The CFTA Negotiations and the Issue of Coherence

20 September 2017

What are the challenges facing the Continental Free Trade Area (CFTA) negotiations in terms of public policy coherence?


The analysis of the coherence of public policies now covers a growing range of dimensions.[1] This issue is particularly significant when it comes to trade policy, due to the stakes and interests it involves. In this article, we will consider three levels of coherence in relation to efficiency: (i) coherence of trade policy in relation to the objectives that were set; (ii) coherence between this public policy and other public policies, which requires a convergence of approaches; and (iii) coherence of negotiation strategies in relation to trade policy objectives.

It is important to point out that, when it comes to objectives, there are two main areas on which trade policies focus in order to contribute to economic and social development: promoting exports and limiting imports.[2] In a regional integration context, a community’s trade policy must be consistent with all the national policies of the member states, as well as with all the other sector-specific community policies.[3] The key question here is therefore about the nature of the challenges – in terms of coherence – for the Continental Free Trade Area (CFTA) negotiations that started in June 2015. The article will draw attention to the coherence requirements set by the guiding principles, the scope, the extent, and the focus of the CFTA negotiations by exploring this issue from a political, economic, institutional, and legal point of view.[4]
 

At the policy and strategic Level

According to the First Ten-year Implementation Plan of Agenda 2063, the scope and disciplines of the agreement establishing the CFTA should contribute to doubling intra-Africa trade by 2022. To achieve this, other complementary policies must be implemented, more specifically ambitious, dynamic, and realistic industrial policies and infrastructure development policies. The main challenge here lies in managing to reconcile all the constraints due to the number of countries taking part in the negotiating process. The 55 member states of the African Union (AU) have different characteristics in terms of level of development, specificities related to various factors of  fragility (isolation, political instability and lack of security, vulnerability to disasters), as well as regarding their integration into the international trading system – e.g. Ethiopia has never signed a free trade agreement, several African countries are not WTO members, etc. As such, the negotiations need to provide for appropriate flexibilities in terms of special and differential treatment to take into account the specific development concerns of all members (guiding principle 5), as well as the necessary support measures, raising the delicate issue of financing.

A second challenge relates to coherence with the large number of cooperation processes – individual and collective – through which the continent engages with third-party partners in the world and which include trade aspects (Economic partnership agreements, potential EU-Africa investment treaty to come, AGOA, China-Africa, etc.). How can we make sure that the CFTA is a framework through which AU member states can offer each other trade concessions that are not less favourable than those that are already being offered elsewhere? It is essential to find the right approach to consistently implement the guiding principles of substantial trade liberalisation (principle 7), most favoured nation treatment (principle 8), national treatment (principle 9) and reciprocity (principle 10). With regard to the level of liberalisation, the scope of the CFTA and the modalities associated with it – which provide for the liberalisation of 90 percent of tariff lines for trade in goods – show a level of ambition that is consistent with this “substantial” liberalisation principle. The CFTA covers all areas of trade, including goods, services, competition, intellectual property, and investment.

In the same spirit, how can we build on the acquis of the various regional economic communities (RECs), which can themselves be very different in terms of their strategic direction for certain aspects of trade policy? For example, the rules of origin applied in the free trade areas of the various RECs are not identical: some apply general rules of origin (ECCAS and ECOWAS), while other apply specific rules (EAC, COMESA and SADC), and the origin criteria are not standardised, including cumulation criteria. The CFTA negotiations should adopt rules of origin that encourage the industrialisation of the continent by reconciling the varying options currently applied within the RECs.

On the other hand, as regards trade in services, although liberalisation could potentially cover all areas, the staging principle set out in the Abuja Treaty (Article 4.2) and the capacity of member states to liberalise beneficially require choosing certain key areas with which to start. How can they be identified? Existing instruments should be relied on to achieve this (guiding principle 3 – preservation of acquis), in particular the Abuja Treaty itself, the treaties establishing the RECs and the decision adopting the Action Plan for Boosting Intra-Africa Trade (identifying service sectors that the States have already agreed to liberalize). To this should be added the commitments made at the WTO, including the conditions regarding the compliance of the CFTA with the GATS (substantial coverage in terms of sectors, modes of supply, and volume of trade), as well as emerging service sectors. Another challenge lies in choosing the service liberalisation approach that is best suited to Africa’s very specific context, which is characterised by the lack of reliable statistics on trade in services (list of specific commitments, regulatory cooperation, or a combination of both).
 

At the legal level

From a legal point of view, there are at least three levels at which coherence issues can be identified. Firstly, the status of the agreement creating the CFTA compared to the Abuja Treaty creating the African Economic Community is highly significant. Logically, to maintain coherence, this agreement should be a protocol annexed to the Abuja Treaty; however, the opinions of member states are divided on this topic. The arguments put forward by those who are against are the following: (i) the Abuja Treaty does not explicitly provides for the negotiation of the CFTA (although it does provide for the implementation of a customs union, which is theoretically a free trade area with a common trade policy among its members);[5] and (ii) the wording of the MFN treatment, a basic principle of the international trade system, as stated in the Abuja Treaty (Article 37), is outdated and could create impediments to implementing the CFTA. Those who are in favour, however, believe that the direction of the AU’s current institutional reform is to create coherence across all the parallel processes – current and future – related to African integration using the Abuja Treaty and the structures set out in it as a frame of reference.

Secondly, the type of dispute settlement mechanism that should be applied as part of the CFTA is also in question. One option is to create a separate dispute settlement mechanism using the WTO approach. The other option is to create a link to the current mechanism – the African Court of Justice and Human Rights – with the risks that this carries regarding the specificities of international trade disputes.

Finally, there is also the question of how the agreement will enter into force. Would it need to be ratified by the member states or would a decision of adoption by the Conference of Heads of State and Government suffice? For these legal aspects, as for the others, it would be appropriate to adopt best practices (guiding principle 12) while taking into account the acquis of the RECs.
 

At the institutional level

The challenges relating to institutional coherence are already present in the negotiation approach selected, namely through the following guiding principles: (1) CFTA negotiations are conducted by AU Member States, RECs and customs territories with the support of the AU Commission (AUC) and its structures; (2) the RECs’ free trade areas will form the basis for implementing the CFTA; (3) preservation of the acquis; (4) variable geometry; and (5) flexibility and special and differential treatment.

In practice, the CFTA negotiations take place between the AU member states, with the RECs taking on a subsidiary role. This creates a coherence issue for countries that are members of customs unions and are thus supposed to implement a common trade policy, while also opening the door to questioning the acquis achieved by consensus within the RECs. Although it is true that the opinions of the RECs are collected by the Continental Task Force on the CFTA, the real challenge here is nevertheless the evolving role of the RECs. They need to move from consulted actors to decision-makers in the harmonisation process of continental trade policies, in co with the current AU reform.

The relevance of the negotiation structures is also an important issue.[6] Experience shows that the architecture chosen is heavy, expensive, and constricting for the progress of negotiations. For example, between the CFTA Negotiating Forum (where consensus is built on a technical level) and the Meeting of Senior Trade Officials (where files are prepared for the Meeting of Ministers, although it is not a negotiating arena), there is often an overlap of competences, as the Meeting of Senior Officials turns into the Negotiating Forum. This is caused by the fact that the same people belong to both these institutions.

Another element relating to institutional coherence pertains to the CFTA’s administration mechanism. Will the monitoring of implementation rely on the AU Commission’s structures? Should other structures be created, and if so, what form should they take? Likewise, what role should the RECs play in the CFTA’s administration mechanism? Finally, what mechanism should be put in place to monitor the implementation of specific annexes, while remaining coherent, avoiding overlapping and duplication, and avoiding multiplying structures that create over-costs?

The question of mobilising material, logistical, human, and financial resources to carry out the negotiating process is also important. This brings up the issue of the capacity of African States to independently finance their ambitions. It can be seen, for example, in the question of financing the participation of delegates to negotiating meetings so as to cover all the technical sectoral specificities of the areas covered by the negotiations. For the most part, member states are only represented by one delegate, whose attendance is paid for by the AUC using the funds provided by the EU, the GIZ, and the World Bank.
 

At the economic level

The key issue is knowing how to turn the CFTA into a tool for promoting the development of African countries and the well-being of their people. Studies conducted by the ECA showed that the CFTA’s contribution to the continent’s economic development is contingent on a real strategy to industrialise economies by developing regional value chains, developing infrastructure, and facilitating trade.[7]

At first sight, the implementation strategy of Agenda 2063 and the priority programmes of the First Ten-year Implementation Plan seem consistent with ambitions to promote intra-Africa trade, in the sense that they not only contain actions that are directly linked to trade policy, but also measures regarding other related policies (industrial policy, infrastructure, etc.). However, planning is not enough; this must now be implemented. Observing the domestication process of Agenda 2063 into national development plans reveals the existence of many challenges in terms of coherence.
 

Conclusion

Ultimately, without claiming to be exhaustive, the analysis of the policy coherence challenges facing the CFTA negotiations reveals that a few key factors must be taken into account in order to help African countries achieve their development goals. These include the issue of flexibility, alignment with national and regional development goals and strategies, taking into account the various characteristics of AU member states, compatibility with previous legal commitments (RECs, AU, WTO, EPAs, etc.) and – in some cases – making more ambitious ones, leadership, and resource mobilisation capacities. Nevertheless, their practical application still has a few obstacles to overcome, which largely have to do with political will.


Author: Jacob Kotcho, Trade policy expert, Economic Community of Central African States (ECCAS).


[1] Pierre Muller, Les politiques publiques, Paris: Presses Universitaires de France, 2013.

[2] Murray Gibbs, Trade Policy, New York: UNDESA, 2007.

[3] Jean-Pierre Rolland & Arlène Alpha, Analyse de la cohérence des politiques commerciales en Afrique de l’Ouest, Paris: GRET, 2011.

[4] See the guiding principles for negotiating the CFTA adopted by the AU Conference (Decision Assembly/AU/11 (XXV)).

[5] See Article 6 of the Abuja Treaty on the modalities for establishing the African Economic Community and Chapter V, Articles 29 to 33.

[6] Continental negotiating task force, technical work groups, negotiating arena, AU Meeting of Senior Trade Officials, AU Meeting of Trade Ministers.

[7] United Nations Economic Commission for Africa (ECA), Economic Report on Africa 2015: Industrialising through Trade, ECA: Addis-Abeba, 2015.

This article is published under
20 September 2017
Leveraging the Services Sector for Inclusive Value Chains in Developing Countries – ICTSD – September 2017 This paper analyses how increased competitiveness in services can drive sustainable...
Share: 
20 September 2017
Fifty years after the signing of its founding declaration, how much has the Association of Southeast Asian Nations (ASEAN) achieved in terms of regional integration? What are the main lessons that...
Share: