Africa: One year of free trade in Africa calls for celebration despite teething problems

Free trade under the auspices of the African Continental Free Trade Area (AfCFTA) officially began in January 2021. A year later, several aspects of the trade pact are successfully implemented as negotiations are underway in other areas. In the first part of this interview with Kingsley Ighobor, the Secretary General of the AfCFTA Secretariat Mr. Wamkele Mene discusses progress, ongoing negotiations and provides an overview of what to expect in 2022. Extracts.

What is your assessment of how far you’ve come since the start of free trade in January 2021, and what are your top three accomplishments?

African heads of state have said that we start trading under the AfCFTA rules on January 1, 2021. And since then we have achieved several important milestones.

First, the number of countries that have ratified the agreement has increased. We now have 39 states parties to the agreement. This makes it the fastest instrument to be ratified within the African Union. It demonstrates the seriousness and commitment of our heads of state for market integration.

Second, we reached around 87.8% agreement on rules of origin, which is a very high consensus threshold. There are almost 8,000 products under the World Customs Organization’s Harmonized System of Rules of Origin and Tariffs, and we have agreements on over 80% of those products.

In the future, for the products for which we have agreements, people will be able to trade with certainty and predictability according to the rules of origin that apply. This is important for industrialization and market certainty and predictability.

Another important step is that we have operationalized the Dispute Settlement Protocol. We are in the process of negotiating the rules for appointing members of the appeal body of the dispute settlement body. This sends a signal that Africa is ready to be bound by the rules of trade law, which will boost intra-African trade and investment.

So we have made progress, but of course a lot remains to be done.

What key challenges have you encountered?

The biggest challenge is that we have 55 countries on the African continent with differences in levels of economic development and differences in levels of industrial capacity. Some countries are industrial capacity ready to export immediately under AfCFTA rules and some countries will need more time.

We also have an annex on trade facilitation, transit, and harmonized customs procedures rules. But when it comes to the ability to enforce harmonized rules, countries are at different levels of preparedness.

We must therefore continue to work to strengthen the capacities of our customs authorities so that they can enforce the rules of origin.

But what do you say to a trader from Accra who wishes to export goods to Côte d’Ivoire and still faces considerable tariff and non-tariff barriers?

In February 2022, we will release what we call the AfCFTA Tariff Book, which will include rules of origin and customs procedures for products. Merchants will be able to identify their specific products in this price catalog, find out which rules of origin apply to each product and the associated prices.

You may wonder why this has not been done earlier. This is because the negotiations were still ongoing. Now that we have concluded agreements on over 87% of the tariff lines, I think we are in a good position to start trading on the basis of what we have agreed to.

I would also say that no trade agreement is ever concluded and implemented at the same time. Typically, trade agreements are negotiated in stages and implemented in stages. And so, this [AfCFTA] will be no different from trade agreements around the world. Trade agreements are very complex, very technical, and involve far-reaching obligations for the countries negotiating them. Countries tend to take a long time to deliberate on the implications and obligations they take. So, I’m not particularly worried. On the contrary, I think we have a lot to celebrate.

When it comes to rules of origin, you don’t have to wait to agree 100 percent on all products.

No, because it may take even longer. The heads of state have been very clear: start trading based on the progress you have made. And we intend to do so with the publication of the AfCFTA tariff book in early 2022.

What about e-commerce and intellectual property rights? How are the negotiations going?

We have started the preliminary process, the technical working groups are meeting, the meetings, the negotiating sessions are continuing. Phase two negotiations focus on competition policy, investment protection and intellectual property rights. Of course, COVID-19 has been a hindrance. We are meeting virtually, to the extent possible, but we have a clear direction to conclude negotiations on phase two, including the required rules for intellectual property rights, by the end of 2022. It is very important as we have seen with the pandemic in digital commerce – we have seen the importance of e-commerce and of having rules that govern commerce on digital platforms.

What impact has the pandemic had on your operations as the Secretariat and on the implementation of AfCFTA at large?

The pandemic has had a very serious impact on the operations of the Secretariat. I was elected at the start of the pandemic and spent the first seven and a half months of my term in lockdown. We couldn’t do much. Some 42 African countries were in full or partial containment. But we kept pushing and we are making progress.

There are two lessons we need to learn: the first lesson is that the pandemic has underscored the importance for Africa to accelerate industrial development, self-sufficiency and the establishment of regional value chains across the continent. . We’re not saying we have to disconnect from global value chains, but we have to accelerate our self-sufficiency, so when there are these border restrictions, when there are export restrictions on antibacterial products, on masks , on the personal protective equipment required to fight a pandemic, that we are self-sufficient.

The second lesson would be to ensure that the rules on intellectual property rights serve Africa’s industrial development and Africa’s public health imperatives; that the AfCFTA legal framework of intellectual property rights supports the ability to produce vaccines without patent infringement and allows Africa to establish its generic drug industry without the constraints presented by intellectual property rights.

What is the status of the Pan-African Payment and Settlement System (PAPSS), a platform that should facilitate free trade?

We will launch PAPSS on January 13, 2022 in Accra, Ghana. We worked with Afreximbank to establish the PAPSS, and we started with a pilot project in six West African countries. Afreximbank provides liquidity for settlements and technology. We provide the legal framework for the platform which will be legally linked and anchored in the AfCFTA.

We are very excited about the potential of this payment system. We have over 42 currencies in Africa. The annual cost of currency convertibility is estimated to be around $ 5 billion. We want to reduce and possibly eliminate this cost because it limits the competitiveness of our SMEs and makes trade expensive and inaccessible to many SMEs and young entrepreneurs.

Are you saying that from January 2022 traders will be able to use this platform?

That’s right. At Afreximbank and the AfCFTA Secretariat, we want to make sure that from January 2022, African countries that intend to switch to the platform will be able to do so. We want to seriously start trading in local currencies.

Recently, the AfCFTA Secretariat and UNDP published The Futures Report 2021, which identifies value chains that African entrepreneurs can take advantage of. Isn’t it too early to explore these value chains, knowing that free trade is not necessarily booming?

I don’t think it’s too early to start looking at these value chains because if you are a trader, exporter or trader it may take a year or two to establish supply chains on new ones. markets.

As you know, we hosted, with Afreximbank, the Intra-African Salon in Durban [South Africa] in November 2021 and one of the goals of the show was to facilitate the process for traders in Africa by establishing supply chain networks and trade connectivity so that with a price list in front of them for a particular market, they already have the right networks to start trading.

So we are very excited to work with UNDP. We have identified around 10 value chains in the report for our young entrepreneurs and women-led SMEs. The successes of the surveys that led to the launch of the report are very encouraging.

The next step is to match young entrepreneurs, SMEs, with investment opportunities in new markets. At the start of 2022, we will be having a summit where we will. We’re going to identify some value chains and say, here is an SME led by a young woman or a young entrepreneur, we want investors to help, invest in the value chain and create export opportunities.