African Free Trade Agreement Ratification

Forty-four African countries recently signed a framework protocol for the African Continental Free Trade Area (AfCFTA) that brings the continent closer to one of the world`s largest free trade areas. The different protocols are negotiated in two phases (see figure below). Phase 1 focused on three protocols: trade in goods with its 9 annexes, trade in services with its 3 annexes and dispute settlement. Phase 2 negotiations will focus on protocols on competition, intellectual property rights and investment. Despite MAN`s concerns, Ms. Songwe insists that the agreement provides for integrated protection for vulnerable sectors. “The agreement explicitly recognises and provides special protection for young industries at risk, as well as for essential security interests or circumstances of critical balance of payments difficulties,” she explains. A second challenge is specific to the East African Community. Of the six members, only three have ratified the AfCFTA to date. Given that the EAC regional bloc is a customs union and therefore has a Common External Customs Tariff (TEC) without the other three member states having yet ratified the AfCFTA, the integrity of the TEC will be problematic. Rules of origin can in principle limit this problem, but their liberal application will lead to higher overhead costs and increase the risk of trade diversion (thus diverting trade from a more efficient exporter to a less efficient exporter due to differences in tariffs).

This could reduce the benefits of the AfCFTA. The greater the degree of harmonization of trade policy regimes within East Africa, the better, as it will facilitate deeper regional economic integration and pave the way for the creation of an Africa-wide customs union, as provided for in the AfCFTA agreement. So far, it is true that only five East African countries have submitted their ratification of the AfCFTA. However, it is not the number of countries that counts, but the fact that a regional bloc of coherent countries, which accounts for about three-quarters of regional GDP, is growing together. From 1 January 1, 2021, Djibouti, Ethiopia, Kenya, Rwanda and Uganda will begin to reduce their tariffs, starting with a linear reduction in tariff lines, which will result in the elimination of tariffs on intraregional imports over a period of five years (10 years in the case of countries classified by the United Nations as “least developed countries”); according to the standards of regional trade agreements, this pace of liberalization will be quite rapid.