Welcome to tralac’s penultimate newsletter for 2020.
Our final newsletter will be sent out on 18 December – we’ll reflect on the trade and related developments during this extraordinary year and share with you some of the lessons we have learned at tralac during 2020.
This newsletter focuses on the decision that trade under the AfCFTA regime will begin on 1 January 2021. We ask some practical questions related to the operationalisation of this decision. 1 January will mark an important watershed in Africa’s trade and integration journey, provided the necessary prerequisites are in place.
13th Extra Ordinary Summit of the Assembly of the Africa Union
Heads of State and Government of the African Union (AU) convened, virtually, on 5 December for the 13th Extra Ordinary Session of the Assembly of the Union on the African Continental Free Trade Area (AfCFTA). The Session was chaired by South Africa’s President Cyril Ramaphosa in his capacity as the current AU Chairperson. While the Decision from this Session is not available, a press release provides details of the deliberations and some decisions. The Assembly confirmed that trade under the AfCFTA regime will begin on 1 January 2021. This will not be all trade, since negotiations on tariff concessions and rules of origin are not yet finalised. With this auspicious date a few weeks away, it is important to consider what has to happen before then. We have a selection of Blogs that provide insights into the legal and other practicalities that are required before goods can cross borders under the AfCFTA trade regime. Since not all trade in goods will start on 1 January 2021, an interim arrangement (with a legal basis) is necessary. Unilateral offers of concessions are but the opening gambit in the negotiations. The Assembly noted the principle of reciprocity – initial tariff offers are followed by negotiations which involve reciprocal concessions being exchanged until the necessary compromise is reached. The outcome of this process is the agreed schedules of tariffs that will be contained in Annex 1 to the Protocol on Trade in Goods. It is not clear what the status of this process is.
It is important to keep in mind that the Agreement is already in force for the State Parties – the African Union Member States – that have ratified the Agreement. Here is an update on the tally of ratifications; the list is growing.
Trade in services
For trade in services, it seems that the decision is to complete the complex process of tabling offers, reciprocal negotiations and agreeing the specific commitments for the five priority services sectors, by mid-2021. The complexity of this process should not be under-estimated. Services are regulatory-intensive. Governments reserve the right to regulate; they use domestic regulation to provide the specific incentives that will shape services sector development to achieve broader economic and development objectives. Schedules of sector commitments have to be considered carefully so that trade in services – across all four modes of supply – will contribute to these national development objectives. There is considerable scope for trade in services to contribute to a more competitive business environment and to facilitate trade in goods. Transport, communication and financial services are key to facilitating cross-border trade in goods. Financial and communication services – two of the priority services sectors – are integral to Africa’s digitalisation agenda. They are also foundations for the e-commerce negotiations that will be on the Phase 2 agenda. In short, the 21st century digital economy is services-intensive. This makes the AfCFTA trade in services agenda so important for the continent.
What is necessary for trade in goods to start under the AfCFTA on 1 January 2021?
A comprehensive work agenda across a number of government agencies has to be completed before trade under the AfCFTA can begin. This is an important interim step towards full implementation of the AfCFTA when the negotiations are complete. The detail of what needs to be done is found in the Annexes to the Protocol on Trade in Goods. Here are a few examples of the preparatory work that needs to be done.
Information about the list of products and the applicable tariffs that will be tradable under the AfCFTA regime on 1 January is essential. There will not be a complete, new column of AfCFTA tariffs in the tariff book of any State Party – since negotiations are not complete. Traders need to know which products will be eligible for AfCFTA preferences and for which State Parties. Keep in mind that not all State Parties have yet submitted initial tariff offers. And not all State Parties can be expected to make offers of tariff concessions for all products.
The rules of origin serve as a gate-keeper. Rules of origin negotiations for some sensitive products are still ongoing. For which products have rules of origin been agreed? When will traders be able to apply for the AfCFTA rules of origin certificates and how long will it take to issue the certificates?
Then there are also matters related standards, including sanitary and phyto-sanitary standards for food products, customs cooperation, transit arrangements and more.
All of this information must be available to the private sector – well in advance of the start of trade. An importer or exporter has to have customers/suppliers and orders lined up; they have to comply with all requirements of the new regime, and have to have the documentation to provide compliance along the entire trade value chain. Traders also need the full range of trade facilitation services to export or import – and those transport, logistics, clearance and other service providers equally require all of this information. Information about a new trade regime – even if it is an interim arrangement – is essential. When will this information be in the public domain? Time is of the essence.
We look forward to your feedback.
|
|
|
A tralac short course
Reading and Interpreting International Trade Agreements:
Case study of the African Continental Free Trade Agreement (AfCFTA)
This year, tralac offered a virtual training course aimed at providing a basic understanding of international trade law or agreements terminology and language, using the African Continental Free Trade Agreement as a case study. Due to exceptional demand, tralac has run this short course 6 times in 2020.
The following courses were offered:
-
Intake 1: Module 1: 27-28 August 2020 and Module 2: 3-4 September 2020
-
Intake 2: Module 1: 10 -11 September 2020 and Module 2: 17-18 September 2020
-
Intake 3: Module 2: 5-6 November 2020 and Module 2: 12-13 November 2020
-
Intake 4: Module 1: 3-4 December 2020 and Module 2: 10-11 December 2020
Some feedback from participants:
-
The training was very well coordinated and it addressed issues that are pertinent in this Covid-19 era hence it exceeded what I expected. The analysis of the AfCFTA agreement was exceptionally done.
-
The course engaged with great contemporary examples and really opened up the floor to the participants and their questions and insights. A great amount of prep and forethought was visible in the way the course was structured and the material for analysis was well chosen.
-
A really enjoyable, engaging and insightful course experience. The facilitators were amazing and I felt like we had a particularly enthusiastic group of colleagues who added to the experience by participating at all stages.
Two additional courses were offered; tailored for specific audiences:
-
Course for the SADC Parliamentary Forum (Module 1: 19-20 November 2020 and Module 2: 26-27 November 2020)
-
Course for the Judges of the COMESA Court of Justice (Module 1: 1-2 December 2020 and Module 2: 8-9 December 2020)
|
|
A training course for Botswana: International Trade Law and Policy – an Introduction
This course was developed by tralac specifically for Botswana – for officials from the Department of International Trade in the Ministry of Investment, Trade and Industry (September – October 2020).
MORE INFO
|
|
tralac Certificate Course: Feedback from the class of 2020
tralac’s Certificate Course on International Trade Law and Policy for Africa’s Development took place via e-learning in April-July 2020. The course, consisting of three modules, provided participants with a comprehensive coverage of International Trade Law and Policy in the 21st Century, from an African development perspective.
Here is some of the feedback tralac has received:
-
Despite the distance learning process imposed by prevailing health conditions, [the] Course succeeded to provide a confident understanding of the fundamental aspects as well as operational details about international trade. Besides grounding participants in the basics of trade law and policy, the course went ahead to create a profound sense of commitment to free trade and the justifications of an Intra-African trade agenda.
-
The course was holistic in matters trade. During registration to undertake the course I only thought it was more of trade policies and law, only to learn a lot more like data analysis and using statistics in building and strengthening existing policies.
-
The course drew several learning points for the forthcoming AfCFTA from a variety of pertinent contemporary global issues such as the crisis at WTO Dispute settlement system, and Brexit. This surpassed my expectation, and I have gained beyond anticipation.
FIND OUT MORE
|
|
Recent blogs
What to expect when all the AfCFTA Pieces have come together? The African Continental Free Trade Area (AfCFTA) Agreement may be in force since 30 May 2019, but this project is still work in progress. What can be expected once all the pieces of the puzzle are in place? How long will this take?
The ABC of the AfCFTA – as it stands. Trade under the African Continental Free Trade Area (AfCFTA) is set to begin. It has been decided to start implementing aspects of the AfCFTA on 1 January 2021, though certain matters must still be concluded. Interim arrangements will be in place to allow for trade to begin. A brief overview of the AfCFTA regime is hereby provided.
Preparing for the start of trade under the AfCFTA: Could Medicines be included? The 90% liberalization target set by the AfCFTA is unlikely to be met in time for the 1 January 2021 starting date. The result will be an interim arrangement for a limited number of goods among specific countries. Who will be involved and what is likely to be traded? Would it be possible to include trade in essential medicines to deal with the challenges of COVID-19?
The AfCFTA will grow gradually and via measures taken in different Forums. What must the African Continental Free Trade Area (AfCFTA) actually bring about? How will this happen and when? The AfCFTA will be “ready for business” once he outstanding negotiations about tariff reductions, rules of origin and trade in five priority services areas are completed. This will finally happen in 2021, but the AfCFTA will not usher in sudden changes.
The AfCFTA in a global Context. There are high expectations locally and internationally about the prospects of the African Continental Free Trade Area (AfCFTA). How could the AfCFTA serve as a platform for strategies to advance Africa’s prospects in a global context? How to do so?
How will Africa engage the new US Administration about Trade Issues? It has been announced that the African Union (AU) Ministers of Trade (AMOT) will be requested to engage the new US Administration on “negotiations” for a successor trade arrangement to the African Growth and Opportunity Act (AGOA). In its present format AGOA runs till the end of 2025. One option is that it might be extended again.
South Africa-UK trade: comparing January-October 2019 and 2020. The United Kingdom (UK) is one of South Africa’s key trade partners. This remains so during the Covid-19 pandemic. Through cycles of social distancing measures (lockdowns) in both countries, the UK remains both a main destination and source market for South Africa. This blog compares South Africa-UK trade for the first 10 months of 2020 with that of 2019.
VIEW ALL BLOGS
|
|
Kenya trade ‘chilling’: Are intra-Africa exports hampered by high tariffs?
In 2019, 19 per cent of Kenya's total trade was with other African countries, mostly with countries in the same free trade area (COMESA FTA) or customs union (EAC). Limited exports to African countries outside these trade arrangements might be attributed to high Most Favoured Nation (MFN) or general tariffs in destination markets. Kenya's exports to these African countries might be ‘chilled’ by high tariffs.
A trade chilling exercise reveals products where trade is low due to high tariffs. This identifies products for tariff liberalisation under the African Continental Free Trade Agreement (AfCFTA) negotiations. View the infographic
|
|
|
When one speaks to the private sector operators (freight forwarders in particular) involved in the business of clearing goods for export to African states, their biggest complaints are about non-tariff barriers (NTBs) in the form of border delays, inconsistent clearance procedures and the uncoordinated regulation of cross-border transport.
When private sector stakeholders are encouraged to report instances of encountering NTBs on a public monitoring platform such as tradebarriers.org, there is a built-in assumption that their complaints will be resolved through appropriate remedial action. For that to happen a certain procedure must be in place.
|
|
|
La Zone de Libre-Echange Continentale Africaine: Un guide du tralac
tralac’s guide to the AfCFTA Agreement booklet – how it fits within Africa’s broader development agenda, architecture of the Agreement, what the Agreement covers and institutional arrangements, as well as an overview of intra-African and intra-REC trade – is now available in French.
DOWNLOAD
|
|
|
Trade-related policy responses to COVID-19
tralac is monitoring trade-related policy measures and responses to the COVID-19 pandemic, adopted and implemented by African countries and beyond. Take a look at our resources pages to find out more:
|
|
|
Key trade stats for AGOA beneficiaries to end September 2020
Aggregate exports to US: 2020 YTD to end September:
|
|
$ 13.7 billion
|
(Share) of AGOA exports: 2020 YTD to end September:
|
|
$ 2.86 billion (represents 21% of total exports)
|
| Total US import duties on aggregate imports from AGOA beneficiaries: 2020 YTD to end September |
|
$ 33.7 million (0.25% of value of total US imports from AGOA beneficiaries) |
|
|
|
|
On 6 February 2020, US President Trump announced that the United States intends to initiate trade agreement negotiations with the Republic of Kenya following a meeting at the White House with Kenyan President Uhuru Kenyatta. The announcement came while the US-Kenya Trade and Investment Working Group held its third meeting in Washington (see inaugural meeting, second meeting) - having been established earlier by President Trump and President Kenyatta in 2018 in order to lay the groundwork for a stronger bilateral trade relationship. On 18 March 2020, the Trump Administration, through the USTR, formally notified the US Congress in line with the Bipartisan Congressional Trade Priorities and Accountability Act (Trade Promotion Authority) which, inter alia, subjects “trade agreements to congressional oversight and approval, consultations…”. In May and June respectively, the United States and Kenya published their negotiating principles. More recently, the Kenya private sector consortium also submitted its inputs. The negotiations began on 7 July 2020.
Some background
No Sub-Saharan African country currently has an FTA with the United States. Morocco is the only country on the African continent that has an FTA with the U.S. (since 2006) – under the FTA bilateral trade between the countries grew considerably with the U.S. enjoying a substantial trade in goods surplus.
An FTA between Kenya and the U.S. would be remarkable in many ways.
At this stage, and for the past two decades, the U.S. African Growth and Opportunity Act (AGOA) has meant that no more than 3% of total tariff lines were potentially subject to import duty in the U.S. when produced in and exported by an African eligible beneficiary country, with 60% of goods receiving duty-free status under AGOA (including around 1,500 tariff lines normally available only to poorer countries with LDC status). This favourable, unilateral and non-reciprocal outcome has meant that of the $667m in goods that Kenya’s producers exported to the U.S. in 2019, $518m entered the U.S. duty-free under AGOA (or GSP). Of the remaining $149m, U.S. importers only had to pay $0.5m in import duties. But the AGOA regime is set to expire late in 2025 and there are no guarantees that GSP preferences continue uninterrupted (GSP is subject to periodic Congressional renewal legislation, which in recent times often happened long after the programme has expired, leaving traders vulnerable and uncertain).
This brochure provides a broad overview – and a number of details – of the current market access arrangements that Kenya enjoys under AGOA, and relevant information and context around the planned transition (negotiations) towards a bilateral FTA, including timelines and early milestones to date, the thematic coverage and objectives of the negotiations (as published by the parties), as well as a closer view of the countries’ trade with each other.
> Read more here.
|
|
|
|
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
|
|
Download: 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 relating to Botswana, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Mauritius, Namibia, Nigeria, South Africa and Tanzania.
|
|
|
|
|
