African Continental Free Trade Area (AfCFTA)
Title: Support to the African Continental Free Trade Area (AfCFTA)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Member States of the African Union
Lead executing agency: African Union Commission (AUC)
Overall term: 2017 to 2021
Although growth in Africa is forecasted at an average of 3.6 per cent for 2019–20, with the world’s fastest growing economies being on the continent, there is still much to be done. Africa is still heavily reliant on commodity and agricultural exports while importing capital goods or food products predominantly from outside the continent. With a global trade share of less than 3 per cent, export diversification has yet to be achieved, as many African countries still rely on rents from extractive exports, whilst falling behind on industrialisation efforts.
Against this backdrop, intra-African trade remains below its potential, accounting for about 17 per cent of the total African trade volume in 2017. In contrast, North American intracontinental trade accounts for 51 per cent of exports, 49 per cent in Asia, and 22 per cent in Latin America, while among West¬ern European countries this number reaches 69 per cent. Although some Regional Economic Communities (RECs) have achieved improvements in trade integration through tariff reductions, the African market remains fragmented. Non-tariff barriers such as uncoordinated bureaucratic procedures, long waiting times at the border or lengthy and cumbersome export requirements raise trade costs on the continent. As a result, Africa has integrated with the rest of the world faster than with itself.
With the Treaty of Abuja in 1991, the Member States of the Organisation for African Unity (OAU) agreed on a road map for the creation of a common African market. To accelerate the implementation of the Treaty and strengthen regional integration, the African Union (AU) Trade Ministers agreed to establish an African Continental Free Trade Area (AfCFTA). The AfCFTA has since been a flagship programme of the AU and AfCFTA negotiations were launched in June 2015.
Out of 55 Member States of the AU, 44 signed the Agreement in March 2018 at the AU Extraordinary Summit in Kigali, Rwanda. Phase I of negotiations covers trade in goods, trade in services and dispute settlement. Phase II is to cover investment, competition policy and intellectual property rights. Outstanding issues of Phase I such as tariff schedules, rules of origin and specifics on trade in services are yet to be completed. At the same time, the Kigali summit kicked off the ratification process of the AfCFTA, with an increasing number of AU Member States ratifying the Agreement in their national parliaments. The AU comes into force with the 22nd ratification deposited at the AU.
The AU is coordinating the ongoing free trade negotiations and the transition to implementation of the African Continental Free Trade Area (AfCFTA).
The AU Commission (AUC), specifically AUC´s Department of Trade and Industry (DTI) is in charge of coordinating in BIAT and AfCFTA related activities. The project advises the AUC Trade Commissioner on strategic policy and advocacy issues by seconding a regional trade policy advisor to DTI´s structures. It also supports the AfCFTA Negotiation Unit by seconding a customs cooperation and trade facilitation expert for the preparation of the negotiations. Outstanding negotiation issues of Phase I for trade in goods and trade in services are being supported by a range of mechanisms, e.g. by providing tailor made technical consultancy expertise, by organising trainings, seminars and workshops or by selectively rendering financial support.
In addition, GIZ is cooperating with a number of institutional partners on specific AfCFTA related topics. The cooperation with ITC’s SheTrades Initiative aims to embed a gender sensitive approach into the negotiating process. Joint efforts with the United Nations Economic Comission for Africa (UNECA) and the Trade Law Centre (TRALAC) are aimed at raising awareness and disseminating information. Furthermore, a close cooperation with the RECs East African Community (EAC), Economic Community of West African States (ECOWAS) and the Southern African Development Community (SADC) is envisaged to ensure the continental and the regional levels are linked.
The programme is targeting AfCFTA related topics such as stakeholder involvement, industrialisation, Special Economic Zones, Green Econ¬omy or eCommerce. In a rapidly changing Africa, a trade agreement that reflects current socioeconomic realities is needed to provide a solid foundation for economic integration across the continent.
The African Continental Free Trade Framework agreement has been signed by 52 African Member States and is operationalised with the necessary 22 ratifications after only three years of free trade negotiations. This stands for a huge diplomatic and political success given the short timeline, the ambitious liberalisation goals set and the heterogeneity and large number of 55 Member States negotiating the Free Trade Area. The course is now set to actively change, reform and agree on new framework conditions, regulations and agreements likely to foster and boost Intra-African trade, investment and employment in the intermediate term. Accompanying and seconding policy documents such as the African Union Trade Facilitation Strategy or the AU Services Sector Development Programme have been developed to set continental-wide guiding standards for further rolling out strategies translating them on to regional and national levels in terms of actual implementation.