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Liberalizing Regional Trade Regimes Through AfCFTA: Challenges and Opportunities

Published online by Cambridge University Press:  04 September 2020

Chidebe Matthew Nwankwo Open the ORCID record for Chidebe Matthew Nwankwo [Opens in a new window]  and
Collins Chikodili Ajibo
Chidebe Matthew Nwankwo*
Affiliation:
University of Nigeria
Collins Chikodili Ajibo*
Affiliation:
University of Nigeria
*
matthew.nwankwo@unn.edu.ng
collins.ajibo@unn.edu.ng
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Abstract

The ratification of the African Continental Free Trade Agreement (AfCFTA) marked a landmark event in the quest to achieve intra-African free trade. AfCFTA is poised to represent the largest free trade area outside the World Trade Organization. Although AfCFTA aspires to liberalize intra-African trade in goods and services to foster socio-economic development, there are concerns that capacity constraints may stultify the underlying goals. AfCFTA is expected to build on the considerable successes already achieved by Africa's regional economic communities. However, it fails to clarify how the overlapping regimes will be reconciled and harmonized. Nevertheless, the agreement is laudable for its quest to facilitate intra-African trade, foster regional value chains that can facilitate integration into the global economy, and energize industrialization, competitiveness and innovation. This article examines the celebrated AfCFTA to understand its potential amid local realities and the possible implications for the multilateral trading system.

Keywords

Regional integrationAfrica Continental Free Trade Agreementtrade liberalizationWTO lawmultilateralismAfCFTA
Type
Research Article
Information
Journal of African Law , Volume 64 , Issue 3 , October 2020 , pp. 297 - 318
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Copyright
Copyright © SOAS, University of London, 2020

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Footnotes

*

PhD. Senior lecturer, Faculty of Law, University of Nigeria, Enugu Campus.

**

PhD. Senior lecturer, Faculty of Law, University of Nigeria, Enugu Campus.

References

1 World Trade Statistical Review 2018 (2018, World Trade Organization) at 66–77.

2 See “African Continental Free Trade Area: Questions and answers” (UN Economic Commission for Africa), available at: <https://www.uneca.org/publications/african-continental-free-trade-area-questions-answers> (last accessed 15 July 2020). Recent statistics on regional trade show trade between North American states of 55% and intra-European trade of 70%, while intra-African trade has remained a meagre 18% of trade within the region: V Songwe and M Biteye “The AfCFTA, the catalyst for Africa's growth” (1 November 2018) The New Times, available at: <https://www.newtimes.co.rw/opinions/afcfta-catalyst-africas-growth#.W9vVvKM7hok.twitter> (last accessed 13 July 2020); G Kogi “Debunking free trade in Africa: Ramifications of the African Continental Free Trade Area (Kigali Declaration)”, available at: <https://www.academia.edu/36912332/DEBUNKING_FREE_TRADE_IN_ARICA_RAMIFICATIONS_OF_THE_AFRICAN_CONTINENTAL_FREE_TRADE_AREA_KIGALI_DECLARATION> (last accessed 13 July 2020).

3 The continental free trade area consists of 55 African Union (AU) member states and eight AU-recognized regional economic communities, with varying trade liberalization frameworks plus a tripartite integration initiative for three of those regional communities.

4 Both treaties set out the plan to establish an AEC in six stages, with full integration by 2028. See Key Pillars of Regional Integration in Africa (2018, UN Economic Commission for Africa).

5 “AfCFTA agreement secures minimum threshold of 22 ratifications as Sierra Leone and the Saharawi Republic deposit instruments” (AU press release, 29 April 2019), available at: <https://au.int/en/pressreleases/20190429/afcfta-agreement-secures-minimum-threshold-22-ratification-sierra-leone-and> (last accessed 13 July 2020).

6 There are eight recognized RECs within the AU: the Arab Maghreb Union, Common Market for Eastern and Southern Africa, Community of Sahel-Saharan States, East African Community, Economic Community of Central African States, Economic Community of West African States, Intergovernmental Authority on Development and South African Development Community.

7 Assessing Regional Integration in Africa VIII (2017, UN Economic Commission for Africa) at 11.

8 Among other goals, Agenda 2063 seeks: an integrated continent, politically united and based on the ideals of Pan-Africanism and the vision of Africa's renaissance; an Africa with good governance, democracy, respect for human rights, justice and the rule of law; a peaceful and secure Africa; an Africa with strong cultural identity, common heritage, values and ethics; an Africa where development is people driven, unleashing the potential of its women and youth; and Africa as a strong, united and influential global player and partner.

9 G Erasmus “The AfCFTA: Overview and implications” (4 July 2018), available at: <https://www.tralac.org/publications/article/13221-the-afcfta-overview-and-implications.html> (last accessed 13 July 2020).

10 See J Baghwati “US trade policy: The infatuation with FTAs” in J Bhagwati and A Krueger The Dangerous Drift to Preferential Trade Agreements (1995, AEI Press) 1; Leal-Arcas, R “Proliferation of regional trade agreements: Complementing or supplanting multilateralism” (2011) 11 Chicago Journal of International Law 597Google Scholar; P Lamy “Is trade multilateralism being threatened by regionalism” in S Baru and S Dogra (eds) Power Shifts and New Blocs in the Global Trading System (2015, International Institute for Strategic Studies) 61.

11 M Mashayekhi, L Puri and T Ito “Multilateralism and regionalism: The new interface” in M Mashayeki and T Ito (eds) Multilateralism and Regionalism: The New Interface (2005, UN Conference on Trade and Development) 1.

12 Ibid.

13 (1994) 1867 UNTS 190.

14 (1994) 1869 UNTS 183.

15 The text of the Enabling Clause is available at: <https://www.wto.org/english/docs_e/legal_e/enabling1979_e.htm> (last accessed 13 July 2020).

16 GATT, art XXIV, para 8.

17 Id, para 5(a).

18 Id, para 5(a) and (b).

19 Enabling Clause, para 2(c).

20 GATS, art V.

21 Under the Enabling Clause, states can exchange systems of both vertical and horizontal preferences. Developed countries can provide generalized non-reciprocal preferences to all developing countries or to all least-developed countries. This is known as the vertical system of preferences. On the other hand, developing countries can also freely provide each other with preferential market access. This forms the horizontal system of preferences. See HM Otieno “Existing in the eternal twilight zone of WTO consistency: The case of the African Continental Free Trade Agreement” (25 January 2019) Afronomics Law, available at: <http://www.afronomicslaw.org/2019/01/25/existing-in-the-eternal-twilight-zone-of-wto-consistency-the-case-of-the-africa-continental-free-trade-agreement/> (last accessed 13 July 2020).

22 Bhagwati coined this term in his work “US trade policy”, above at note 10.

23 See WTO “Regional trade agreements: Facts and figures”, available at: <https://www.wto.org/english/tratop_e/region_e/region_e.htm#facts> (last accessed 13 July 2020).

24 An example is the agreement between European Union and African, Caribbean and Pacific countries in 2000 to negotiate economic partnership agreements pursuant to art 36(1) of the Cotonou Agreement (below at note 26), with a view to designing trading arrangements that would be compatible with WTO rules by progressively removing “barriers to trade between them and enhancing cooperation in all areas relevant to trade”.

25 See Baghwati “US trade policy”, above at note 10 at 6.

26 The Cotonou Agreement is a treaty signed in June 2000 in Cotonou between the then 15 EU member states and 78 ACP countries. The treaty was further revised on 25 June 2005 and 22 June 2010. In its preamble, the treaty affirms the commitment of state parties “to work together towards the achievement of the objectives of poverty eradication, sustainable development and the gradual integration of the ACP countries into the world economy”.

27 It is noteworthy that sustainable development only started to feature prominently in WTO law after the US Shrimp case (below at note 92). The relationship between WTO law and sustainable development is currently unclear, although WTO member states are using innovative means to integrate trade and sustainable development. See Gehring, MW “WTO law and sustainable development” in Armstrong, D (ed) Routledge Handbook of International Law (2009, Routledge) 375Google Scholar.

28 Cotonou Agreement, art 1.

29 The Cotonou Agreement also has the following objectives: “support shall be given to the respect of the rights of the individual and meeting basic needs, the promotion of social development and the conditions for an equitable distribution of the fruits of growth. Regional and sub-regional integration processes which foster the integration of the ACP countries into the world economy in terms of trade and private investment shall be encouraged and supported. Building the capacity of the actors in development and improving the institutional framework necessary for social cohesion, for the functioning of a democratic society and market economy, and for the emergence of an active and organised civil society shall be integral to the approach. Systematic account shall be taken of the situation of women and gender issues in all areas - political, economic and social. The principles of sustainable management of natural resources and the environment, including climate change, shall be applied and integrated at every level of the partnership.”

30 WTO “Regional trade agreements”, above at note 23.

31 On the effects of trade protectionism in international trade, see Fouda, R “Protectionism and free trade: A country's glory or doom” (2012) 3 International Journal of Trade, Economics and Finance 351Google Scholar.

32 A-K Satchu “Is free trade a silver bullet for African prosperity?” (30 March 2018) TRTWorld, available at: < https://www.trtworld.com/opinion/is-free-trade-a-silver-bullet-for-african-prosperity--16355> (last accessed 13 July 2020).

33 AU “CFTA: Continental free trade area”, available at: <https://au.int/en/ti/cfta/about> (last accessed 13 July 2020).

34 See “African Continental Free Trade”, above at note 2.

35 David, L and Babajide, S “Launch of the continental free trade area: New prospects for African trade?” (2015) 4/6 ICTSD Bridge Africa 8Google Scholar.

36 For an exposé on the effects of Africa's crosscutting RTAs operating as conflicting legal regimes, see generally Gathii, JT African Regional Trade Agreements as Legal Regimes (2013, Cambridge University Press)Google Scholar.

37 This committee considers individual RTAs and is also mandated to hold discussions on the systemic implications of the agreements for the MTS. See “The Committee on Regional Trade Agreements”, available at: <https://www.wto.org/english/tratop_e/region_e/regcom_e.htm> (last accessed 13 July 2020).

38 This committee serves as the focal point for considering and coordinating development work in the WTO.

39 COMESA was notified under the Enabling Clause on 4 May 1995.

40 EAC was notified under ibid and GATS, art V on 9 October 2000 and 1 August 2012 respectively.

41 ECOWAS was notified under the Enabling Clause on 6 July 2005.

42 CEMAC was notified under ibid on 21 July 1999.

43 SACU was notified under GATT, art XXIV on 25 June 2007.

44 SADC was notified under ibid on 2 August 2004.

45 The Arab Maghreb Union, the Intergovernmental Authority on Development and the Tripartite Free Trade Area are yet to be notified. The West African Economic and Monetary Union was notified under the Enabling Clause on 27 October 1999. See WTO “Regional trade agreements: Database information system”, available at: <http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx> (last accessed 13 July 2020).

46 See Trade Law Centre (TRALAC) “African Continental Free Trade Area: Questions and answers”, available at: <https://www.tralac.org/documents/resources/faqs/2377-african-continental-free-trade-area-faqs-june-2018-update/file.html> (last accessed 13 July 2020).

47 See D Luke “Making the case for the African Continental Free Trade Area” (15 January 2019) Afronomics Law, available at: <http://www.afronomicslaw.org/2019/01/12/making-the-case-for-the-african-continental-free-trade-area-2/> (last accessed 13 July 2020).

48 See OD Akinkugbe “Negotiating the AfCFTA in the shadow of international and regional struggle for power: A caution!” (20 January 2019) Afronomics Law, available at: <http://www.afronomicslaw.org/2019/01/19/negotiating-the-afcfta-in-the-shadow-of-international-and-regional-struggle-for-power-a-caution/> (last accessed 13 July 2020).

49 Ibid.

50 See B Girard “What will the US-China trade war mean for Africa? The collateral damage and potential opportunities, as seen from Uganda, Nigeria, and Ethiopia” (25 October 2018) The Diplomat, available at: <https://thediplomat.com/2018/10/what-will-the-us-china-trade-war-mean-for-africa/> (last accessed 13 July 2020).

51 UN Conference on Trade and Development (UNCTAD) African Continental Free Trade Area: Challenges and Opportunities of Tariff Reductions (2018, UN).

52 AfCFTA, art 3.

53 Id, art 5.

54 Protocol on Trade in Goods, art 2 and part III.

55 R Akeyewale “Who are the winners and losers in Africa's Continental Free Trade Area?” (17 October 2018, World Economic Forum), available at: <https://www.weforum.org/agenda/2018/10/africa-continental-free-trade-afcfta-sme-business/> (last accessed 13 July 2020).

56 Ibid.

57 Protocol on Trade in Goods, art 17.

58 Id, art 18.

59 Id, art 19.

60 Id, art 24.

61 Id, part VIII.

62 See Akeyewale “Who are the winners and losers”, above at note 55.

63 Protocol on Trade in Goods, art 6.

64 See “Nigeria: AfCFTA will go on without Nigeria, says Obasanjo” (27 May 2019), available at: <https://allafrica.com/stories/201905280030.html> (last accessed 13 July 2020).

65 WTO “Technical information on rules of origin”, available at: <https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm> (last accessed 13 July 2020).

66 Ibid.

67 Ibid.

68 Ibid.

69 Ibid.

70 WTO Preferential Rules of Origin for Least Developed Countries (ministerial decision, 19 December 2015) WT/MIN(15)/47 - WT/L/917.

71 See Protocol on Trade in Goods, art 13 and AfCFTA, annex 2 on Rules of Origin, art 2.

72 AfCFTA, annex 2.

73 Id, art 6 states that products are not wholly obtained or are considered to have undergone substantial transformation in that state party if they fulfil one of the following criteria: value added; non-originating material content; change in tariff heading; or specific processes. This should be consistent with appendix IV, which requires that the listed goods qualify as originating goods if they satisfy the specific rules set out therein.

74 Id, art 5(b)(l).

75 See N Ekekwe “Our president should sign AfCFTA free trade after strengthening ‘rule of origin’ clause” (23 March 2018), available at: <https://www.tekedia.com/president-should-sign-afcfta-free-trade-after-strengthening-rule-of-origin-clause> (last accessed 13 July 2020).

76 UNCTAD “Unleashing Africa's economic integration potential: The case of trade facilitation-led reforms under the African Continental Free Trade Area (AfCFTA)” (side-event 2, organized by UNCTAD African Regional Office and the Trade Policy Training Centre in Africa, 28 November 2018), available at: <https://unctad.org/en/Pages/MeetingDetails.aspx?meetingid=2011> (last accessed 13 July 2020).

77 See sections on “Market access and competitive pressure” above and “Nigeria's initial rejection of AfCFTA” below.

78 TRALAC “African Continental Free Trade Area”, above at note 46.

79 See CC Ajibo “Regional economic communities as the building blocs of African Continental Free Trade Area Agreement: Challenges and way forward” (4 February 2019) Afronomics Law, available at: <http://www.afronomicslaw.org/2019/02/04/regional-economic-communities-as-the-building-blocs-of-african-continental-free-trade-area-agreement-challenges-and-way-forward/> (last accessed 13 July 2020).

80 See generally UNCTAD The International Classification of Non-Tariff Measures (2015, UN).

81 Id at 1.

82 Id at 3.

83 Ibid.

84 UNCTAD The International Classification, above at note 80 at 2.

85 International Trade Centre - European Commission Navigating Non-Tariff Measures: Insights from a Business Survey in the European Union (2016) at 1, available at: <http://www.intracen.org/uploadedFiles/intracenorg/Content/Publications/Navigating_Non_Tariff_Measures_ITC_EC__final_Low-res(1).pdf> (last accessed 13 July 2020).

86 Ibid.

87 UNCTAD Non-Tariff Measures: Economic Assessment and Policy Options for Development (2018, UN) at 18.

88 C Lumina “Free trade or just trade? The World Trade Organisation [sic], human rights and development (part 1) at 20 (2008) Law, Democracy & Development, available at: <https://www.ajol.info/index.php/ldd/article/view/52892> (last accessed 13 July 2020).

89 See Thomas, C “Should the World Trade Organization incorporate labor and environmental standards?” (2004) 61 Washington & Lee Law Review 347 at 358Google Scholar.

90 Bhagwati, J “Afterword: The question of linkage” (2002) 96 American Journal of International Law 126 at 133–34CrossRefGoogle Scholar (arguing that the WTO Appellate Board should avoid making drastic changes to existing environmental laws).

91 Pauwelyn, J “The role of public international law: How far can we go?” (2001) 95 American Journal of International Law 535 at 566CrossRefGoogle Scholar.

92 WTO Appellate Body, EC – Tariff Preferences WT/DS246/AB/R, adopted 20 April 2004, para 94; WTO Appellate Body Report on United States Import Prohibition of Certain Shrimp and Shrimp Products WT/DS58/AB/R (12 October 1998), para 154; WTO Dispute Panel Report on United States Standards for Reformulated and Conventional Gasoline WT/DS2/R (29 January 1996).

93 L Bartels “Social issues: Labour, environment and human rights”, available at: <http://www.worldtradelaw.net/articles/bartelsfta.pdf.download> (last accessed 13 July 2020).

94 K Suneja “India rejects move to include non-trade issues in WTO” (11 December 2017) Economic Times, available at: <https://economictimes.indiatimes.com/news/economy/foreign-trade/india-rejects-move-to-include-non-trade-issues-in-wto/articleshow/62017009.cms> (last accessed 13 July 2020).

95 “Nigerian manufacturers ask President Buhari to keep off AfCFTA” (21 March 2018) Sahara Reporters, available at: <http://saharareporters.com/2018/03/21/nigerian-manufacturers-ask-president-buhari-keep-afcfta> (last accessed 13 July 2020).

96 See Anderson Tax LP “Nigeria: President signs the agreement establishing the African Free Trade Continental Area” (17 July 2019), available at: <http://www.mondaq.com/Nigeria/x/826642/international+trade+investment/President+Signs+The+Agreement+Establishing+The+African+Continental+Free+Trade+Area> (last accessed 13 July 2020).

97 C Giles “Nigeria rejects West Africa-EU free trade agreement” (6 April 2018) CNN, available at: <https://edition.cnn.com/2018/04/06/africa/nigeria-free-trade-west-africa-eu/index.html> (last accessed 13 July 2020).