The African Continental Free Trade Agreement: Opportunities and Challenges

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Friday, December 11, 2020 / 1:19 PM / by Cuts International / Header Image Credit: CBC

 

Introduction: From Independence to the Entrance into Force of the Treaty


While protectionism is rising throughout the world, fifty-four African countries agreed to sign an African Continental Free Trade Agreement (AfCFTA) that will become the largest free-trade agreement since the signing of the World Trade Organization (WTO) in 1994 (164 members in 2016).

 

The journey towards African cooperation in development efforts and unity began soon after most African countries gained independence in the late 1950s to 1960s. In 1964, the formation of the Organization of African Unity (OAU) highlighted this yearning for regional integration and cooperation.

 

The OAU's main objectives were to foster cohesion and solidarity among African countries within the global governance and trading system. The organization later adopted the Lagos Plan for action in 1980, which aims at fostering the integration of the continent based on the "self-reliance, endogenous development and industrialization" of Africa.

 

A decade later, in July 1991, the OAU adopted the Abuja Treaty that implemented a progressive approach to regional integration in Africa. This included the establishment of Regional Economic Communities (RECs) and a plan for creating an African Economic Community by 2028. The Abuja Treaty provided a detailed pathway towards the creation of the African Unity. The first step was to establish Free Trade Areas (FTAs) in each region, followed by customs unions, and then the creation of a common market to finally form a monetary union.

 

At the beginning of the new millennium, eight significant RECs had already been created and were advancing the process of regional integration. These RECs were the following:

  • The Southern African Development Community (SADC), composed of sixteen countries
  • The Eastern African Community (EAC) composed of five countries
  • Common Market East and South Africa (COMESA), composed of twenty-one countries
  • The Economic Community of West African States (ECOWAS), composed of fifteen countries
  • The Economic Community of Central African States (ECCAS) composed of eleven countries
  • The Intergovernmental Authority on Development (IGAD), composed of seven countries
  • The Arab Maghreb Union (AMU), composed of five countries
  • Community of Sahel-Saharan States (CENSAD), composed of six countries

 

Despite the intended purpose of using RECs as stepping stones toward greater unification, the fact that some countries were part of various Economic Communities became problematic. To overcome this situation, Ministers of Trade and Industry of three RECs (SADC, EAC and COMESA) decided to merge them. Thus, in June 2011, Heads of State of the SADC, EAC, and COMESA launched the Tri-Partite Free Trade Agreement (TFTA) negotiations in Johannesburg, South-Africa.

 

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In January 2012, in a paper titled "Boosting Intra-Africa Trade. Issues affecting Intra-Africa Trade, Proposed Action Plan for boosting Intra-Africa Trade and Framework for Fast Tracking of a Continental Free Trade Area", the Economic Commission for Africa made a strong case for a CFTA negotiation to be launched by the African Union (the successor of the OAU). During the 18th ordinary session of the Assembly of Heads of State and Government of the AU held in Addis Ababa, the idea of the CFTA was agreed upon.

 

In parallel, three years later (10 June of 2015), the TFTA was signed by representatives of most of the 26 Member States of the AU, in Sharm el-Sheik, Egypt.


The Sharm el-Sheik Declaration, launching the TFTA, reaffirmed the "developmental integration approach built on the three pillars of industrial development, infrastructure development, and market integration".

 

The TFTA called upon the leaders of the AU to be more ambitious about regional integration and economic cooperation. Shortly thereafter, on June 15th, 2015, the AU's Heads of State meeting (25th Ordinary Session of the Assembly) in Johannesburg started the negotiations toward a Continental Free Trade Agreement (CFTA). They decided that the CFTA negotiations should be run in parallel with the TFTA Phase II, which provided a time-frame of 24 months to conclude negotiations on trade in services, competition policy, intellectual property rights (IPR). etc. During this meeting, which led to the Abuja Treaty, the objectives and principles of the CFTA were enunciated.

 

The same year, the AU launched its own fifty years vision and action plan called "Agenda 2063". This program contains seven aspirations on several topics in regards to development. Two of the main ones are: (i) to create a prosperous Africa based on durable growth and sustainable development in order to raise the standards of living and enhance the quality of life of millions of Africans and; (ii) to call for a unified continent based on the idea of Pan-Africanism. The Agenda 2063 also urges for a Continental Customs Union. This would only be achieved after the implementation of an African Common External Tariff (ACET).

 

Eventually, the Agreement establishing the AfCFTA was adopted by the 10th Extraordinary Session of the Assembly in Kigali, Rwanda, on 21st March 2018.

 

The Agreement provided that for the CFTA to be implemented, at least twenty-two member states must sign it. The pace of the AfCFTA ratifications was remarkable. By 1 April 2019, only one year and ten days after its signing, the threshold of 22 countries required for the entry into force of the agreement, was reached. It was reached specifically on April 29, 2019, when Sierra Leone and the Saharawi Republic deposited their instruments of ratification of the agreement. The timelines of this ratification process are unprecedented in the AU history.

 

Before the 12th Extraordinary Session of the Assembly of the African Union on the AfCFTA in Niamey, Niger on 7 July 2019, there was one significant issue: the Nigerian reluctance to sign the treaty in order to protect its industry from low-income workers. Considering Nigeria's efforts to encourage local manufacturing and the expansion of agriculture in the country, Nigerian officials had expressed concerns regarding the possibility of low-priced goods flooding their market.

 

In the end, they signed the AfCFTA during the aforementioned session. This meant a significant boost to the Treaty since Nigeria is considered the biggest economy of the continent. Following the Assembly of the African Union on the AfCFTA in Niamey, fifty-four out of the fifty-five states of the continent had signed.

 

During this 12th extraordinary session, Accra (Ghana) was selected by the Assembly of Heads of State and Government of the AU as the host country for the Secretariat of the AfCFTA.

 

Figure 1: Evolution of African Continental Economic Integration

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Credit:

The report The African Continental Free Trade Agreement: Opportunities and Challenges was authored by Theophile Albert and published by Cuts International Geneva


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