The CFTA: Moving towards an African “mega-regional” agreement?

12 February 2016

This article suggests key insights to strategically advance the Continental FTA negotiations. 

 

The establishment of the African Continental Free Trade Area (CFTA) is gaining speed. At last year's African Union Summit, participants agreed to get the CFTA agreement in place by 2017, and to immediately initiate negotiations on the liberalisation of trade in goods and services. A first round of these negotiations is expected to take place in February 2016, and the preparatory process is now intensifying.[1]  

Continental integration has figured high on the African agenda ever since African countries gained political independence, but the CFTA initiative is the latest and perhaps the most ambitious of intra-African trade initiatives. It may be considered “the” African “mega-regional” trade agreement, even if the economic and trade weight of the participants cannot be compared to those of other mega-regionals currently in the making, i.e. the Trans-Pacific Partnership (TPP), the Regional Comprehensive Economic Partnership (RCEP)[2] and the Trans-Atlantic Trade and Investment (TTIP) agreement.

Once fully implemented, the CFTA agreement would offer African countries considerable benefits. According to most estimates, the opening of the regional market to African goods and services will increase intra-African trade significantly. The UN Economic Commission for Africa (UNECA), for instance, estimates that the removal of tariff barriers for intra-African trade could raise their share in total African trade from 10.2 percent to 15.5 percent in 10 years[3], and the gains would be greater if informal traders are better integrated into formal trade channels.

Challenges and opportunities of the CFTA

The path towards an accelerated pan-African economic integration presents formidable political, economic, legal, and functional challenges. High on the list of these challenges is the conflicting disciplines of the different Regional Economic Communities (RECs) already in place. Most African countries are parties to more than one REC, and convergence between different RECs should be made compatible with the goals and timelines set for the CFTA. Also, consideration should be given to the fact that most RECs have missed the 2014 deadline to establish FTAs and this in itself calls for an adjustment in their calendar and plan of action, thus effecting on the CFTA timelineitself.

Moving decidedly towards the CFTA agreement would also require harmonising the multitude and varied trade commitments undertaken by practically all African countries at the multilateral, regional, and bilateral levels. Most African countries are bound by their WTO commitments, and many have entered into or are negotiating comprehensive trade agreements with outside countries, such as the Economic Partnership Agreements (EPAs) with the EU. In addition, most African countries are beneficiaries of unilateral trade preferences granted by developed, developing, and emerging economies. Thus, a key strategic consideration for African countries would be to ensure that existing trade arrangements act as “building blocks” of the CFTA, and do not impede progress to fulfil its objectives or make them more difficult to achieve.

Another important consideration would be to design a CFTA that is comprehensive enough to cover all issues that make modern trade agreements economically meaningful, while keeping the scope of the agreement within the boundaries of African needs and concerns. The CFTA framework should include disciplines in a large number of areas, from market access for goods and services to investment disciplines, intellectual property, unfair trade practices, dispute settlement, and institutional issues, among others.

Last but not least, the negotiating process itself should be carefully organised. Regional and international organisations, working closely with the AUC, could play an important role in assisting African negotiators to move the CFTA process forward, and they can do it efficiently by cooperating among themselves, and coordinating their different contributions to the CFTA negotiations.

Sequencing and pacing the negotiations

As indicated, African countries have recognised eight RECs as “building blocks” for the CFTA.[4] This includes, in particular, the dedicated efforts of three RECs, namely COMESA-EAC-SADC, to establish the Tripartite Free Trade Area (TFTA). The TFTA is a collective representing nearly 60 percent of Africa’s population and aggregate output, and although negotiators missed the deadline to conclude their work by early 2015, agreements have been reached on a number of areas.

Other RECs are also lagging behind their own schedules. Thus, consideration should be given to a more realistic approach regarding the “building block” function that they are called to perform. A possibility would be for the RECs to focus on issues that do not belong strictly to a CFTA agreement—such as macroeconomic stability and supporting the establishment of regional value chains—and let the dismantling of trade barriers to goods and services be dealt with at the CFTA level. Indeed, to fulfil the ambitious deadlines set for the CFTA, consideration should be given to undertake immediately some continent-wide negotiations on a number of areas, i.e. trade in services, building on progress (or lack thereof) achieved at the RECs level, but not waiting until they complete their own objectives in these areas. 

It would also be very important to make trade agreements with outside partners “compatible” with the CFTA. As regional trade agreements among African countries support the growth of intra-African trade, the preferential treatment granted to Africa by many developed and developing economies support African export growth to the outside world. The trade preferences granted by the EU, the US, China, India, and Japan benefit the bulk of Africa exports. Their impact on LDCs' exports, for example, is undeniable: more than 70 percent of their exports go to these five destinations.

In addition to unilateral preferences, African countries are negotiating reciprocal, although asymmetrical, trade agreements with the EU and other countries. With regard to these “reciprocal” agreements, CFTA compatibility is to be sought by making current rights and/or obligations under these agreements the starting point of CFTA market access and rule-making negotiations by, for instance, granting to intra-African trade the same degree of market access currently granted to outside partners.

African countries may need to re-think the relationship between RECs and the CFTA and move towards a clearer division of labour between them. They may consider launching continental-wide negotiations on the issues to be included in the CFTA agreement, “building” on progress achieved so far in some RECs and particularly on the important achievements of the TFTA. They also need to carefully balance the future CFTA agreement and the current trade arrangements with countries outside the region.

Technical support to the CFTA negotiations

Finally, serious consideration should be given to the organisation of the CFTA negotiating process itself. There can be no doubt about the complexities associated with negotiating an agreement among 54 participating countries with unequal negotiating capabilities, unequal manpower, and unequal knowhow on the issues to be included in the CFTA agreement, as well as differences in productive and competitive strengths.

The African Union Commission (AUC) has played, and is expected to continue to play, a major role in the inception, organisation, and implementation of the CFTA. Therefore, it is clear that the AUC, as the top pan-African intergovernmental body, must continue to play its part in the creation of the CFTA and follow-up implementation of the agreement. However, it is important that further support is sought from other development-friendly and Africa-attuned intergovernmental organisations.

What is required at this stage is a combination of analysis and the provision in an orderly and systematic manner of information on the national and regional rules; and how these rules bind African participants through their national laws and regulations or their regional and international commitments in all the areas included in the negotiations.

In this context, consideration should be given to involve some key organisations like the UN Economic Commission for Africa and UN Conference on Trade and Development which under the direction of the AUC, could establish a joint technical mechanism to support the CFTA negotiations. The mechanism could be open to the participation of other regional and international organisations interested in contributing to the negotiating process and, eventually, to the implementation of the agreement.

Conclusion

Summing up, a regional understanding on any of the issues to be included in the CFTA framework when considered individually would represent a major challenge to African negotiators; taken together the issues may look almost unsurmountable. Harmonising those issues and the regional and external trade commitments would be particularly complex.

Time is of the essence, though. The international trading arrangement may change drastically if the on-going negotiations on the “mega-regional” agreements come to fruition, as African countries may see diluted many of their existent trade preferences and trade relations. To counter this possibility, it is imperative for Africa not to be left behind and to instead move ahead with its own ambitious, continental-wide “mega-regional” trade agreement, the CFTA.

 
Author: Miguel Rodríguez Mendoza, International consultant based in Geneva, with many years of experience in dealing with international and regional trade negotiations, including trade disputes between WTO members.

[1] The African Development Bank hosted a two-day Expert Group Meeting on February 2-3, 2016, in Abidjan, Côte d'Ivoire. The two-day meeting was expected to produce preliminary outlines for the CFTA agreement, as well as a detailed plan and timeline for the development of a full draft agreement. This meeting was part of a series of preparatory activities for the formal launch of the CFTA negotiations, under the guidance of the AU.

[2] The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) (BruneiBurma, Myanmar, CambodiaIndonesiaLaosMalaysia, the PhilippinesSingaporeThailandVietnam) and the six states with which ASEAN has existing FTAs (AustraliaChinaIndiaJapanSouth Korea, and New Zealand). RCEP negotiations were formally launched in November 2012 at the ASEAN Summit in Cambodia. RCEP is viewed as an alternative to the TPP trade agreement, which includes the United States but excludes China.

[3] Mevel and Karingi, 2012

[4] These eight RECs are: African Economic Community (AEC): the Arab Maghreb Union (AMU), the Common Market for Eastern and Southern Africa (COMESA), the Community of Sahara-Sahel States (CEN-SAD), the East African Community (EAC), the Economic Community of Central African States (ECCAS), the Intergovernmental Authority on Development (IGAD), the Economic Community of West African States (ECOWAS), and the Southern African Development Community (SADC).

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