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tralac Newsletter • Issue 10 • March 2019
Welcome to tralac’s March 2019 newsletter. Our Annual Conference was held 21-22 March in Nairobi, Kenya, under the theme ‘Africa’s integration Agenda – From Aspirations to Pragmatic Implementation.’ For a third year, the key focus was the African Continental Free Trade Area (AfCFTA). The AfCFTA has garnered a level of political support for regional integration, that we have not seen for several decades. This is entirely justified because the AfCFTA marks a key milestone in Africa’s integration journey. In addition to the AfCFTA, the Conference agenda also provided an opportunity to appraise particular features of the current crisis in multilateralism.

A very important session at the Conference was the launch of tralac’s Women in Trade Governance Network (WiTG). This is tralac’s response to the significant under-representation of women in trade policy and governance roles. There are now many initiatives to support women entrepreneurs, especially in micro, small and medium enterprises and women traders (including informal cross border traders in Africa), ours is a complementary initiative. This is not only a matter of justice but also of economics – in many African countries less than half the population is male. The establishment of the Wit network is a contribution by tralac to supporting and promoting gender equality and equity to enhance Africa’s development outcomes. This year we are launching a pilot programme to support a group of young women involved in trade policy and governance roles in Africa. More details of the programme and how to become involved are available HERE.

On the theme of ‘practical implementation’ for regional integration, conference participants were provided an update on important progress that is being made with respect to trade facilitation, and also reminded of the challenges that still inhibit business linkages across national boundaries. Whether investors, producers and traders will be able to take advantage of these enhanced market access opportunities, will depend, of course, also on other policy interventions. Industrial policy is very much on Africa’s regional integration agenda, but requires new thinking and new approaches. A lively discussion about horizontal and enabling industrial policies and good governance suggested that the time is right for approaches beyond the sector approaches that are currently the preferred approach.

Access to reliable data is important for policy analysis and decisions; a session focusing on trade, financial flows and governance of foreign direct investment, provided insight into illicit financial flows, Africa’s commodity trade and implications of trade data deficits. This discussion was very relevant for the African Trade Observatory that will be established to curate and make available trade and related data for African countries. The presentations and background notes for all conference session, can be found HERE. tralac will be presenting its first Applied Data Science for Trade short course (27-31 May) using cutting edge technology to acquire, clean, analyse and make predictions using trade data. For more information click here.

The Conference provided an opportunity to examine where we stand in the process to achieving a functional AfCFTA, what the legal and institutional arrangements are to be established, and what remains to be done to have a functional continental free trade area. We provide here a brief summary of some of the legal issues related to the entry into force of the AfCFTA. At the end of this Introduction, we have a brief summary of what signature, approval, ratification and entry into force of the AfCFTA mean.

The final conference session featured ‘poster presentations’ by tralac alumni. Our alumni selected a range of current trade policy and law issues and prepared presentations which they presented in rotation to the participants. Presentations were accessible via QR (quick response) codes. tralac is exploring various tech solutions in its work at the office and in its training courses and conferences. In addition to pushing digital boundaries, we are also reducing our use of paper and other traditional resources.

While in Nairobi for the Annual Conference, tralac also hosted a half-day Workshop for Kenya on current and emerging trade issue, in collaboration with Kenya’s Export Promotion Council (EPC). Kenya’s trade performance was reviewed. Kenya’s trade relationship with the United States under AGOA, the impact of Brexit on trade with the European Union and the United Kingdom, as well as Kenya’s participation in the AfCFTA and Tripartite Free Trade Area negotiations were discussed. Climate change and its impact on trade were also on the agenda. A detailed report, presentations and background material are available HERE.

We would like to thank our Kenyan colleagues for a very warm welcome to Nairobi and excellent collaboration, also all the Conference and Workshop participants for their participation, and our presenters for sharing their expertise and supporting a very active and lively debate on Africa’s trade agenda. Some of the feedback from participants is available HERE.

We look forward to your feedback.

The tralac team
The African Continental Free Trade Area Agreement: a summary

How and when will the AfCFTA enter into force?

What does ratification mean in the context of the AfCFTA Agreement? How many ratifications are required for the Agreement to enter into force? What will enter into force? These questions were discussed at the tralac’s 2019 Annual Conference.

What is entry into force? It refers to when an international agreement/treaty becomes effective or legally binding on the state parties. The state parties are those that have consented to be bound by the treaty. Every treaty includes its own ‘entry into force’ provisions.

The terms for entry into force of the AfCFTA Agreement are set out in Art. 23:

  1. This Agreement and the Protocols on the Trade in Goods, Trade in Services, and Protocol on Rules and Procedures on the Settlement of Disputes shall enter into force thirty (30) days after the deposit of the twenty second (22nd) instrument of ratification.

  2. The Protocols on Investment, Intellectual Property Rights, Competition Policy and any other instrument within the scope of this Agreement deemed necessary, shall enter into force thirty (30) days after the deposit of twenty second (22nd) instrument of ratification.

  3. For any Member States acceding to this Agreement, the Protocols on Trade in Goods, Trade in Services, and the Protocol on Rules and Procedures on the Settlement of Disputes shall enter into force in respect of that State Party on the date of the deposit of its instruments of accession.

  4. For Member States acceding to the Protocols on Investment, Intellectual Property Rights, Competition Policy, and any other Instrument within the scope of this Agreement deemed necessary, shall enter into force on the date of the deposit of its instrument of accession.

  5. The Depositary shall inform all Member States of the entry into force of this Agreement and its Annexes (Emphasis added).

Ratification is a formal act whereby a state expresses its consent to be bound by the treaty. This is normally done by depositing an instrument of ratification with the designated depositary specified in the treaty. Prior to this, national processes, in accordance with the country’s constitutional provisions, have to be concluded. In many (African) countries, the Parliament/Cabinet/National Assembly’s approval is required, following the signature (by the Head of State or a designated Minister) of the treaty. One must read the constitutional provisions of a state to determine whether the requisite domestic processes have been completed.

Art. 23 (1) stipulates that the AfCFTA Agreement will enter into 30 days after the 22nd instrument of ratification has been deposited with the depositary of the AfCFTA (Chairperson of the African Union Commission, according to Art. 24). The instrument of ratification is usually a formal letter signed by the head of state or government, or relevant minister indicating the state’s intention and consent to be bound by the treaty.

As at 2 April 2019, 15 African countries had deposited their instruments of ratification. This means 7 more instruments of ratification are required for the AfCFTA Agreement to enter into force. A further 7 countries have completed their national processes of obtaining Parliamentary approval, most recently by The Gambia.

What will enter into force after the deposit of 22nd instrument of ratification? According to Art. 23 (1), read together with Art. 1 (b),[1] the AfCFTA Agreement and its (3) Protocols on Trade in Goods, Services and Dispute Settlement as well as their respective Annexes and Appendices will enter into force. However, some Annexes of the Protocols on Trade in Goods and Services are yet to be negotiated. It is highly likely that the AfCFTA Agreement enters into force with some Annexes still incomplete. Several legal and technical complications arise should this happen.[2] It is notable that two essential Annexes of the Protocol on Trade in Goods are not yet complete. Member states have yet to start negotiations on tariff concessions and negotiations on Rules of Origin are still under way. Schedules of preferential tariffs and preferential Rules of Origin are essential for a free trade area. Without these the AfCFTA is not functional – even if the requisite number of ratifications has been achieved. For trade in services, the specific sector commitments are still to be negotiated. The conclusion is that even if the AfCFTA enters into force no preferential trade in goods or trade in services can take place under the AfCFTA, until the respective outstanding negotiations are completed. Trade under other trade agreements (such as the regional economic communities, or bilateral agreements) or under the WTO will of course continue.

On entry into force, the AfCFTA will become legally binding only on the state parties (those countries that have deposited their instruments of ratifications with the depositary).

Signature of the AfCFTA, is an important indication of commitment to the AfCFTA process but does not bring any legal obligations. As at 29 March 2019, 52 of member states of the African Union have signed the AfCFTA Agreement. Nigeria, Eritrea and Benin are the only AU member states yet to sign the AfCFTA Agreement.

Accession is a process whereby a state ‘become(s) a party to a treaty already negotiated and signed by other states. It has the same legal effect as ratification. Accession usually occurs after the treaty has entered into force.’[3] This will be the path followed by those countries that have not ratified the AfCFTA prior to its entry into force. The AfCFTA Agreement does not provide detail of the accession process. It may well be that a process similar to the accession process of World Trade Organisation (WTO) will be followed. If so, this could be a lengthy process.

For further information:

tralac will present a short course: ‘Reading and interpreting international agreements – a case study of the AfCFTA’ from 13-15 May 2019. Details will be provided in due course.

For up-to-date information on AfCFTA ratification, see tralac’s AfCFTA Ratification Barometer.
 


[1] Art. 1 (b) defines the Agreement to include the AfCFTA Agreement and its Protocols, Annexes and Appendices.

[2] See tralacBlog, Where does the AfCFTA Process stand and what happens next?

[3] See United Nations, Glossary of terms relating to Treaty actions.

Geek Week: Applied Data Science for Trade

tralac is organising a 5-day introductory data science course in Stellenbosch from 27-31 May 2019. The course will provide participants with the complete picture of how to use cutting edge technology to acquire, clean, combine, aggregate, interrogate, analyse and predict using data. Email info@tralac.org or visit our website to find out more.
tralac Annual Conference 2019

tralac’s 2019 Annual Conference attracted 100 policymakers, traders and other professionals from across the continent. The packed Conference agenda provided a wealth of information and generated informed and engaging discussion among participants.

Discussions over the two days covered, inter alia, issues surrounding the AfCFTA – entry into force and implementation, legal and institutional arrangements, and trade facilitation – as well as new approaches to industrial development and diversification for Africa; global trade governance; and trade, foreign direct investment and illicit financial flows.

Download the following featured presentations:

Visit the tralac website for the full list of presentations available to download.

Download the Conference Report
In a first for tralac, and as a step towards our goal to be a paperless organisation, certain Conference material, including background briefs and poster presentations were not printed, but rather downloaded by participants on their smartphones or tablets by scanning QR codes.

Conference briefs

tralac prepared a number of short briefs ahead of the Conference on key trade-related topics featured on the agenda, including various issues around the AfCFTA, illicit financial flows, and trade in the digital economy. Scan the QR code to access these documents.

Poster presentations

Poster presentations covered investment facilitation, trade data challenges, women in governance and trade, SMEs and the AfCFTA, export potential of the EAC, and trade facilitation in west and central Africa. Scan the QR code to access the posters.

Kenya Trade Workshop

tralac and the Export Promotion Council co-hosted a workshop on 20 March 2019 in Nairobi on current and emerging trade issues for Kenya. The workshop was attended by 85 people representing various Ministries, the Kenyan Manufacturers Association, the Export Promotion Council, the private sector, academia, civil society organisations and the media.

In the first session on the African Growth and Opportunity Act (AGOA), Eckart Naumann, tralac Associate, provided an overview of Kenya’s trade relationship with the United States and the impact of AGOA. This included a review of the direction and structure of Kenya’s international trade, focusing on trade with the United States, and illustrating the extent of market preferences that Kenya enjoys when exporting to the US. Download the brochure on AGOA performance and country profile of Kenya:
Subsequent sessions focused on Brexit matters, trade and climate change, and an update on regional integration in Africa. The following presentations are available to download:

In conclusion, the presenters emphasised the continuing importance of regional economic communities, and while hoping for these new trade areas to be effective, advocating for a sober assessment of the realities and a close look at what has actually been committed.

Intra-Africa trade and tariff analysis
Intra-Africa trade, 2017

Although trade within the continent remains low and has not changed significantly over time, the 2016-2017 period saw an 8% increase in intra-Africa exports, with intra-Africa exports reaching 16% of Africa’s world exports in 2017. Meanwhile, 13% of Africa’s world imports were intra-Africa imports.

In terms of top exporters, 53% of intra-Africa exports in 2017 were products exported from South Africa (34%), Nigeria (7%), Egypt (5%), Ivory Coast (4%) and Morocco (3%). South Africa is also the main destination market (having imported 17% of intra-Africa exports).

Tariffs on intra-Africa trade

Many African countries trade under preferential trading arrangements of their regional economic communities (RECs) which offer tariff presences on intra-REC trade for those countries which are members of their RECs’s Free Trade Agreements (FTAs) or Customs Unions.

Intra-Africa imports from outside the territories of those FTAs or Customs Unions are levied the general applied tariff (those countries not members of the WTO) or the Most Favoured Nation applied tariff of the destination market.

AGOA Business Connector
The AGOA Business Connector is new online facility on AGOA.info, introduced at the Kenya national trade workshop hosted by tralac and the Kenya Export Promotion Council on 20 March 2019 (See a related double-sided Kenya AGOA info-graphic, with newly updated 2018 data).

It aims to help enable trade and business connections between producers, exporters, importers, sourcing agents, trade-related service suppliers including trade finance, logistics and related services, support organisations such as business chambers and exporter associations and others, from sub-Saharan African AGOA beneficiary countries and the United States.

New: AGOA guides and info-graphics
tralac has produced a number of info-graphic type brochures (see section on AGOA.info / Exporter Toolkit) covering a range of AGOA-related topics, including on AGOA’s legal provisions with regard to eligibility and annual/out of cycle reviews, rules of origin, AGOA FAQs, sector-focused brochures (textiles and clothing, agriculture), as well as national AGOA brochures covering Botswana, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Mauritius, Namibia, Nigeria, South Africa and Tanzania.
AGOA trade data full year 2018
Aggregate exports from AGOA beneficiary countries to the US were down by 1.4% for the year, compared to the same period in 2017, from $24.95b to $24.59b. Trade under AGOA/GSP* was down 11.6% to $12b compared to $13.6b in 2017. Among the leading exporters, South Africa, Nigeria, and Angola recorded lower AGOA exports while those from most of the other AGOA exporters (especially Kenya, Ghana, Congo Republic, Lesotho, Cote d’Ivoire, Madagascar, Ethiopia and Gabon) were all up year-on-year.

Within the AGOA duty-free category, product chapters that have seen the largest YOY increase are apparel, fruits and nuts, and iron and steel. The largest decreases were in mineral oils, motor vehicles and aluminium.

Key trade stats for AGOA beneficiaries to end 2018

Aggregate exports to US: 2018: $ 24.59 billion (down 1.4% yoy)

(Share) of AGOA exports: 2018: $ 11.97 billion (down -11.6% yoy)

With respect to the apparel sector, exports claiming AGOA preferences have continued to rise in 2018, and are 18% higher for the full year to December 2018, with Kenya the leading exporter ahead of Lesotho, achieving more than double the AGOA exports in this sector of Mauritius and Madagascar combined.

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