The African Continental Free Trade Area A TRALAC GUIDE 11thed. May 2024Background In2012,theAfricanUnion(AU)decidedtoestablishacontinent-wideFreeTrade Area.Thenegotiationstoadopttherequiredinternationalagreementbeganin 2015.AllMembersoftheAUwereinvitedtoparticipateinthesenegotiations. TheAgreementestablishingtheAfricanContinentalFreeTradeAreawas presentedforsignatureatthe10thExtraordinarySummitoftheAUAssemblyon 21March2018inKigali,Rwanda.Aftertherequirednumberofratificationswere depositedwiththedesignateddepositarytheAfCFTAAgreemententeredinto forceon30May2019.Itsgeneralobjectivesaretocreateasinglecontinental marketforgoodsandservices,withfreemovementofbusinesspersonsand investments,toexpandintra-Africatradeacrosstheregionaleconomic communitiesandthecontinent;toenhancecompetitivenessandsupport economictransformation;andtopromoteindustrialdevelopment. TheAfCFTA’sspecificobjectivesaretoeliminatetariffsandnon-tariffbarriersto tradeingoods;liberalisetradeinservices;cooperateoninvestment,intellectual propertyrightsandcompetitionpolicyandonalltrade-relatedareas. TheAfCFTAaFlagshipProjectoftheAU,asmentionedinAgenda2063.Others includetheestablishmentofasingleairtransportmarket(Yamoussoukrou DecisionandtheSingleAirTransportMarketDecision)andachievingfree movementofpersons(ProtocolonFreeMovementofPersons,Rightof ResidenceandRightofEstablishment)andSeveralcomplementarycontinental frameworkscompleteAgenda2063.TheseincludetheComprehensiveAfrican AgriculturalDevelopmentProgramme(CAADP),ProgrammeforInfrastructural DevelopmentinAfrica(PIDA),AfricanMiningVision(AMV),ScienceTechnology InnovationStrategyforAfrica(STISA),BoostingIntraAfricanTrade(BIAT),and theAcceleratedIndustrialDevelopmentforAfrica(AIDA). 1Agenda 2063 BIAT PIDA CAADP AIDA SAATM Decision AfCFTA Agreement Sources:Continental Initiatives and Flagship Projects of Agenda 2063: https://au.int/en/agenda2063/flagship-projects; https://au.int/en/agenda2063/continental-frameworks 2ArchitectureoftheAfCFTA TheAfCFTAAgreementisacomprehensivelegalcompactwhichincludesthe AgreementestablishingtheAfCFTA,ProtocolsonTradeinGoods,Tradein Services,DisputeSettlement,Investment,IntellectualPropertyRightsand CompetitionPolicy.ProtocolsonDigitalTradeandWomenandYouthinTrade havealsobeenadded. Phase1negotiationscoverTradeinGoods,TradeinServicesandDispute Settlement.TheProtocolonTradeinGoodsandtheProtocolonTradein ServiceseachhaveseveralAnnexescoveringsubstantivedisciplines. Negotiationsonanumberofissues(e.g.tariffconcessions,rulesoforiginfor goodsandschedulesofspecificcommitmentsforservices)arestillongoing.The negotiationsoftheProtocolonDisputeSettlementhavebeenconcluded. Phase2negotiationscoverInvestment,CompetitionPolicyandIntellectual PropertyRights.TheseProtocolsarementionedinArticle7oftheAgreement establishingtheAfCFTA. Phase3negotiationscoverDigitalTrade,andWomenandYouthinTrade.These twoProtocolswereaddedsubsequenttotheentryintoforceoftheAfCFTA,asis permissibleintermsofArticle8oftheAgreementestablishingtheAfCFTA, whichprovides:“additionalinstruments,withinthescopeofthisAgreement, deemednecessary,shallbeconcludedinfurtheranceoftheobjectivesofthe AfCFTA,andshall,uponadoption,formanintegralpartofthisAgreement”. ItisnowcommonpracticetorefersimplytoPhase2AfCFTAnegotiations– coveringInvestment,CompetitionPolicy,IPR,DigitalTradeandWomenand YouthinTrade.Forclarity,wedistinguishPhase2andPhase3. 3AgreementestablishingtheAfCFTA • SchedulesofSpecific Commitments • MFN Exemption/s • Air Transport Services • List of Priority Sectors • Framework Document on Regulatory Cooperation Annexes ProtocolonTrade in Services • Working Procedures of the Panel • Expert Review • Code of Conduct for Arbitrators and Panelists Annexes ProtocolonRules and Procedureson the Settlementof Disputes • SchedulesofTariffConcessions • RulesofOrigin • Customs Cooperation and Mutual Administrative Assistance • TradeFacilitation • Non-TariffBarriers • TechnicalBarrierstoTrade • SanitaryandPhytosanitary Measures • Transit • TradeRemedies:Guidelineson implementationof TradeRemedies Annexes ProtocolonTrade in Goods ProtocolonInvestment Annex on Dispute Settlement ProtocolonIPRs Eight Annexes Protocolon Competition Policy Phase 1 Phase 2 Phase 3 ProtocolonWomen and Youth in Trade Protocolon Digital Trade Annexes 4TradeinGoods:TariffNegotiations TheProtocolonTradeinGoodsenteredintoforcewiththeAgreementestablishingtheAfCFTA on30May2019,althoughnegotiationsonsomerulesoforiginandschedulesoftariff concessionsarestillongoing.TheAfCFTAwillseetheprogressiveliberalisationof97%ofintra- Africatariffs,7%ofwhicharecategorisedassensitiveproductsandwillbeliberalisedovera longertimeframethatthe90%oftarifflinesinCategoryA(seebelow).Theremaining3%of tariffsmaybeexcludedfromliberalisationforreasonsrelatingtofoodsecurity,nationalsecurity, fiscalrevenue,livelihood,andindustrialisation. Coverage(%) TarifflinesImportValue 90 7 3 90 10 TransitionPeriod non-LDCsLDCs 5years 10years Noliberalisation 10years 13years Noliberalisation TariffElimination Modalities Category A products Sensitiveproducts Excludedproducts Forty-fiveStatePartieshave(asatFebruary2024)submitted offersoftariffconcessionsthathavebeenverifiedbytheAfCFTA Secretariattobecompliantwiththenegotiatingmodalities. TheseProvisionalSchedulesofTariffConcessionsareavailablein thee-TariffBook(https://etariff.au-afcfta.org/mapsearch)and areappliedtotradeundertheGuidedTradeInitiative.Tariff offersofAngola,SãoToméandPríncipeandZimbabwearebeing reviewedbytheSecretariat.Djibouti,Libya,Mozambique, Somalia,theSaharawiRepublicandSudanarestilltosubmit tariffoffers. 5RulesofOrigin RulesofOrigin(RoO)determinetheeconomicnationalityofaproductandhenceitseligibility forpreferentialtarifftreatmentinafreetradearea.TheAfCFTARoOincludethe‘wholly obtained’ruleforagriculturalandotherprimaryproducts,andproduct-specificruleshavebeen agreedontoencouragelocalvalueadditionandtransformationofinputs. RoOfor92.3%oftarifflineshavebeenagreed;generalRoOandadministrativerulesarealso finalised.BelowisanupdateonspecificRoO.(Seetralac’sRoOGuidesat https://www.tralac.org/resources/by-region/cfta.html#rules-of-origin) 6TradeinServices TheProtocolonTradeinServicesnegotiationsaretakingplaceinsuccessiverounds.Forthe firstroundofnegotiations,whichisongoing,StatePartieshaveagreedtoschedule commitmentsinthefolloeing5prioritysectors: NegotiationsareunderwayforthedevelopmentofRegulatoryFrameworksthatwillunderpin themarketaccess(MA)andnationaltreatment(NT)conditionsguaranteedintheSchedulesof SpecificCommitments.Theseframeworksshouldpromoteregulatorypredictabilitybyguiding theimplementationofnationallaws,regulationsandpolicieswhilerespectingStatesParties’ righttointroducenewregulations.Regulatoryframeworksforfinancialandcommunication servicesarebeingprioritised. TheAssemblyhasadopted22SchedulesofSpecificCommitmentsinthe5priorityservices sectors;financial,transport,communication,businessandtourismservices.Twenty-six additionaloffersinthefiveprioritysectorsarecurrentlybeingnegotiated.FiveEACmember states(Kenya,Rwanda,Tanzania,Burundi,Uganda)havegazettedtheiradoptedSchedulesof SpecificCommitmentsforthe5prioritysectors. AGuidedTradeInitiativeforserviceshasalsobeensuggested. 7PhaseIIandPhaseIIINegotiations TheProtocolsonInvestment,IntellectualPropertyRights(IPRs),andCompetitionPolicyhave beencompletedandadopted.FurthernegotiationsarerequiredforfinalisingtheAnnexesto theInvestmentandIPRProtocols. DisputeresolutionundertheInvestmentProtocol TheProtocolonInvestmentprovidesforadisputeresolutionmechanismthatinvestorswill haveaccessto.Article47oftheProtocolprovidesthatintheeventthataninvestorofaState PartyandtheHostStateareunableresolveadisputeamicably,theymaymakeuseofthe disputeresolutionmechanismprovidedintherelevantAnnex(whichisyettobenegotiated). WhiletheInvestmentProtocolonlyappliestointra-Africainvestment,foreignfirmsthatalready haveanestablishedcommercialpresenceinaStatePartywillbeabletomakeuseofthe Protocol’sdisputesettlementmechanism. TheProtocolsonDigitalTradeandWomenandYouthinTradehavebeenadoptedbytheAU AssemblyinFebruary2024.TheProtocolonDigitalTrade(whichcoverse-commerceand digitally-deliveredtrade)aimstosupporttheProtocolsonTradeinGoodsandTradein Servicesbypromotingthesustainableandinclusivetransformationofdigitaltradeonthe continent. TheProtocolonWomenandYouthinTradeisgearedtowardstowardseliminatinggender- specificbarrierstotradeandunlockingthepotentialofthecontinent’syoungpopulation. 8Next >