African leaders launch Africa’s largest free trade area
African heads of state are set to launch the largest free trade area across Africa, the Tripartite FTA (TFTA), during the Third Tripartite Summit held in Sharm El Sheikh, Egypt that is ending today.
The proposed “Grand” FTA will stretch from Cape Town to Cairo, creating an integrated market with a combined population of almost 600 million people and a total Gross Domestic Product (GDP) of about US$1 trillion.
The TFTA comprises the three largest regional economic communities (RECs) in Africa: the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC).
The deal will come into force once ratification is attained by two-thirds of the 26 member states.
A post-signature implementation plan will follow the launch including, among other elements, an indicative schedule of negotiations on outstanding issues in phase I and phase II of the negotiations – most likely, rules or origin, trade remedies and dispute settlement – and the programme of work on the movement of business and the industrial development pillar.
The launch of this “mega” African deal is the first step towards a more ambitious plan of establishing an African Customs Union by 2019.
Observers note that such a large FTA will be an important step towards a potentially game-changing environment for Africa’s trade and integration.
In recent years, this initiative has often been referred to by African officials as a response to the changing global landscape which has been accompanied by a proliferation of bilateral and regional trade agreements, and more recently mega-regional trade deals, such as the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), both currently under negotiation.
The TFTA project was originally endorsed at the Tripartite Summit of Heads of State and Government in Johannesburg in June 2011 which also marked the start of the negotiations to establish a framework for tariff preferences and other commitments. (See Bridges Africa, 2 February 2012)
The proposed 26-country Tripartite FTA, together with other regional FTA processes, are also meant to set the stage for a broader Continental FTA, or CFTA.
The various regional processes are expected to 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. (See Bridges Africa, 29 October 2014)
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.”
“Monumental” step for continental integration
Egypt’s Minister of Industry and Trade, Mounir Fakhri Abdel Nour, welcomed the TFTA launch as a “monumental step.”
The move was hailed by business leaders during the World Economic Forum (WEF) on Africa held last week in Cape Town, South Africa, where participants highlighted the current low level of intra-African trade, currently standing at around 12 percent compared to some 55 percent in Asia and 70 percent in Europe.
“I think Africa will surprise the world,” Fatima Haram Acyl, the African Union’s commissioner for trade and industry, said during the WEF meeting.
“We have realised that having one trade regime is better than costly multiple trade regimes,” said the secretary general of COMESA, Sindiso Ngwenya, who has been leading the negotiations between the three blocks.
The decision to launch the Tripartite FTA was made after a majority of the Tripartite members made “ambitious” tariff offers following the Tripartite Sectoral Committee of Ministers meeting in Bukumbura, Burundi in October last year.(Bridges Africa, 16 March 2015)
Regarding tariff offers, Tripartite ministers reiterated recently the importance of making tariff offers and concluding related negotiations “expeditiously.” In this regard, they decided that countries that had not yet exchanged tariff offers would need to do so within the next 6-12 months; those that have exchanged and are negotiating tariff offers should endeavour to conclude that process within 12 months.
Work on rules of origin to continue
Tripartite ministers agreed on rules of origin (RoO) to be applied in the interim while further work continued on specific rules of origin, reported COMESA last week.
One of the key challenges involves finding an acceptable framework for RoO, as the EAC and COMESA regimes in this area are significantly different from the one used by SADC.
Phase II of negotiations next
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, 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 into the second phase, which addresses trade in services, intellectual property, competition policy, and trade competitiveness.
Phase I officially concluded in December 2014 through the adoption by heads of state and government of the “Declaration on the Conclusion of Negotiations on Phase I Trade in Goods.” Phase II of the negotiations is scheduled to commence shortly after the launch.
SADC industrial strategy
Earlier this year, the Tripartite Technical Committee on Industrial Development (TTCID) adopted a draft programme of work on industrial development, and since then has been working on developing the appropriate legal instrument for cooperation in this area.
As part of this effort, the SADC region recently adopted a Strategy and Roadmap on Industrialisation incorporating one of the strategic components of the Tripartite agenda, which refers to industry and infrastructure as two of its three pillars, the other being market integration.
The SADC Industrialization Strategy follows three strategic tracks including industrialisation, competitiveness, and regional integration, and is premised on a three-phase long framework spanning 2015 -2063.
Awaited launch amid scepticism
The launch of the TFTA was originally planned for December 2014 at the Tripartite Summit of Heads of State and Government in Cairo, Egypt. However, due to reasons that are unclear, several delays and postponements were encountered. (See Bridges Africa, 16 March 2015)
Observers who have been following the process expressed their satisfaction regarding the launch, while still maintaining some reservations on the actual implementation process that will follow.
“It is not clear how if this agreement will bring all the other agreements under one umbrella or if it will simply be another complication in the current spaghetti bowl,” said a trade expert.
Some observers commented that such an ambitious integration agenda will prove difficult to operationalise given the various integration challenges facing African countries at the level of their RECs, and the envisaged timeframe.
African RECs are of the view that once operational, the TFTA will become a means to enhance economic inter-linkages and create an enabling business environment that unlocks regional potential, scales up productive capacities and competitiveness, and stimulates the emergence of value chains.
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 business community is also expected to benefit from an improved and harmonised trade regime. As a result of eliminating overlapping trade regimes, the TFTA will ultimately reduce the cost of doing business, a factor which currently constitutes a complexity in Africa’s regional arrangements.
The enlarged FTA 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; “Africa unveils mega ‘Cairo to the Cape’ FTA,” BLOUINNEWS, 8 June 2015; “Council of Ministers finalize tripartite launching instruments,” SUDAN VISION, 10 June 2015; “Africa officials say trade deal ready for signing,” DAILYMAIL, 8 June 2015; “African leaders ready to sign deal to launch Free Trade area,” COSTWEEK, 10 June 2015; “Africans negotiate ‘one trade regime’ for common market,” AFP, 7 June 2015; “ New ‘Cape to Cairo’ free trade pact hailed as a milestone for Africa by proponents,” AFP, 9 June 2015.