Next steps for AfCFTA, by ECA

The United Nations Economic Commission for Africa (ECA) yesterday released a report titled: ‘Next Steps for the African Continental Free Trade Area (AfCFTA )’. It is an assessment of the regional integration efforts in Africa. Excerpts:

The historic signing of the AfCFTA Agreement on 21 March 2018 marked a momentous milestone for regional integration in Africa. The signing strongly indicated commitment by policy makers and African leaders to regional integration.

Regional integration faces challenges. They include limited energy and infrastructure development, insecurity and conflicts, multiple and overlapping membership of RECs, poor sequencing of the regional integration arrangements and limited financial resources.

Africa’s large infrastructure deficit hinders intra-regional trade. Infrastructure financing can be supported by maximising the use of public–private partnerships, tapping into national resources and using regional and global infrastructure development funds and innovative financing tools.

Regional energy integration through power pools can attract considerable investment in energy. Africa’s governance, peace and security challenges are inextricably linked and are prerequisites to establishing a continental-wide economic space.

Policy recommendations

More economic and physical integration, including through important infrastructure projects, is needed. It will require significant resources, including leveraging public–private partnerships and innovative financing tools.

Cross-border collaboration in energy trade should be strengthened. Mechanisms include regional energy policy frameworks, gas and power pools and integrated regional energy markets.

African States at the level of both RECs and the African Union should strengthen and resource their existing instruments promoting good governance, peace and security. These will create the right environment for the pursuit of regional integration

Monitoring the implementation of regional integration is critical. The development of the African Regional Integration Index by ECA in collaboration with the African Union Commission and the African Development Bank is a powerful tool for monitoring integration.

Monetary integration continues to be actively pursued by five of the eight regional economic communities. These RECs have adopted macroeconomic convergence criteria, but their member countries have had mixed success in meeting these criteria.

Integration in services is important, given its contribution to African GDP growth. In 2017, over 53 per cent of the continent’s GDP came from services.

Gradual progress is being made towards the free movement of people. Steps have included the launching of the Common Electronic Biometric African Passport in July 2016 and the adoption of the AU Protocol on Free Movement of Persons, Right of Residence and Right of Establishment in January 2018—the latter, however, has struggled to gain country ratifications.

A mismatch between available skills and the needs of Africa’s labour markets slows the continent’s economic integration and overall development. Deepening of regional cooperation in education, including through the
African countries must address the crisis of implementation and translate promises at the continental and regional levels into action. These include ratifying and implementing the AfCFTA, the Single African Air Transport Market, peace and security instruments, monetary integration commitments and the AU protocol on the movement of persons.

Remarkable progress has been made in realizing the AfCFTA. Fifty-two of 55 AU member States have now signed the agreement. As of April 2019, 22 have ratified and deposited ratification instruments with the AUC. Negotiators have concluded all four of the phase I protocols to the agreement and 10 of the 12 annexes (Trade in Goods annex 1 on Schedules of Commitments and annex 2 on Rules of Origin are to be concluded by July 2019), marking commendable progress since the launch of negotiations in June 2015.

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Implementing the AfCFTA is about more than trade. It is about dispelling the “crisis of implementation” of AU decisions and initiatives and validating the African Union and its Agenda 2063. It is a litmus test of the commitment of African countries to economic integration.

The AfCFTA aspires towards deepening the integration of the African continent beyond merely a free trade area. It includes as objectives to “create a liberalized market […] through successive rounds of negotiations,” “lay the ground for the establishment of a Continental Customs Union” and “contribute to the movement of capital and natural persons.”

African countries must take care that the AfCFTA not simply add an additional strand in the African spaghetti bowl of preferential trade regimes. Instead, it must provide coherence to the internal and external trade policy landscape in Africa.

The remaining African countries should ratify the AfCFTA without delay and ensure that the continent moves together by greatly exceeding the minimum number of 22 ratifications required for entry into force.

Critical technical components that need to be finalized before the AfCFTA can be operationalized must be urgently concluded. They include schedules of concessions for trade in goods, rules of origin and schedules of specific commitments for trade in services. These must be followed by the phase II negotiations on investment, competition policy and intellectual property rights.

Ratification of the AfCFTA must be followed through by effective implementation. This requires creating the AfCFTA institutions, establishing the mechanisms envisaged in its operative provisions and incorporating AfCFTA obligations into the laws and regulations of each State party. And countries must strategically take advantage of the AfCFTA to achieve economic development and poverty alleviation.

The effectiveness of the AfCFTA committees will require many prompt decisions. Certain perfunctory decisions could be delegated to the Secretariat, other decision-making authority delegated to REC representatives in the absence of State representation or permanent representatives accredited to the Committee of Senior Trade Officials, as is done in the WTO in Geneva.

Implementing of the AfCFTA will be more effective if national ministries responsible for trade create AfCFTA committees. The committees can comprise persons focal for satisfying the commitments and interest of the AfCFTA and can harmonize their country’s approach to implementation. These should ideally be framed within the structure of an AfCFTA national strategy.

Using the AfCFTA to realise the deeper forms of integration in Africa that have been called for by African Heads of State and Government. This requires progressively deepening the liberalisation achieved under the AfCFTA until it is sufficient to subsume the existing REC FTAs into a single, fully liberalised, African trade area.

Unilateral trading schemes of Africa’s partners can reinforce African regional value chains if they are designed appropriately. African countries should accordingly deploy their diplomatic capabilities towards influencing trading partners to promote regionalism as they design their unilateral trading schemes, including generalised systems of preferences.

Taking Full Advantage of the AfCFTA

To take full advantage of the AfCFTA, countries must buttress its implementation with complementary measures in investment, production, trade facilitation, trade-related infrastructure and import defence.

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Investment in the AfCFTA can be supported through: (1) national investment plans that channel investment flows into sectors that benefit from AfCFTA market liberalisation; (2) investment promotion agencies to attract and facilitate investment, including through “matchmaking” between international and domestic firms, one-stop shop centres for investors, and measures detailed in the UNCTAD Global

Action Menu for Investment Facilitation and (3) partnerships with other African countries to learn from their experiences and with UNCTAD and ECA for support with UNCTAD investment policy reviews and UNCTAD/ECA online investor guides.

A productive capacity development agenda can support a country in producing the goods demanded by the AfCFTA market through: (1) an industrial policy to create a supportive and facilitative overarching enabling environment, (2) sector-specific strategies that take a regional approach to value chains development and (3) the AUC Service Sector Development Programme, which seeks to provide a blueprint for the development of competitive services sectors in Africa.

Trade facilitation measures can support AfCFTA trade opportunities through: (1) an effectively designed AfCFTA non-tariff barrier mechanism, (2) investment in standards infrastructure and strategically harmonising standards in sectors with high AfCFTA potential and (3) introduction of a continental simplified trade regime, to help small and informal traders gain from the AfCFTA.

Trade-related infrastructure for pursuing the opportunities of the AfCFTA can be supported through: (1) effective implementation of the Programme for Infrastructure Development in Africa and (2) strategic logistics management to align trade facilitation with infrastructure development.

Import defence measures can help to manage import competition from the AfCFTA through: (1) pooled resources to establish regional trade remedy institutions at the REC level, (2) competition institutions established or reinforced at the regional or continental levels, (3) ministries of trade focal persons assigned by the ministry of trade to proactively assess likely import implications of the AfCFTA and monitor customs data for changing import patterns and (4) platforms sponsored by the ministry of trade for private sector stakeholders to flag import stress.

National AfCFTA strategies can provide a coherent and strategic approach towards measures to complement the AfCFTA. They and should incorporate gender mainstreaming to ensure that the gains from the AfCFTA support gender equality.

Intellectual Property

As private rights used in the industrial and commercial context, IP rights function as policy tools to promote entrepreneurship, investment, competition and innovation. At the same time, IP regimes are essential in maintaining certain public policy objectives that relate to the dissemination of knowledge and indigenous learning.

The AfCFTA provides an opportunity to advance a continental approach to a balanced IP rights system that responds to the aspirations contained in Agenda 2063.

Membership of the WTO by 44 African Union member States has a significant influence on how the IP rights protocol in the African Continental Free Trade Area can be designed: the WTO TRIPS Agreement does not provide exceptions for regional preferential agreements, which means that, unlike other the protocols in the AfCFTA, the benefits of an IP rights protocol must be extended to all WTO member States. African countries also differ significantly in their use of TRIPS flexibilities.

African countries have different levels of obligations in IP treaties beyond WTO: including participation in multilateral IP treaties and commitments arising from bilateral trade agreements.

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African countries have undergone extensive reforms in IP laws and regulations: nevertheless, the use of IP rights, as demonstrated by patents and trademarks, is very limited in Africa compared to other regions and most patents and trademarks registered in Africa belong to non-residents. Considerable innovation is taking place in Africa, but without receiving protection from IP rights.

Three options may be identified in regional economic integration in IP rights:

(a) arrangements for regional cooperation and sharing of experiences on IP rights in general;

(b) regional filing systems, usually for patents, but also for trademarks and industrial designs; and

(c) development of one substantial law or unification of laws for members of a regional organisation. Different parts of Africa have experience with all three of these models.

Developing one substantive IP regime for 55 African Union member States would be challenging:

(a) it may well prove over-ambitious to negotiate;

(b) it may undermine existing flexibilities that African countries enjoy in their multilateral and bilateral IP commitments; and

(c) it may conflict with obligations that African countries have committed to in international and bilateral agreements.

An African Continental Free Trade Area protocol involving only a cooperative framework for IP rights would fail to take advantage of many opportunities, including developing tools for promoting regional integration, ensuring non-discrimination between countries with different international treaty membership and advancing the objectives of industrial diversification and value chain integration.

A viable IP rights protocol in the African Continental Free Trade Area could do the following:
Provide guiding principles for national IP law and policy, as well as for engagement of African countries in international IP treaties.

b Provide for non-discrimination among nationals of States parties on matters of IP rights.

Develop norms to safeguard African interests, including non-discrimination among African countries on matters pertaining to IP rights.

Establish a regional IP exhaustion system to prevent fragmentation of the AfCFTA market and encourage regional value chain development.

Provide the minimum requirements for the protection of traditional knowledge, genetic resources, and cultural expressions, but with sufficient flexibility for domestic law and multilateral negotiations on these issues.

Require the ratification of the Marrakesh Treaty, with the additional commitment to adhere to any other multilateral agreement that promotes access to work for persons with disabilities.

Require the ratification of the protocol amending the TRIPS Agreement, 2005, in order to benefit from the facilitated production and exportation of pharmaceuticals for a regional trade agreement in which 50 per cent of the members are least developed countries.

Oblige the protection of geographic indications through either a sui generis system or certification and collection marks.

Develop minimum standards on plant variety protection, including on availability, scope of protection, and exceptions to plant breeders’ rights and the protection of traditional and new farmers’ varieties.
Develop guidelines on procedures for the enforcement of IP rights.

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