The Continental Free Trade Area Negotiations: Lessons from the Tripartite FTA

tralac Annual Conference : International Trade Governance – quo vadis?

6 & 7 April 2017: The Table Bay Hotel, V&A Waterfront, Cape Town, South Africa

Mr. Prudence Sebahizi

Chief Technical Advisor on the CFTA and Head of CFTA Unit

Department of Trade and Industry

Why the CFTA? 1. Pan-Africanism and Political Liberation;

2. Economic Ownership (Lagos Plan of Action) - Low intra-African Trade;

3. Towards African Economic Community (Article 6 of the Abuja Treaty);

4. Addressing the Challenges of Overlapping Membership (Rationalization of

RECs);

5. Facing the changing global trade architecture (US new Administration, the

BREXIT) - Positioning Africa;

6. Harnessing Continental Opportunities - Demographic dividend &Trade and

investment opportunities;

7. Africa’s integration is vital to the successful implementation of Agenda 2063;

8. The CFTA is critical not only for its potential benefits, but also to mitigate the

costs associated with inaction;

9. Africa’s Trade Patterns with the World is not Sustainable due to continuous

Deterioration of Terms of Trade;

10. CFTA as a tool to foster Structural Transformation.

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• “One of the most fascinating things about Africa is the remarkable contrasts that formulate the continent. It is the richest continent in the World, but the poorest people in the world are found there” – Kwame Tapiwa Muzawazi

• “We Must Realise that Progress Lies in Working Together” – Paul Kagame

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Roadmap for Africa’s Integration Agenda

• The ‘Treaty Establishing the African Economic Community (AEC)’ (The Abuja Treaty) lays out a detailed time-bound schedule for African economic and political integration through six stages:

i. 1994 – 1999: Establish and strengthen African Regional Economic Communities.

ii. 2000 – 2007: Eliminate Tariff Barriers (TBs) & Non-Tariff Barriers (NTBs) in RECs.

iii. 2008 – 2017: Establish Free Trade Areas (FTAs) & Customs Union (CUs) in RECs.

iv. 2018 – 2019: Establish a Continental Level CU & Common External Tariff (CET).

v. 2020 – 2023: Establish an African Common Market (CM), including the free movement of factors of production and the right of establishment.

vi. 2024 – 2028: Establish a Pan-African economic and monetary union that includes the establishment of an African Central Bank and a single African Currency.

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Roadmap for Negotiations of the CFTA

Oct 2016

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The Future of Africa’s Integration: Fast – tracking the CFTA in Abuja Context

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Update on the Establishment of the CFTA (1) • The 18th Ordinary Session of the AU Assembly held in January 2012 in Addis

Ababa, adopted an Action Plan for Boosting Intra-African Trade (BIAT) and agreed on a roadmap for the establishment of a CFTA by 2017.

• The AU Assembly launched the CFTA negotiations at the 25th Ordinary Summit of Heads of State and Government on 15 June 2015 in Johannesburg, South Africa.

• The 27th Ordinary Summit of the AU Heads of State and Government that took place in Kigali, July 2016, reaffirmed its commitment to fast tracking of the CFTA by 2017.

• The 28th Ordinary Session of the AU Heads of State and Government, held in Addis Ababa, Ethiopia, in January 2017 mandated H.E Mahamadou Issoufou, President of the Republic of Niger to champion the process of the CFTA to ensure that the deadline of the end of 2017 is reached and report on measures taken to the next ordinary session of the Assembly in July 2017.

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Update on the establishment of the CFTA (2) • Since the June 2015 launch of the negotiations, much progress has been made to

prepare the ground:

• Analytical Studies to inform negotiations;

• Capacity Building of Negotiators;

• Establishment of the CFTA Negotiations Support Unit;

• Drafting of the CFTA Model Text;

• Decision to appoint Eminent Persons ( one per region);

• Study on NTBs Elimination Mechanism.

• In November – December 2016, the AUC organized Africa Trade Week that brought together key stakeholders to discuss the CFTA culminated into the High Level Trade Facilitation Forum.

• Five meetings of the CFTA Negotiating Forum (CFTA-NF) were held in February, May, October, November 2016 and March 2017 at the AU Headquarters in Addis Ababa, Ethiopia.

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CFTA Architecture Protocol Establishing the Continental Free Trade Area

Annex A:

Agreement on Trade in Goods

Appendix I: Tariffs Liberalization Schedule of Commitments

Appendix II: Rules of Origin

Appendix III: Customs Cooperation

Appendix IV: Trade Facilitation and Transit

Appendix V: Non-Tariff Barriers

Appendix VI: Technical Barriers to Trade

Appendix VII: Sanitary and Phyto-Sanitary Measures

Appendix VIII: Trade Remedies and Safeguards

Annex B:

Agreement on Trade in Services

Schedules of Specific Commitments

Agreement on Movement of Natural Persons involved in Trade in Services and Investment

Regulatory Frameworks

Reference to Annex C and Annex D

Annex C:

Agreement on Investment

Annex D:

Rules and Procedures on Dispute Settlement

tralac Annual Conference: International Trade Governance – quo vadis?

Protocol Establishing the CFTA

CFTA Protocol

Preamble

Part I. Definitions

Part II. Establishment, Objectives, Principles and Scope

Part III. Administration and Organisation (Institutional Framework)

Part IV. Transparency (Publication and Notification)

Part V. General Provisions (Continental Preferences, CUs and FTAs)

Part VI. Dispute Settlement

Part VII. Final Provisions (Entry into force, Notification, Amendments)

tralac Annual Conference: International Trade Governance – quo vadis?

Annex A: Agreement on Trade in Goods

Agreement on Trade in Goods

Preamble

Part I. Definitions, Objectives, Scope and Principles

Part II. Non-discrimination (MFN and National Treatment)

Part III. Liberalisation of Trade (Imports and Export Duties, NTBs and RoO)

Part IV. Customs Cooperation, Trade Facilitation and Transit

Part V. Trade Remedies and Safeguards (Anti-dumping, Countervailing, Safeguard Measures)

Part VI. Product Standards and Regulations (TBT, SPS Measures)

Part VII. Agriculture, Fisheries And Food Security

Part VIII. Complementary Policies (SEZs, Infant Industries and STEs)

Part IX. Exceptions (General and Security Exceptions, BoP)

Part X. Institutional Provisions (M&E, Consultation and DS, Oversight Committee)

Part XI. Technical Assistance, Capacity Building and Cooperation

tralac Annual Conference: International Trade Governance – quo vadis?

CFTA Agreement on Trade in Goods: Appendices

Appendices Appendix I: Tariffs Liberalization Schedules of Commitments

Appendix II: Rules of origin

Appendix III: Customs Cooperation

Appendix IV: Trade Facilitation and Transit

Appendix V: Non – Tariff Barriers

Appendix VI: Technical Barriers to Trade

Appendix VII: Sanitary and Phytosanitary Measures

Appendix VIII: Trade Remedies and Safeguards

tralac Annual Conference: International Trade Governance – quo vadis?

Annex B: Agreement on Trade in Services

Agreement on Trade in Services

Preamble

Part I: Definitions

Part II. Scope of Application

Part III. Objectives

Part IV. General Obligations and Disciplines

Part V. Progressive Liberalization

Part VI. Institutional Provisions

tralac Annual Conference: International Trade Governance – quo vadis?

Annex C: Agreement on Investment

Agreement on Investment

Part I: General Provisions

Part II. Objectives

Part III. Standards of Treatment of Investors and Investments

Part IV. Development – Related Issues

Part V. Investors’ Obligations

Part VI. Institutional Provisions

tralac Annual Conference: International Trade Governance – quo vadis?

Appendix on Movement of Natural Persons Involved in Services and Investment

Movement of Natural Persons

General Principles on Movement of Persons

Process to Facilitate Entry

Scope

Definition of Categories of Natural Persons

tralac Annual Conference: International Trade Governance – quo vadis?

Annex D: Rules and Procedures on Dispute Settlement

Rules and Procedures on Dispute Settlement

Section 1: Objectives (Peaceful Settlement and Recourse to DSM)

Section 2: Alternate DS Procedures (Good Offices, Negotiation and Mediation)

Section 3: Arbitration

Section 4: Judicial Process

tralac Annual Conference: International Trade Governance – quo vadis?

The Tripartite FTA is by far the largest FTA in Africa – 26 countries from the Cape of Good Hope to the Mediterranean Sea

Trade between and among Tripartite member/Partner States has grown from US$62 billion in 2008 to US$98 billion in 2013

Has a combined population of 632 million people and a GDP of US$1.3 trillion

It is envisaged that the Continental Free Trade Area launched in June 2015 will build on the successes of the TFTA

Lessons from the Tripartite FTA: Overview of the TFTA

45 Articles

Covering Tariff Liberalization, NTBs, SPS, TBT, Rules Of Origin, Customs Cooperation, Trade Facilitation, Trade Remedies and Dispute Settlement etc. and Phase II in-built.

10 Accompanying Annexes

Annex 1 on Tariff Schedules, Annex 2 on Trade Remedies, Annex 3 on NTBs, Annex 4 on Rules of Origin, Annex 5 on CP, Annex 6 on TF, Annex 7 on Transit, Annex 8 on TBT, Annex 9 on SPS and Annex 10 on Dispute Settlement

Lessons from the Tripartite FTA: The TFTA Agreement

• Low Ambition: Member States agreed to liberalize 60-85 % of tariff lines upon entry into force of the agreement- and negotiate the rest over 5-8 year period;

• Ambiguity of the principle of building on the acquis;

• Outstanding work on this Annex (Annex 1 of the TFTA Agreement)

Tariff Offers

•Member States agreed to negotiate product specific rules instead of agreeing on a general rule for processed or manufactured products which led to prolonged negotiations.

Rules of Origin

• One of the Annexes that were developed late in the process;

• Most countries do not have the legislation and institution for trade remedies- only Egypt, South Africa and Mauritius have these- and they utilize the WTO mechanism

Trade Remedies

Lessons from the Tripartite FTA: Contentious Issues

Article 44

Negotiations on Outstanding Issues on Phase I

Tripartite Member/Partner States undertake to conclude negotiations on outstanding issues under Phase I as set out in Annex I on Elimination of Customs Duties, Annex II on Trade Remedies and Annex IV on Rules of Origin after the launch of the Tripartite Free Trade Area.

Article 45

Phase II Negotiations

Recognising the need to conclude Phase II Negotiations, and to provide flexibility in the implementation of the Agreement, the Tripartite Member/Partner States agree to negotiate and endeavour to conclude the following protocols within 24 months upon entry into force of this Agreement:

a) A protocol on trade in services; and b) Protocols on trade-related matters, including Competition policy, Cross-Border Investment, Trade and

Development, and Intellectual Property Rights.

The Tripartite Member/Partner States may conclude protocols in any other trade- related matter agreed to by the Tripartite Member/Partner States.

Lessons from the Tripartite FTA: Built – in Agenda

AU Agenda 2063

1. A prosperous Africa based on inclusive growth and sustainable development

2. An integrated continent, politically united and based on the ideals of Pan Africanism and the vision of Africa’s Renaissance

3. An Africa of good governance, democracy, respect for human rights, justice and the rule of law

4. A peaceful and secure Africa

5. An Africa with a strong cultural identity, common heritage, values and ethics

6. An Africa where development is people-driven, unleashing the potential of its women and youth

7. Africa as a strong, united and influential global player and partner.

Boosting Intra-African Trade –

BIAT

Trade Policy

Trade Facilitation

Productive Capacity

Trade Related Infrastructure

Trade Finance

Trade Information

Factor Market Integration

Continental Free Trade Area – CFTA

Trade in Goods

Trade in Services

Investment

Intellectual Property Rights

Competition Policy

Industrialization and Infrastructure Pillars

CFTA Enablers: AIDA, PIDA, CAADP, Etc.

Agricultural Transformation

Food Security

Energy

Transport

ICT

Water Resources

CFTA Within AUC Policy Framework (5)

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Opportunities of the CFTA

Some of the opportunities that could come about through the CFTA regional

include:

• Food Security;

• Encouraging Industrialization, innovation, diversification, Technology

Transfer and job creation;

• Market access;

• Demographic dividend;

• Elimination of NTBs;

• Free movement of people;

There is enormous potential with African economies growing in excess of

5% i.e. Cote d‘Ivoire, Ethiopia, Senegal, Rwanda, Morroco and Kenya, etc.

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• Different speed and priorities and of the different Regional Economic Communities;

• Overlapping Membership, 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;

• Multitude and varied trade commitments undertaken by African countries.

• Institutional, organizational, and productive Capacities;

• Sensitive issues such as RoO, Level of ambition, Services Regulations, etc.

Challenges of the CFTA

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• It should be emphasized that besides establishing the Continental Free Trade Area, among the fundamental drivers of trade are development of productive capacity and industrial sophistication because a country cannot trade effectively unless it can produce and add value to its raw material endowments.

• Trade – related infrastructure and services along with other trade facilitation measures such as removal of non-tariff barriers, simplification of customs procedures and documentation, and flawless operations of Africa’s transport and transit corridors are also fundamental to Africa’s internal trade.

• Lastly, given the imbalances in the levels of development in African countries, it would be a remise to talk about creating the CFTA without ensuring equitable outcomes for Member States through compensation mechanisms to address adjustment costs to greater trade opening, and help smaller and weaker countries build their production and trade capacities.

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Conclusion ….

• “There cannot be a good reason why it is easier for us to trade with Asia, Europe and the Americas, rather than with fellow Africans.” – Kenya’s President Uhuru Kenyatta • “The CFTA is critical NOT ONLY for its potential

benefits, BUT ALSO to mitigate the costs associated with inaction”. - UNCTAD

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