The African Continental Free Trade Area (AfCFTA) and the Sustainable Development Goals (SDGs)

Willemien Viljoen, tralac Researcher, discusses how the AfCFTA can contribute towards the realisation of the United Nations’ post-2015 sustainable development goals

In September 2015, the 17 SDGs of the 2030 Agenda for Sustainable Development were adopted by world leaders. The overarching rationale for the SDGs is to eradicate poverty, protect the planet and end inequality. Included in the 17 SDGs are the eradication of poverty through inclusive economic growth that provides sustainable jobs and promote equality; infrastructure investment, sustainable industrial development and technological progress; and food security and sustainable agriculture.

To achieve the SDGs, 169 specific targets have been set to be reached by 2030. These include investment in rural infrastructure and agricultural extension services; the prevention of restrictions and distortions in agricultural markets and timely access to market information; access to information and communication technology; integrating small-scale industries into value chains and markets; access to affordable essential medicines and vaccines; and access to education, water and sanitation, financial and reliable energy services.

The objectives of the AfCFTA include the creation of a single continental market for goods and services with the free movement of business persons and investment, the expansion of intra-Africa trade and the improvement of the competitiveness of industries and enterprises. To achieve these objectives the AfCFTA is not just focused on liberalisation of trade in goods, but also services liberalisation, trade facilitation, addressing non-tariff barriers to improve access to markets, competition policy, intellectual property rights and possibly e-commerce. If these objectives can be achieved the AfCFTA can make a valuable contribution to African countries’ progress on the SDGs.

The AfCFTA can contribute to the SDGs through:

Improved intra-Africa goods trade

An important aim of the AfCFTA is to facilitate intra-African goods trade by making cross-border trade easier, simpler and less costly. Trade facilitation measures to address non-tariff barriers, like delays at borders, inefficient customs documentation, lack of timely information on health certification and standards and inconsistencies in transit traffic requirements can allow for the easier flow of goods through the region. These trade facilitation measures can only be successful if coupled with investment in infrastructure; both hard infrastructure like upgrading of border posts, roads, rail and Information and Communication Technology (ICT) infrastructure and soft infrastructure such as policy and regulation to support the competitive access to the infrastructure services.

Enlarging the African market by making it easier and more cost effective to trade inter-continentally can attract Foreign Direct Investment (FDI) for national and regional infrastructure projects. Infrastructure investment enhancing regional connectivity, in turn, stimulates market demand for African products which are more easily accessible. With improved access to inputs into the manufacturing process, markets and public infrastructure, producers including small and medium sized enterprises can improve competitiveness and production capacity. If intra-Africa and cross-border trade becomes easier and less costly the AfCFTA creates the opportunity to establish regional value chains and promote industrial development, but also affords benefits for small-scale producers and informal cross-border traders. Increased intra-Africa trade can have numerous knock-on effects which can be linked with the targets for the SDGs, including poverty alleviation, food security and addressing inequality through industrial development and the flow of benefits to small-scale producers and informal cross-border traders due to improved access to inputs, infrastructure, information and markets.

Services liberalisation and the movement of business persons

There is significant focus on access to services in the targets of the SDGs and the AfCFTA can play a significant role to facilitate the flow of services on the continent. Liberalising services trade and synchronising services trade regulations can have an immense impact on the majority of the SDGs. Services trade and the movement of business persons also have a direct link to industrial and infrastructure development. The movement of business persons facilitates the transfer of knowledge and know-how and trade-related services including agriculture extension services and energy, ICT, financial, education, health and professional services are vital for sustainable economic growth but often lacking in African economies. Through improved access to services the AfCFTA can make a cross-cutting contribution to the SDGs. Services trade can have a direct impact on sustainable economic growth, improving the health and education of the working population and youth; access to finance for agriculture, small-scale producers and entrepreneurs; and efficient infrastructure-related services to improve the functioning of the economy.

Competition policy, intellectual property and e-commerce

The second phase of the AfCFTA negotiations addresses key policy issues that can lead to a fair playing field in African economies. Intellectual property governance is important for example for the development of pharmaceutical production capacity and access to medicines on the continent; an important element for the provision of health services. E-commerce and increased connectivity can be of significant benefit to small-scale producers and entrepreneurs to reach markets otherwise unattainable.

The AfCFTA will serve to integrate the markets and economies of 55 countries, all at different stages of development. Progressive liberalisation can give least developed countries the necessary time to build productive capacity and diversity from trade in commodities to ensure long-term sustainable economic growth, employment creation and poverty alleviation.

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Are Trade Remedies important for achieving the AfCFTA Goals?

Gerhard Erasmus, tralac Associate, comments on trade remedies in the African Continental Free Trade Area

Trade remedies (TR) are trade policy tools used by governments to take remedial action against imports which cause injury to domestic industries. TR consist of anti-dumping (AD), countervailing and safeguard measures.

TR do not feature in intra-African trade. Most African Governments do not have the required domestic arrangements to undertake TR investigations. They claim that these investigations are cumbersome, not a priority, or that they lack the technical capacity and resources. The consequence is that domestic industries are not protected in a rules-based manner. However, REC Member States (MS) often take unilateral action in violation of their obligations. Recent practices, for example, in Zimbabwe (imposing surcharges on imported goods in violation of COMESA and SADC trade rules) serve as an example of how regional trade arrangements are then undermined. This becomes worse when combined with the absence of effective inter-State dispute settlement mechanisms. Could this change under the AfCFTA?

The AfCFTA State Parties have agreed to allow anti-dumping, countervailing and safeguard measures. (As provided for in Annex 9 to the AfCFTA Protocol on Trade in Goods and the CFTA Guidelines on the Implementation of Trade Remedies in accordance with the relevant WTO Agreements.) Preferential Safeguards may be imposed on goods traded under the AfCFTA Agreement. The Parties shall cooperate with each other in TR investigations.

What benefits do TR bring? AD measures provide protection against dumped imports. Dumping involves the selling of goods below their “normal value”. When dumping causes or threatens to cause material injury to a domestic industry, AD duties may be imposed. (AD rules regulate anti-dumping measures, not the practice of dumping.) A domestic Investigating Authority must undertake a proper investigation prior to the adoption of anti-dumping measures. This procedure must be transparent and fair. Affected firms must be allowed to request local courts to review AD measures.

The WTO’s Subsidies Agreement disciplines the use of subsidies. A MS may remedy the trade effects of a subsidy through dispute-settlement procedures and seek the withdrawal of the subsidy or the removal of its adverse effects. Alternatively, a MS may unilaterally launch its own investigation and impose an extra duty (“countervailing duty”) on subsidized imports to offset the injury to domestic producers, or affected industries may lodge an application for the initiation of a countervailing investigation.

Safeguard action is “emergency action” and may be taken where a surge of imports causes or threatens to cause serious injury to domestic industries. Safeguard action may involve the restriction of imports of a product temporarily to help the domestic industry to adjust. A prior investigated must be undertaken. Safeguards usually consist of an extra duty, or a quota.

The AfCFTA regime on TR will co-exist with those of the RECs. REC agreements also contain provisions on trade remedies. Exactly how the different trade legal regimes will coexist depends on the application of the relevant TR rules for specific goods traded between the Parties. Overlapping and uncoordinated TR could, if actively applied, become trade barriers. The fact that this has not yet happened is a consequence of the non-application of TR in Africa; not the smooth coordination of different regimes.

The biggest problem regarding the protection of domestic industries against unfair trade practices and import surges is the non-availability of domestic Investigating Authorities. If they are serious about TR, the AfCFTA MS will have to develop national legislative and institutional frameworks on TR. Only a few AfCFTA Members already have the necessary domestic machinery in place. (Only Egypt and south Africa are active TR users.) The CFTA Agreement must be complemented by properly aligned domestic arrangements to implement TR. There should be legal certainty at all levels. Domestic TR institutions can, of course, undertake regional as well as global TR investigations.

The law of the land will also have to be developed and be reformed where necessary. TR measures are reviewable (as part of the due process requirement). National courts will undertake these reviews. Affected private parties will thus be able to apply for the national courts to set aside trade remedy measures imposed in an unlawful manner.

There can also be inter-state disputes about TR measures. (Most of the disputes decided under the dispute settlement system of the WTO are about TR issues.) The frequency of these international disputes is a consequence of the fact that TR measures are not discretionary or arbitrary in nature. They are exceptional measures and they are conditional. The applicable rules must be respected. Questions about compliance with the applicable rules and the procedures are justiciable.

The need in FTAs to counter unfair firm behaviour may, to a considerable degree, also be accommodated via competition rules. Competition law is not specifically regulated by the WTO. This makes it “easier” to design an appropriate AfCFTA Competition Agreement.

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tralac has prepared a series of Trade Data Updates providing a snapshot of South Africa and Africa’s trading relationships with selected African and global trading partners. The aim is to provide an overview of the trade relationship and the major products or sectors being traded. The most recent data analysed for South Africa covers a 10-year period from 2007-2016. Visit the Trade Data Analysis page to find out more and view a selection of tralac Infographics here.

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