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tralac Newsletter • Issue 41 • April 2022
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Welcome to the April 2022 tralac newsletter
Welcome to the tralac newsletter, as we celebrated Africa Day on 25 May 2022.
It seems appropriate that most of the Blogs in this newsletter deal with matters high up on the continental agenda. The most important matter dealt with in this Newsletter is the fact that the AfCFTA is still not implemented. We believe that it is vital to keep the momentum going in respect of this important initiative. We devote a Blog to a discussion of a proposal to start implementing the AfCFTA Protocol on Trade in Goods at the present levels of agreement. We also provide an update, with a case study from Cameroon, on the preparations that are necessary at national level for trade to begin.
We are fully aware of the gravity of such a suggestion. We therefore discuss the pros and cons and the practicalities involved in this idea. We believe the benefits of a demonstration that continental trade under AfCFTA preferences has actually started, outweigh the disadvantages. It will focus the attention of investors, importers, and exporters on tangible outcomes and new opportunities. It will also provide evidence of Africa’s ability to act and speak in a collective voice. The international community has harboured high expectations of this initiative for years now. It is time to deliver and to prevent scepticism about the AfCFTA. The AfCFTA Council of Ministers (COM) is the forum to tackle this very significant challenge.
We note that some of the Regional Economic Communities (RECs) are moving forward and are deepening their integration agendas. The East African Community (EAC) is an example. We write about the fact that the Democratic Republic of Congo (DRC) has recently been accepted as an EAC Member. This will have far-reaching implications in respect of the domestic and regional reforms and initiatives now required. But there could be massive opportunities if the potential of this resource rich country could be unlocked. This development also poses a specific challenge for the international donor community. Will we see efforts to assist the DRC and the EAC, despite the political and governance problems and even security challenges?
Another Blog deals with the changing international context in which the AfCFTA will become operational. Its original agenda was drafted more than a decade ago. The world and the multilateral system have changed quite dramatically since then. Africa should take stock of these developments and their implications and respond with appropriate ideas and action plans. But for that, suitable institutions and cooperation arrangements are required. In respect of some of these matters, we should go beyond traditional cooperation models. They tend to be vague, slow, and deferential to individual state interests.
That is why we have included a Blog about the issue of whether the outstanding AfCFTA Protocols (on competition, intellectual property rights and investment) now being negotiated together with new ones, should provide for cooperation among the State Parties or should aim for harmonisation. We are in favour of bespoke harmonisation arrangements. The reasons have to do with the dangers inherent in overlapping memberships, fragmentation, costs, and waste of effort. The welfare benefits to be had through deeper and wider integration will then not materialise. Private sector stakeholders (especially SMEs) will not be able to benefit from the opportunities offered by new market access arrangements. This applies to trade in services too. Services are regulatory intensive; when the State Parties do not have firm responsibilities to harmonise national regulatory measures and regimes, there will be unnecessary duplication and costs.
We also include several other Blogs that cover developments that are pertinent to Africa’s trade and integration agenda. On 17 May, a Global Alliance of Special Economic Zones was inaugurated. This is important, and we have recently published a paper on Special Economic Zones in Africa, and how these industrial policy interventions are being used to support Africa’s industrialisation and diversification. These initiatives are critical to enhancing Africa’s capacity to trade, also under the AfCFTA. Trade facilitation issues remain important to support not only Africa’s trade performance but also its industrialisation initiatives; review of port developments in the SADC region provide a reminder of how important trade facilitation and improvements in customs and border management, including port management, are to lower the transactions costs of trading and developing cross-border value chains.
Domestic trade governance remains key to support integration and to reap the benefits of trade agreements, and to address basic needs in the domestic economy. We review a recent decision by the Zimbabwe government to suspend import duties and remove import license requirements for basic commodities.
And we revisit a topic about which we have written before; trade governance requires good governance. What does this mean and why are the obvious solutions not implemented on a larger scale? The International Trade Facilitation Agreement has entered into force several years ago, and most African states are parties thereto. We also note some of the success stories and suggest that they contain lessons to be learned elsewhere. Sound leadership remains a priority for Africa’s integration efforts.
We look forward to your feedback.
The tralac Team
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Forthcoming Events and Training
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eTradeHubs: The AfCFTA NTB Monitoring Mechanism
In this webinar, we’ll work through the NTB portal – registering, notification and follow up on non-tariff barriers . By the end of the webinar – all participants will be registered and able to notify any NTB they encounter.
Date: 6 July 2022
Time: 12:00 - 13:00 GMT+2
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Expediting the start of trade under the AfCFTA
The African Continental Free Trade (AfCFTA) Agreement is in force since 30 May 2019. Why is it not yet possible to trade under AfCFTA preferences? The short answer is that the AfCFTA is incomplete. Tariff reductions and rules of origin, as well as conditions for trade in the five priority services sectors, must still be agreed. This has turned out to be a tough and very complicated exercise.
To Cooperate or to Harmonise?
Regional integration makes sense in and for Africa. In a Free Trade Area (FTA), the first level of economic integration, the member states retain policy space over some matters. However, over essential aspects such as tariff liberalisation, standards, and rules of origin they are bound by their obligations. What happens when the FTA in question harbours ambitions about higher levels of integration and forming a modern and comprehensive arrangement? In the AfCFTA, the State Parties are at the point where they have to take final decisions about this question. They must decide whether they will pursue proper integration governance (through harmonisation of rules for specific disciplines) or opt for mere cooperation.
Cameroon: Making the most of the AfCFTA through a national implementation strategy
Cameroon signed the African Continental Free Trade Area (AfCFTA) Agreement on 21 March 2018. On 1 December 2020, Cameroon became the 33rd State Party to deposit its instrument of ratification with the AUC Chairperson. To make the most of the AfCFTA, Cameroon, in partnership with the United Nations Economic Commission for Africa, Sub-regional office for Central Africa (UNECA), developed a national AfCFTA implementation strategy. The strategy clearly demonstrates the country’s awareness of the need to undertake supplementary reforms both at institutional and regulatory level to be able to maximise the benefits offered by the AfCFTA.
The Democratic Republic of Congo joins the East African Community: What does this signify?
On 29th March 2022, Kenyan President Uhuru Kenyatta, the Chair of the Summit of the EAC Heads of States, announced that the Democratic Republic of Congo (DRC) has been admitted as the seventh member of the EAC. The geopolitical, legal, and economic implications of this development are vast and challenging. It could bring massive developmental benefits to a country and region plagued by political instability and military interventions from neighbouring countries; now to become partners of the DRC in the EAC.
Thinking about Trade Governance as Good Governance
During a recent tralac workshop, we included a practical session on remedies for private parties when they encounter customs and border administration problems and when government officials fail to issue certificates required for the importation and exportation of goods. During the subsequent discussion we suggested that advice in the form of “the government should implement agreements”, the courts “should decide these issues”, or that national focal points should be established, will not solve problems that have been around for decades.
Has the Context changed in which new AfCFTA Protocols are to be adopted?
The ideas and decisions to launch the African Continental Free Trade Area (AfCFTA) were developed and adopted about a decade ago. The design seemed, at the time, to encapsulate a sound approach. It would have added an institutional framework for collective action and boosting intra African trade. However, this will not be adequate for dealing with the challenges of the day and to boost intra-African trade and industrialisation. One of the reasons is that AfCFTA is designed to be a member-driven arrangement and a Free Trade Area (FTA). This has important implications for how the AfCFTA will function.
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Audrey Bessette
Special Economic Zones (SEZs) are delimited zones in which industrial development is promoted by incentives and support programmes designed to attract foreign direct investment (FDI) and promote exports. What are the different policies and regulatory regimes that are established in order to make SEZs successful and attract foreign investment? As the zones enjoy a more liberal administration, they create different rules from the national legislation regarding investment conditions, international trade law and labour law. Women represent a high percentage of African SEZs workers, but they are also more vulnerable to the breach of national requirements for labour protection.
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John Stuart
The African Continental Free Trade Area (AfCFTA) is in the process of taking shape. This momentous initiative for Africa holds much promise, not just for the promotion of intra-African trade but more broadly for the integration of financial, labour, and digital markets. The ever-expanding digital economy offers unique opportunities for African integration. Digital marketplaces for e-commerce and digitally-delivered services, which both disrupt existing markets and create entirely new ones, offeri opportunities for digital entrepreneurs in Africa.
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AfCFTA resources from tralac
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This booklet provides a guide on the African Continental Free Trade Area (AfCFTA) and how it fits within Africa’s broader development agenda – the architecture of the AfCFTA Agreement, what the Agreement covers, institutional arrangements, committees and other AfCFTA initiatives.
The booklet provides an overview of intra-African trade (based on up-to-date trade data from 33 African countries as of end-December 2021) and intra-REC trade in goods (agricultural trade, trade in commodities, non-commodity and non-agriculture trade); intra-African tariffs and MFN tariffs on key intra-African imports; trade in services; and trade facilitation performance.
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What is the AfCFTA? The African Continental Free Trade Area (AfCFTA) is, in addition to being a free trade area, a flagship project of the African Union (AU) in terms of Agenda 2063. It offers a member-driven blueprint for attaining inclusive and sustainable development across the continent. It is anchored in an overarching Agreement, Protocols and additional Annexes and appendices. They constitute a single undertaking. The AU Summit adopted the AfCFTA Agreement in March 2018, in Kigali, Rwanda.
What do the AfCFTA legal instruments cover? The AfCFTA Agreement is the founding agreement of the AfCFTA. It establishes the African Continental Free Trade Area and provides for Protocols on Trade in Goods, Trade in Services, Investment, Intellectual Property Rights, and Competition Policy. The AfCFTA negotiations take place in phases. Phase I covers trade in goods and services as well as dispute settlement. Phase II covers intellectual property rights, investment, and competition policy. A Phase III has been added and will cover E-Commerce.
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tralac maintains a collection of regional and national trade-related resources including copies of the texts and annexes of regional and bilateral trade agreements, copies of various regional protocols, memoranda of understanding and tariff offers, and copies of national legislation and trade-related policy documents.
VIEW ALL TRALAC REGIONAL AND CONTINENTAL RESOURCES
Please note: Free registration is required to download resources.
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Key trade stats for AGOA beneficiaries for the year 2021 vs. 2022 YTD
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2020
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2021
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% Change
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2021 YTD to end March*
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2022 YTD to end March*
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| Aggregate exports to US: |
$ 18.4 billion |
$ 27.4 billion |
+ 49 |
$ 5.9 billion |
$ 6.6 billion |
| - - (Share) of AGOA exports: |
$ 4.2 billion |
$ 6.7 billion |
+ 62% |
$ 1.0 billion |
$ 1.6 billion |
| Total US import duties on combined imports from AGOA beneficiaries: |
$ 44 million |
$ 74 million |
+ 69% |
$ 13.5 million |
$ 43.3 million |
* excludes Ethiopia, Mali and Guinea, for comparison purposes
| Top 10 Exporters (AGOA trade only)* |
2020 exports to US ($m) |
2021 exports to US ($m) |
YTD to March 2021 |
YTD to March 2022 |
Change 2020/21 YTD to March |
| South Africa |
1,897.15 |
2,704.15 |
484.09 |
457.68 |
-5.46% |
| Nigeria |
499.02 |
1,376.52 |
146.78 |
434.18 |
195.79% |
| Ghana |
136.18 |
324.4 |
17.54 |
233.02 |
1,171.21% |
| Angola |
144.28 |
300.02 |
69.87 |
139.93 |
100.27% |
| Kenya |
437.09 |
517.29 |
118.96 |
121.77 |
2.36% |
| Madagascar |
198.81 |
279.78 |
56.63 |
85.24 |
50.53% |
| Lesotho |
253.26 |
288.62 |
56.29 |
73.57 |
30.69% |
| Congo-Kinshasa |
2.04 |
216.02 |
0 |
53.06 |
N/A |
| Cote d’Ivoire |
69.37 |
73.89 |
15.18 |
32.58 |
114.59 % |
| Senegal |
45.9 |
56.48 |
13.96 |
19.79 |
41.79% |
| All AGOA countries |
3,907 |
6,228 |
1,021 |
1,643 |
61% |
* Excludes Ethiopia, Mali and Guinea, who lost AGOA beneficiary status at the start of 2022. With these former AGOA beneficiaries included in 2021 data, the year-on-year change in AGOA exports would have been 57% (rather than 61%).
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US imports entering under AGOA/GSP preference were 57% higher in the 3-month period to March 2022, compared with the equivalent 2021 period, noting that 2022 data no longer includes AGOA exports by the three countries that lost AGOA beneficiary status. This increase follows a 62% increase between 2020 and 2021, as international trade started to recover somewhat from the early impacts from Covid-19. However, a strong driver of the much higher value of AGOA exports is the increase in energy sector exports under the scheme.
Of the leading ‘AGOA exporters’ in 2022, South Africa’s year-on-year AGOA trade fell by 5.5%, nevertheless still holding on to the top position in terms of AGOA trade, ahead of Nigeria, which profited from much higher oil exports in particular and tripled its AGOA exports in the year to March. In fact, energy sector exports have seen countries like Ghana, Angola and Nigeria significantly increase their AGOA ranking in 2022. Cote d’Ivoire grew its US-bound exports of chocolate and cocoa paste and is now also in the top-10 group of AGOA exporters, while Senegal has benefited mainly from higher AGOA exports of prepared or preserved fish.
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While AGOA offers beneficiary countries duty-free access to its market in approximately 6,500 tariff lines (the remaining tariff lines are mostly already duty-free on a MFN basis), the program is built on the US Generalized System of Preferences, which removes duties on up to 5,000 tariff lines (depending on the development status of beneficiary countries). The GSP however expired at the end of 2020 and has at this stage not yet been renewed; this has in effect significantly elevated the value of AGOA since dozens of countries around the world currently no longer enjoy US GSP privileges (GSP products are also AGOA eligible). Legislation has meanwhile been drafted that could potentially renew the US GSP. Notwithstanding tariff preferences, AGOA does not do away with quantitative restrictions, for example tariff rate quotas or tariff preference levels (such as those applicable to the apparel sector under AGOA). Exports from AGOA beneficiary countries in tariff lines that are potentially quota-constrained face import duties once the quota has been utilized – sometimes these are a global quota, other times specific to individual countries or country groups. Read more about AGOA quotas and where to look up quota fill rates on AGOA.info here.
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During 2021 a number of new or updated National AGOA Strategies have been published. These – and previous strategies from other AGOA beneficiaries – are available on AGOA.info in the AGOA Strategies section. The most recent publications involve Namibia’s (new) and Botswana’s (updated) AGOA Strategies, which were facilitated through the support of the USAID TradeHub.
Various AGOA-related infographic styled brochures have been updated recently in the AGOA.info Exporter Toolkit, and are available to download from AGOA.info, with more to follow. See for example Namibia, Botswana, Kenya, Nigeria, Ghana, Malawi, Angola, Ethiopia, Mozambique and Lesotho, as well as the textiles and apparel-specific sector document.
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 The AGOA Business Connector is an online facility on AGOA.info 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), both from within sub-Saharan African AGOA beneficiary countries and the United States. Registered users are also able to list their businesses or professional trade-related service on the platform, and to communicate with other listings through a messaging facility
> Download the AGOA Business Connector Brochure at this link
> Register on AGOA.info and list your business or service
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