricultural development and food security.

In order to realise the general objectives, State Parties are enjoined to: eliminated tariff and non-tariff barriers on the trade in goods; liberalise trade in services; corporate on investments, intellectual property rights, competition policy, all trade related areas, custom matters, and on the implementation of trade facilitation measures; establish a mechanism for the settlement of disputes and institution framework for the implementation and administration of the AfCFTA.

During the process of implementation, the State Nations are required to recognise Member States of the African Union as the key drivers. Key elements of the governing principles, set out in Article 5, evoke a sense of Pan – Africanism. Member States are urged to work together in an open, transparent, and unified manner – in a brotherly fashion – built upon structures and existing REC (Free Trade) systems.

The AfCFTA agreement covers trade in goods, trade in services, investment, intellectual property rights and competition policy. However what has been adopted so far is the agreement itself along with the Protocols on: Trade in Goods; Trade in Services; and Dispute Resolution. Phase II negotiations in respect of intellectual property rights, investments and competition policy is work in progress.

All Protocols, associated annexures, appendices as well as additional instruments, deemed necessary and within the scope of the agreement, shall form an integral part of the agreement.

The AfCFTA Institutions 
The institutional framework for the implementation and administration of AfCFTA is the Assembly, the Council of Ministers, the Committee of Senior Trade Officials and the Secretariat.

Decisions by the institutions, on substantive issues, must be taken by consensus. Otherwise questions of simple procedure may be decided by a simple majority of State Parties.

Matters, in which the Committee of Senior Trade Officials fail to reach consensus, are referred to the Council of Ministers and likewise the Assembly received referrals on non-consensual matters from the Council of Ministers.

The Council of Ministers, under exceptional circumstances, may waive obligations imposed upon a State Party by consensus or at least three fourth of State Parties (this proviso does not apply to performance obligations subject to transition periods or staged implementations periods that have lapsed at the time of request). A grant of waiver shall stipulate the exceptional circumstances justifying the decision, the terms of the waiver and a termination date.

Given the “Africa first” nature of the AfCFTA, Part V of the agreement provides for continental preferences. It is apparent from Article 18 of the agreement that State Parties are expected to accord continental preferences on the basis of reciprocity. These preferences shall not be less favourable than those given to Third Parties. However, the agreement recognises the possible existence of Third Party preferences prior to the entry into force, of the agreement. In such a situation, such a State Party shall give other State Parties the opportunity to negotiate such preferences expected to be on a reciprocal basis. Interested State Parties are also allowed to negotiate these preferences and regard shall be given to their level of development. Pre-existing Trade Agreements between State Parties and Third Parties remain valid.

Currently, there exists a number of Regional Agreements in Africa, namely; The Arab Maghreb Union (UMA); The Economic Community of West African States (ECOWAS): The Common Market for Eastern and Southern Africa (COMESA), The South African Development Community (SADEC), and The Community of Sahel-Sahara States (CSSS). Article 19 envisages the possibility of conflict and inconsistency between AfCFTA and the regional agreements, expectedly the AfCFTA prevails to the extent of the inconsistency except as otherwise provided in the agreement.

The agreement continues to recognise the impact of the existing regional agreements (as reflected in Article 3) and goes further to permit the maintenance of higher level of regional integration between State Parties.

Dispute Settlement 
Article 20 establishes the dispute settlement mechanism, between the State Parties, which will be administered in accordance with the Protocol on Rules and Procedures on the Settlement of Disputes.
Withdrawal, Review and Amendment

The Brexit saga endured by EU member States provides hard lessons on the modalities for withdrawal from Regional Integration. Article 27 provides for withdrawal after five (5) years by way of written notification to other State Parties through the Depository (the Chairperson of the African Union Commission). In similar fashion, to that of the EU, withdrawal shall be effective two years after receipt of notification or such later date as may be specified in the notification.

There is provision for periodic review. Under Article 28, the agreement shall be subject to review every five years, after entry into force of State Parties, to ensure effectiveness, deeper integration and to adapt to evolving regional and international developments. Equally there are provisions for amendments to the agreement.

Conclusion
The overwhelming support for AfCFTA, by African nations, signals what appears to be a resurgence of the Pan-Africanist ideals of the pre-colonialist era. In buttressing the point we lend support from the words of Kwame Nkrumah, a foremost proponent for the union of Africa, who in his 1961 “I speak of freedom” speech said: “It is clear that we must find an African solution to our problems, and that this can only be found in African unity. Divided we are weak; united, Africa could become one of the greatest forces for good in the world.

Although most Africans are poor, our continent is potentially extremely rich. Our mineral resources, which are being exploited with foreign capital only to enrich foreign investors, range from gold and diamonds to uranium and petroleum. Our forests contain some of the finest woods to be grown anywhere. Our cash crops include cocoa, coffee, rubber, tobacco and cotton. As for power, which is an important factor in any economic development, Africa contains over 40 percent of the potential water power of the world, as compared with about 10 percent in Europe and 13 percent in North America. Yet so far, less than 1 percent has been developed. This is one of the reasons why we have in Africa the paradox of poverty in the midst of plenty, and scarcity in the midst of abundance.

Never before have a people had within their grasp so great an opportunity for developing a continent endowed with so much wealth. Individually, the independent states of Africa, some of them potentially rich, others poor, can do little for their people. Together, by mutual help, they can achieve much. But the economic development of the continent must be planned and pursued as a whole. A loose confederation designed only for economic co-operation would not provide the necessary unity of purpose. Only a strong political union can bring about full and effective development of our natural resources for the benefit of our people”.

The need for African unity is no less relevant today than it was in the 1960’s. Tragically, till date, Africa has failed to achieve the lofty goals of unification and though AfCFTA it represents perhaps the most serious attempt in recent times to achieve that. Its success lies in, not only its implementation, but also the resolve Africa’s leaders and its people.

Dalley is an arbitrator and a partner in the Law Firm of GRF Dalley and Partners, Lagos.


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