Africa’s Largest Free Trade Area Set to Launch in December
The planned Tripartite Free Trade Area (TFTA) – a zone that would be the largest free trade area in Africa and span across the continent’s three main regional economic communities (RECs) – is now set to launch in mid-December at the Tripartite Summit of Heads of State and Government in Cairo, Egypt.
This announcement was made at the end of a two-day meeting of the Tripartite Sectoral Committee of Ministers in Bujumbura, Burundi on 25 October.
The TFTA, once enacted, would bring together the East African Community (EAC), the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA).
In other words, it would cover 26 countries ranging from Egypt to South Africa with a combined population of 625 million people and an aggregate GDP of US$1 trillion.
These figures represent half of the African Union’s membership and 58 percent of the continent’s economic activity, according to COMESA.
The TFTA project, also known as the Grand FTA, was originally endorsed at the Tripartite Summit of Heads of State and Government in Johannesburg in June 2011. That endorsement came three years after another tripartite summit in Uganda, where the Heads of State and Government of the respective RECs agreed on a “programme of harmonisation of trading arrangements amongst the three regional economic communities.”
According to COMESA Secretary General Sindiso Ngwenya, who chairs the Tripartite Task Force, the decision to operationalise the free trade area by the end of this year takes “into account the fact that the majority of the Tripartite Member/Partner States have made ambitious tariff offers” in the ongoing negotiations.
Zimbabwean trade official Chiratidzo Iris Mabuwa, who chaired the Burundi ministerial meeting, urged delegations to now engage in “expedite[d] negotiations on trade-related areas, including trade in services, intellectual property, and competition policy” to enable the formal launch in mid-December.
Sources close to the negotiations have indicated that a post-signature implementation plan will be enacted immediately after the launch. This would include, among other elements, the finalisation of negotiations on outstanding areas of the TFTA Agreement - most likely Rules of Origin (RoO), trade remedies, and dispute settlement – along with the ratification of the Agreement by member states and the start of the implementation.
Stepping stone for continental free trade
The proposed 26-country Tripartite FTA, together with other regional FTA processes, is meant to set the stage for a broader Continental FTA, or CFTA.
Upon their expected completion in 2014, these regional processes would be consolidated into the CFTA between 2015 and 2016, with the pan-African pact launching in 2017 and a continental customs union forming by 2019, according to a roadmap released by the African Union in 2011.
The roadmap also encourages the regional blocs of the TFTA “to ensure that the member states currently outside the three RECs FTA join and become part of the Tripartite FTA.”
The proposed CFTA would be a key component of the African Union’s (AU) strategy to boost intra-African trade, which currently stands at 12 percent of total trade, compared to 60 percent for Europe, 40 percent for North America, and 30 percent for ASEAN, according to statistics cited by the WTO.
According to the AU Action Plan for boosting intra-African trade, the projected CFTA would increase trade within the region by at least 25-30 percent in the next decade.
The Action Plan is a document produced during the AU trade ministers’ meeting in December 2011 detailing priority action clusters to address obstacles to increasing intra-African trade. These include, among others, differences in trade regimes, restrictive customs procedures, administrative and technical barriers, limitations of productive capacity, and inadequacies of trade-related infrastructure.
The TFTA negotiations are being conducted through the Tripartite Trade Negotiation Forum, with specific technical areas being dealt with by Technical Working Groups (TWGs).
The liberalisation exercise was initially divided into two negotiation sequences.
In the first phase, discussions focused mainly on the issues of tariff liberalisation, rules of origin (RoO), trade remedies, and customs and transit procedures, among other elements. It was originally agreed that trade officials needed to clear these agenda items before entering the second phase, which addresses trade in services and other issues such as intellectual property, competition policy, and trade competitiveness.
Phase one will be officially concluded in December 2014 after the 3rd Summit of Heads of State and Government, which will see the signing of the Declaration on the Conclusion of Negotiations on Phase One – Trade in Goods. It is envisaged that phase two will begin immediately after phase one, while negotiations on outstanding areas will also work towards conclusion based on an agreed timeframe.
Notwithstanding this ambitious integration agenda and the announced launch of the Grand FTA by the end of this year, concerns have been raised over the arduous nature of current TFTA negotiations.
Specifically, in phase one, the COMESA-EAC-SADC troika faces notable challenges in harmonising differential RoO, which have so far impeded inter-regional trade and the creation of regional value chains.
Apart from Rules of Origin, the other difficult negotiating areas involve trade remedies and a dispute settlement mechanism.
Observers familiar with the talks have said that one of the key challenges consists in finding an acceptable framework for RoO, as the EAC and COMESA regimes in this area are significantly different from the one used by SADC.
Experts such as Eckart Naumann from the Trade Law Centre in South Africa have pointed out that 56 percent of the RoO are dissimilar across the three regional economic communities. In these instances, the TFTA TWG on RoO has decided to adopt a line-by-line negotiation approach.
“Indications are that… [this] process could begin in earnest later in 2014 at the next TWG meetings,” Naumann told Bridges Africa, which is also published by ICTSD. (See Bridges Africa Volume 3 Issue 9, forthcoming)
Regarding the prospects for harmonisation, Naumann says that “since individual dissimilarities can potentially involve lengthy consultation and negotiation, the outstanding task of achieving a harmonised RoO outcome is one not to be underestimated.”
The agreement reached in Burundi last week allows for a provisional application of rules where they are the same, while noting that further work will continue in all situations where product-specific rules are dissimilar. The latter make up the majority of cases.
According to the Chairperson of the Ministerial Meeting, Chiratidzo Iris Mabuwa, negotiators will now need to expedite phase two of the talks.
Industrial programme to follow
“Africa has now joined the league of emerging economies and the Grand FTA will play a pivotal and catalytic role in the transformation of the continent,” said Mabuwa, while hailing the projected TFTA launch as a milestone in African regional and continental integration.
COMESA Secretary General Ngwenya concurred, declaring that the December launch will be the beginning of a phase of “implementing a developmental regional integration strategy that places high priority on infrastructure development, industrialisation, and free movement of business persons.”
Concerning industrialisation, Ngwenya said that the TFTA will need to be complemented with a regional industrial programme to ensure an “inclusive and equitable growth” process in Eastern and Southern Africa.
The TFTA will include Libya, Djibouti, Eritrea, Sudan, Egypt, Ethiopia, Kenya, Uganda, Burundi, Rwanda, Tanzania, Malawi, Zambia, Zimbabwe, Angola, the Democratic Republic of the Congo, Mauritius, Madagascar, Comoros, Seychelles, Mozambique, Botswana, Lesotho, Namibia, South Africa, and Swaziland.
ICTSD reporting; “Three blocs finalise plan for Africa’s biggest free trade area,” THE STAR, 27 October 2014; “East Africa: EAC, COMESA and SADC to Launch Free Trade Zone,” ALLAFRICA, 27 October 2014; “COMESA, EAC, SADC Ministers Agree to Launch Africa’s Largest Free Trade Area,” COMESA, 25 October 2014.