BIZweek n°216 2 nov 2018
BIZweek n°216 2 nov 2018
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  • Parution : n°216 de 2 nov 2018

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  • Editeur : Capital Publications Ltd

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  • Nombre de pages : 14

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VENDREDI 02 NOVEMBRE 2018 BIZWEEK ÉDITION 216 LA TOUR BINESWAREE BOLAKY, UNCTAD’S ECONOMIC AFFAIRS OFFICER, AFRICA SECTION « Regional integration is likely to create winners and losers » The African Continental Free Trade Area (AfCFTA) and the Tripartite Free Trade Area (TFTA) are ambitious and complex projects. If the benefits are various, so are the challenges and fears of the African countries which are to adhere to them. For Bineswaree Bolaky, Economic Affairs Officer, Africa section (Research and Policy Analysis Branch, Division for Africa, Least Developed Countries and Special Programmes (ALDC)) of the United Nations Conference on Trade and Development (UNCTAD), the two projects are progressing at a far more rapid pace in terms of negotiations than in the past. However, she is of opinion that more effective and timely negotiations at the level of the Regional Economic Communities (RECs) would have facilitated negotiations at the level of the TFTA and the AfCFTA. For African enterprises to benefit from the integration process, she said, they must first build competitiveness with respect to non-African imports to be able to survive and expand on the regional markets » Several months, or even years, after the announcement of an African Continental Free Trade Area (AfCFTA), where are we today in the process of creating this area ? The AfCFTA is the main flagship project of the AU Agenda 2063 « The Africa We want », whose aspiration is to create a « peaceful, integrated and prosperous Africa » within the next 50 years. At the outset, it must be pointed out that the AfCFTA is an ambitious, complex project that involves 55 member countries of the African Union (54 member states and the Saharawi Republic). It is much more than a simple Free Trade Agreement in favor of the free movement of goods (A Free Trade Agreement is a trade bloc where members agree to remove or significantly reduce tariffs and quotas on each other). The AfCFTA goes well beyond trade in goods to encompass negotiations on trade in services, investment facilitation, intellectual property rights and competition policy. There are plans as well to negotiate on e-commerce. Back in June 2015, negotiations were launched by AU Heads of State on the AfCFTA. The first negotiating Forum was held in February and May 2016. Twelve negotiating principles were adopted and these include, among others, for the AfCFTA to be member-driven, for the current RECs (Regional Economic Communities – there are 8 of them) to be the building blocks of the AfCFTA, to allow for the principle of variable geometry. This means that States can join whenever they are ready, to proceed by consensus decision-making and allow flexibility and Special and Differential Treatment. Other principles relate to national treatment, reciprocity and substantial liberalization. On 21 March 2018, in Kigali, Rwanda, at the 10th Extraordinary Summit of the AU Assembly of Heads of State and Government, 44 AU member states signed on to the AfCFTA, 47 onto the Kigali Declaration and 30 onto the Free Movement Protocol by order of interest. 29 countries signed all 3 legal instruments while 13 signed only 2 (Saharawi Republic, Seychelles, Algeria, Lesotho, Swaziland, Benin, Cabo Verde, Libya, Madagascar, Mauritius, Egypt, Ethiopia and Tunisia), 8 signed only 1 (South Africa, Côte d’Ivoire, Morocco, Tanzania, Cameroon, Zambia, Botswana, Namibia) and 5 did not sign anything (Burundi, Eritrea, Guinea Bissau, Nigeria and Sierra Leone). » So, what’s the current stand of Mauritius ? Mauritius signed onto the AfCFTA and the Kigali Declaration but not the Free Movement Protocol. » In what way can the AfCFTA be considered historic ? The signing of the AfCFTA consolidated text was historic as never before had any legal instrument been signed by so many at a single sitting. The AfCFTA consolidated text consists of 3 protocols  : Protocol on Trade in Goods ; Protocol on Services and Rules and Procedures on Settlement of Disputes. Negotiations need to happen over the contents of Protocols, Annexes, Appendices and Guidelines and these can be lengthy and laborious. Phase 1 negotiations have been under way this year and cover tariff reductions, rules of origin and trade in services arrangements. The United Nations Conference on Trade and Development (UNCTAD), the institution I work for, has provided technical assistance to the AU in the drafting stages. The Division for Africa, Least Developed Countries and Special Programmes at UNCTAD has, for instance, provided TA to the 7th Technical Working Group on Rules of Origin. Phase 2 negotiations on Intellectual Property Rights, investment and competition policy should start soon. The AfCFTA Secretariat ought as well to be established. The AfCFTA will enter in force once 22 countries ratify - so far only 7 countries have done so and these are  : Ghana, Kenya, Rwanda, Niger, Chad, eSwatini (former Swaziland), and Guinea. South Africa has announced its intention to ratify before end January 2019. Nigeria has initially been reluctant to sign owing to concerns expressed by the private sector, namely the Manufacturing Association of Nigeria (MAN) that fears that the deal may undermine local industry in Nigeria. But on 11 July the President of Nigeria, Muhammadu Buhari, indicated that his country will sign. » The Tripartite Free Trade Area (TFTA) is also part of the recent development of the African continent. Several countries have signed, and so far there have been only four ratifications. Do you still think there is a lack of political will to move things forward at this stage ? The Tripartite FTA, involving the 26 members of COMESA, SADC and the EAC, was launched in June 2015 in Egypt. Negotiations of the legal texts underpinning the TFTA were concluded in May 2017. 22 of the 27 member states have so far signed the agreement (exceptions are Lesotho, Ethiopia, Eritrea, South Sudan and Mozambique) but only 3 in fact have ratified, Egypt, Kenya and Uganda. South Africa is in the process of ratifying. The TFTA can only enter into force if at least 14 countries have ratified. Negotiations on rules of origin are reported to be at least 60 per cent complete and are 4 Suite en page 5
VENDREDI 02 NOVEMBRE 2018 BIZWEEK ÉDITION 216 expected to be concluded by mid-2019. I think there are different levels of political commitment on one hand, but on the other hand, there are differing levels of development and socio-economic conditions across countries. The political economy context differs across countries. It is important for countries to « get the negotiations right » instead of rushing to finalize negotiations. Not enough attention is being paid to what all these negotiations are imposing on the capacities of the trade-policy making apparatus in member states – we need to bear in mind the capacity constraints of governments in Africa as wellas legitimate concerns over lost tariff revenues. The private sector must be adequately involved and consulted during the whole process. I do not think it is just a matter of political will. I think the pace, sequencing and timing of negotiations matter also and it is important that there is a coherence between the TFTA negotiations, as wellas the AfCFTA negotiations. The coherence issue is even more important regarding what countries are negotiating at a bilateral level with external partners and what they are negotiating within their RECs and across RECs in Africa. Whatever negotiations African countries decide to sign with external partners should take into account the objectives and goals of the AfCFTA and such third-party negotiations must not be treated as an independent exercise and separate from the AfCFTA. There are important strategic interactions among all these negotiations that necessitate careful strategic thinking on the part of African trade policy negotiators. » Why is Africa lagging behind at this level ? Besides signing and ratifying agreements, the key of course is in implementation. What matters most will be for the continent not to lag behind in implementation once the AfCFTA enters into force. Having said that, I think historically the TFTA and AfCFTA have probably been progressing at a far more rapid pace in terms of negotiations than in the past. We need to place the pace of current developments in a proper historical context. Let’s not forget that the Abuja Treaty was signed in 1991, that’s 27 years ago. The Abuja Treaty had called in Phase 3 (from 2005 to 2014) for each Regional Economic Community (REC) to establish a Free Trade Area (FTA), followed by a Customs Union (CU) which is essentially an FTA with a common LA TOUR external tariff (CET). Phase 4 during 2015 and 2016 should have witnessed coordination and harmonization of tariff and non-tariff systems among the various RECs with a view to establishing a Customs Union at the continental level. Article 6 of the Abuja Treaty had called for the establishment of an African Economic Community (AEC) « gradually in six (6) stages of variable duration over a transitional period not exceeding thirty-four (34) years » and the Treaty clearly views the RECs as the building blocks for the establishment of an African Common Market in Stage 5 and the AEC in Stage 6. There has been delay obviously at implementing the provisions of the Abuja Treaty. So far only the Eastern African Community (EAC), the Economic Community of Central African States (ECCAS) and the Economic Community of West African States (ECOWAS) have a Customs Union that has entered into force and is operational. I think lack of progress at the level of the RECs to progress on the linear-based approach to regional integration has hampered and is hampering faster progress on the TFTA and AfCFTA. » Can you please elaborate on this ? More effective and timely negotiations at the level of the RECs would have facilitated negotiations at the level of the TFTA and at the level of the AfCFTA. The « domino cascading » effect planned for in the market-based linear approach to integration enshrined in the Abuja treaty did not occur due to delays and lack of implementation in the earlier stages. In addition, Free trade agreements cannot operate in a vacuum and need to be operationalized and supported by appropriate institutional structures that should include compensatory and dispute settlement mechanisms. At a REC level, these institutional structures have sometimes not seen the day and have hindered the operationalization of FTAs and CUs within the RECs. In its Economic Development in Africa Report 2013 titled « Intra-african trade  : unlocking private sector dynamism », which I co-authored, UNCTAD had advocated for a different approach to integration, one that moves way from a linear-based model of integration to embrace a new model based on developmental regionalism that recognizes the role of institutional structures, regional development strategies and the building of productive capacities in the economic integration process, along with proper dialogue between the State and the private sector. « Regional integration is likely to create winners and losers and appropriate compensatory mechanisms, akin to those that exist in the EU, need to be designed and implemented to ensure a more equitable distribution of gains and benefits among countries. The UNCTAD Economic Development in Africa Report (2013), for instance, recommends the creation of a Regional Integration Fund, financed in part by large resource-rich countries to support the development of productive capacities in low-income countries such that the latter can benefit from the regional integration process by exporting more to their African neighbors » Lack of political stability and political cohesion among members have no doubt undermined some RECs such as the Arab Maghreb Union (AMU). Great political relations make for vibrant trade across countries. But overall insufficient investments in the institutional frameworks of RECs and lack of progressin building productive capacities, implementing regional industrial policies and diversifying economic bases have meant that the benefits of boosting intra-African trade have not become visible to member states in a way that would have helped to build political momentum for the AEC project and fast-track the vision behind the Abuja Treaty. » What are the challenges that Africa faces in creating a viable AfCFTA ? The challenges are unfortunately wide-ranging and have been well documented in countless reports and articles. But first, we need to define what is a viable AfCFTA. The President of Nigeria, Muhammudu Buhari, recently touched on it when he stated that the AfCFTA should result in a free movement of African goods and African services. This is the right message. For the AfCFTA to be viable, it must above all benefit Africans, that is create jobs to feed a fast growing young population and lift people out of poverty on the continent, and be led by Africans for Africans. The AfCFTA is not about removing intra-regional trade barriers to facilitate market penetration and market access for foreign firms and foreign labor. There is what we can call « a scramble for Africa » these days with so many developed and emerging countries taking an interest in the continent and on the look-out for investment opportunities. While such foreign investments are welcome, they need to be harnessed to develop national entrepreneurship and productive capacities in Africa. E-commerce on the African continent, for instance, must be driven by African vendors, and African firms trading with African customers on African-based ecommerce platforms that pay taxes to national governments, rather than be driven by a few large international digital giants for the benefit of foreignowned enterprises that escape taxes in Africa. A viable AfCFTA is one that produces tangible, visible social and economic benefits to Africans and the African private sector such that the regional integration process generates a « buy-in » from local populations to push ahead with integration and eventually create an African Economic Community (AEC). 5 Suite en page 6

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