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NEWS ADMIN

DATE

28/01/2019

NEWS PROVIDER

Nur Aisha Abd. Wahab

NEWS SOURCE

Asia Times

CATEGORY

HEADLINE

Harsh realities hamper establishment of an African FTA

Asia Times (26/01/2019) - If the African Union (AU) is to be believed, this is the year that the African Continental Free Trade Area (AfCFTA) really starts to take shape. Forty-nine member states have signed up to the deal, and 15 of them have already ratified it – including South Africa, the continent’s second-largest economy.

Only seven more ratifications are required before the agreement, finalized at the AU’s extraordinary summit in Kigali, Rwanda, last year, becomes legally binding. But businesses planning around the deal must be warned: It will only be several years later, once all the outstanding issues have been negotiated, that tariffs and trade barriers may actually drop. And that is in the best-case scenario.

The numbers surrounding the proposed continental free-trade area are staggering. Once in effect, it will be the largest trade deal since the establishment of the World Trade Organization, encompassing 55 countries, 1.2 billion people and a combined gross domestic product of US$2.5 trillion. The AU’s figures suggest that it could boost intra-African trade by a stunning 52%. According to Paul Kagame, president of Rwanda and the current AU chairman, the deal would rank “among the most historic achievements of the African Union.”

The AU’s trade commissioner, Albert Muchenga, has expressed his confidence that the necessary ratifications will be obtained before the next AU summit, in Addis Ababa on February 10-11.

“We are welcoming the concrete beginning of the journey to create one African market,” Muchenga said last year at the Kigali summit. “We are saying goodbye to the era of small, isolated and fragmented small markets.

“We are clearly signaling that Africa is not for isolationism or nationalism. Our message to ourselves and to the rest of the world is that we pool our independence and sovereignty to create a higher value of inter-dependency anchored on creating one African market.”

But despite all the impressive numbers and the fine rhetoric, there is still a long way to go before the AfCFTA approaches the implementation stage, and major hurdles must be overcome before Africa’s free-trade dream approaches reality.

The most obvious weak point is whether Nigeria intends to participate. President Muhammadu Buhari was planning to sign the deal, but withdrew at the last minute after pressure from trade unions (so last-minute, in fact, that his convoy was already on the way to the airport, en route to the Kigali summit, before suddenly turning back).

Buhari said he needed more time to hold consultations, and has subsequently tweeted: “We will not agree to anything that will undermine local manufacturers and entrepreneurs, or that may lead to #Nigeria becoming a dumping ground for finished goods. #AfCFTA.”

There is unlikely to be any further clarity on Nigeria’s position before the presidential election in mid-February. Buhari’s main opponent, Atiku Abubakar, has indicated that he plans to sign the free-trade deal should he be elected.

If he wins, however, he will also have to do battle with the reluctant trade unions – and there is no guarantee that this is a battle he would win. The absence of the continent’s largest economy and most populous country would doubtless compromise the trade deal’s effectiveness.

The other major obstacle is likely to prove even more contentious. In order to facilitate the signing of the deal, the AU agreed to postpone decisions on particularly divisive areas such as the protocols on competition policy, intellectual-property rights and rules of origin. In other words, the really tough negotiations around the technical details of the deal are still to come.

Tove van Lennep of the Helen Suzman Foundation, a South Africa think-tank, outlines just how much work remains outstanding:

“Ministers of trade must now submit schedules of tariff concessions and specific commitments on trade in services to the Assembly at the 32nd AU summit in Addis Ababa [in February]. These schedules require the liberalization of 90% of products by each state, as well as a list of sensitive products that are to be temporarily exempted.

“For trade in services, scheduling will call for a deep review of the regulatory framework of the identified sectors, in view of preparing, sub-sector by sub-sector, mode by mode, the initial market access offers [that] will then be subject to negotiations.

“The second phase will establish the rules for continental investment, intellectual property and competition policy, the latter critical for restraining monopolies in larger economies. The deadline for this phase is January 2020.”

Given that there are at least 49 countries involved in these upcoming negotiations, that deadline seems ambitious, to say the least.

The AfCFTA is a compelling idea, and one that has captured the imagination of African leaders – as evidenced by their widespread agreement to the concept. But to obtain that agreement, the AU has so far avoided the really difficult conversations around the nitty-gritty of the deal. These conversations have the potential to derail the trade deal, and are almost guaranteed to drag on for far longer than the 12 months that have been allocated.

For now, then, businesses are advised not to bank on the implementation of a continental free-trade area any time soon.

Read more at http://www.atimes.com/harsh-realities-hamper-establishment-of-an-african-fta/