The Africa Continental Free Trade Area (AfCFTA) Guided Trade Initiative (GTI) is a temporary intervention of the AfCFTA secretariat that rolled out last week on Friday, October 7, 2022, on the fringes of the 10th Council of Ministers meeting held in Ghana. The initiative nudged eight countries that have published their tariff concessions to commence trading.
Kenya Tea Development Authority (KTDA) and Associated Battery Manufacturers (ABM) from Kenya took part by sending a shipment of goods using the AfCFTA protocol. All five regions of Africa were represented during the launch.
A lot has been done so far to finalise AfCFTA’s founding agreement which was signed in Kigali in 2018. The agreement entered into force on May 30, 2019, after 24 countries deposited their instruments of ratification. In July of the same year, the operational phase of the agreement was launched and trading was set to begin in January 2021. The operational phase required the adoption of five key instruments: The rules of origin, the tariff concessions, the online mechanism on monitoring, the pan-African payment and settlement plan and the African trade observatory.
Though signed, the agreement still remains incomplete and therefore cannot be implemented as yet. 87% of the rules of origin have been negotiated and the member countries requested that trading starts with what has been agreed upon, as consensus is sought on the remaining 13%. However, negotiations on the first protocols on trade in goods, trade in services and dispute settlement have been concluded. Phase two negotiations will comprise competition policy, investment protection and intellectual property rights.
The Guided Trade Initiative was conceived because no trade had occurred using the framework despite the go ahead to start trading that began early last year. But even as the first shipment of Kenyan goods crossed into Ghana last week using the lower tariffs of the protocol, the AfCFTA GTI brought to the fore the question of what is pending to fully operationalise the agreement.
One of the key issues remains the fact that the agreement brings together countries that are at very different levels of development. Africa is home to 33 Least Developed Countries (LDCs) out of the world’s 46. This disparity poses a big problem as LDCs are keen to protect their nascent industries behind tariff barriers. Even the adoption pace of some of the agreements will be determined by the LDCs that are sometimes slower on the uptake. Countries also have different interests and this can have an impact on negotiations.
The AfCFTA is also being used as a framework for Africa’s industrialisation and industrial policy and the import tariff as an instrument of industrial policy. Composed of eight Regional Economic Communities (RECs) each with their own focus on industrial development, the continental bloc does not intend to do away with the RECs. On the contrary, their role is emphasised. Only four of the eight RECs have Free Trade Agreements (FTAs). However, all countries belong in one way or another to one of the four blocs with FTAs. Trade will be governed by existing REC FTAs and agreements will only be among states without preferential agreements amongst them.
However, provisions for Special Economic Zones (SEZs) have been made and goods produced in these zones will continue to enjoy special concessions.
Another key issue is the ongoing negotiations on the tariffs and rules of origin. Preferential rules of origin are the passport to the preferential rates of duty. Some member countries want more stringent rules and others want less strict rules of origin.
The other question is that of developing value chains. While it is important to develop local value chains, they can hinder progress as they take time. It is important for countries to realise that they still have access to global value chains that can supply raw or intermediate supplies that can set the ball rolling and not hinder progress on the basis of a slower process.
The movement of persons is also a very sensitive issue for most countries.
Negotiating the regulatory framework issues also needs to be fast tracked such as transport regulation is critical as transport is a key trade factor. Most intra-Africa trade goods are transported by road.
The AfCFTA is a flagship project of the African Union that foresees a more integrated continent particularly in terms of trade but given these issues, the GTI was necessary as a way to test the waters and start off trading. The GTI will undergo review every year. Already, Tunisia is poised to join the pilot.