The Continental Free Trade Area Negotiations: Lessons from the Tripartite FTA

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6 & 7 April 2017: The Table Bay Hotel, V&A

Prudence Sebahizi Chief Technical Advisor

1 The Continental Free Trade Area Negotiations: Lessons from the Tripartite FTA tralac Annual Conference : International Trade Governance quo vadis? 6 & 7 April 2017: The Table Bay Hotel, V&A Waterfront, Cape Town, South Africa Mr. Prudence Sebahizi Chief Technical Advisor on the CFTA and Head of CFTA Unit Department of Trade and Industry

2 tralac Annual Conference: International Trade Governance quo vadis? Why the CFTA? 1. Pan-Africanism and Political Liberation; 2. Economic Ownership (Lagos Plan of Action) - Low intra-african Trade; 3. Towards African Economic Community (Article 6 of the Abuja Treaty); 4. Addressing the Challenges of Overlapping Membership (Rationalization of RECs); 5. Facing the changing global trade architecture (US new Administration, the BREXIT) - Positioning Africa; 6. Harnessing Continental Opportunities - Demographic dividend &Trade and investment opportunities; 7. Africa s integration is vital to the successful implementation of Agenda 2063; 8. The CFTA is critical not only for its potential benefits, but also to mitigate the costs associated with inaction; 9. Africa s Trade Patterns with the World is not Sustainable due to continuous Deterioration of Terms of Trade; 10. CFTA as a tool to foster Structural Transformation.

3 tralac Annual Conference: International Trade Governance quo vadis? One of the most fascinating things about Africa is the remarkable contrasts that formulate the continent. It is the richest continent in the World, but the poorest people in the world are found there Kwame Tapiwa Muzawazi We Must Realise that Progress Lies in Working Together Paul Kagame

4 tralac Annual Conference: International Trade Governance quo vadis? Roadmap for Africa s Integration Agenda The Treaty Establishing the African Economic Community (AEC) (The Abuja Treaty) lays out a detailed time-bound schedule for African economic and political integration through six stages: i : Establish and strengthen African Regional Economic Communities. ii. iii. iv : Eliminate Tariff Barriers (TBs) & Non-Tariff Barriers (NTBs) in RECs : Establish Free Trade Areas (FTAs) & Customs Union (CUs) in RECs : Establish a Continental Level CU & Common External Tariff (CET). v : Establish an African Common Market (CM), including the free movement of factors of production and the right of establishment. vi : Establish a Pan-African economic and monetary union that includes the establishment of an African Central Bank and a single African Currency.

5 tralac Annual Conference: International Trade Governance quo vadis? Roadmap for Negotiations of the CFTA Oct 2016

6 tralac Annual Conference: International Trade Governance quo vadis? The Future of Africa s Integration: Fast tracking the CFTA in Abuja Context

7 tralac Annual Conference: International Trade Governance quo vadis? Update on the Establishment of the CFTA (1) The 18 th Ordinary Session of the AU Assembly held in January 2012 in Addis Ababa, adopted an Action Plan for Boosting Intra-African Trade (BIAT) and agreed on a roadmap for the establishment of a CFTA by The AU Assembly launched the CFTA negotiations at the 25 th Ordinary Summit of Heads of State and Government on 15 June 2015 in Johannesburg, South Africa. The 27 th Ordinary Summit of the AU Heads of State and Government that took place in Kigali, July 2016, reaffirmed its commitment to fast tracking of the CFTA by The 28 th Ordinary Session of the AU Heads of State and Government, held in Addis Ababa, Ethiopia, in January 2017 mandated H.E Mahamadou Issoufou, President of the Republic of Niger to champion the process of the CFTA to ensure that the deadline of the end of 2017 is reached and report on measures taken to the next ordinary session of the Assembly in July 2017.

8 tralac Annual Conference: International Trade Governance quo vadis? Update on the establishment of the CFTA (2) Since the June 2015 launch of the negotiations, much progress has been made to prepare the ground: Analytical Studies to inform negotiations; Capacity Building of Negotiators; Establishment of the CFTA Negotiations Support Unit; Drafting of the CFTA Model Text; Decision to appoint Eminent Persons ( one per region); Study on NTBs Elimination Mechanism. In November December 2016, the AUC organized Africa Trade Week that brought together key stakeholders to discuss the CFTA culminated into the High Level Trade Facilitation Forum. Five meetings of the CFTA Negotiating Forum (CFTA-NF) were held in February, May, October, November 2016 and March 2017 at the AU Headquarters in Addis Ababa, Ethiopia.

9 CFTA Architecture Protocol Establishing the Continental Free Trade Area Annex A: Agreement on Trade in Goods Appendix I: Tariffs Liberalization Schedule of Commitments Appendix II: Rules of Origin Appendix III: Customs Cooperation Appendix IV: Trade Facilitation and Transit Appendix V: Non-Tariff Barriers Appendix VI: Technical Barriers to Trade Appendix VII: Sanitary and Phyto-Sanitary Measures Appendix VIII: Trade Remedies and Safeguards Annex B: Agreement on Trade in Services Annex C: Agreement on Investment Annex D: Rules and Procedures on Dispute Settlement Schedules of Specific Commitments Agreement on Movement of Natural Persons involved in Trade in Services and Investment Regulatory Frameworks Reference to Annex C and Annex D tralac Annual Conference: International Trade Governance quo vadis?

10 Protocol Establishing the CFTA CFTA Protocol Preamble Part I. Definitions Part II. Establishment, Objectives, Principles and Scope Part III. Administration and Organisation (Institutional Framework) Part IV. Transparency (Publication and Notification) Part V. General Provisions (Continental Preferences, CUs and FTAs) Part VI. Dispute Settlement Part VII. Final Provisions (Entry into force, Notification, Amendments) tralac Annual Conference: International Trade Governance quo vadis?

11 Annex A: Agreement on Trade in Goods Agreement on Trade in Goods Preamble Part I. Definitions, Objectives, Scope and Principles Part II. Non-discrimination (MFN and National Treatment) Part III. Liberalisation of Trade (Imports and Export Duties, NTBs and RoO) Part IV. Customs Cooperation, Trade Facilitation and Transit Part V. Trade Remedies and Safeguards (Anti-dumping, Countervailing, Safeguard Measures) Part VI. Product Standards and Regulations (TBT, SPS Measures) Part VII. Agriculture, Fisheries And Food Security Part VIII. Complementary Policies (SEZs, Infant Industries and STEs) Part IX. Exceptions (General and Security Exceptions, BoP) Part X. Institutional Provisions (M&E, Consultation and DS, Oversight Committee) Part XI. Technical Assistance, Capacity Building and Cooperation tralac Annual Conference: International Trade Governance quo vadis?

12 CFTA Agreement on Trade in Goods: Appendices Appendices Appendix I: Tariffs Liberalization Schedules of Commitments Appendix II: Rules of origin Appendix III: Customs Cooperation Appendix IV: Trade Facilitation and Transit Appendix V: Non Tariff Barriers Appendix VI: Technical Barriers to Trade Appendix VII: Sanitary and Phytosanitary Measures Appendix VIII: Trade Remedies and Safeguards tralac Annual Conference: International Trade Governance quo vadis?

13 Annex B: Agreement on Trade in Services Agreement on Trade in Services Preamble Part I: Definitions Part II. Scope of Application Part III. Objectives Part IV. General Obligations and Disciplines Part V. Progressive Liberalization Part VI. Institutional Provisions tralac Annual Conference: International Trade Governance quo vadis?

14 Annex C: Agreement on Investment Agreement on Investment Part I: General Provisions Part II. Objectives Part III. Standards of Treatment of Investors and Investments Part IV. Development Related Issues Part V. Investors Obligations Part VI. Institutional Provisions tralac Annual Conference: International Trade Governance quo vadis?

15 Appendix on Movement of Natural Persons Involved in Services and Investment Movement of Natural Persons General Principles on Movement of Persons Process to Facilitate Entry Scope Definition of Categories of Natural Persons tralac Annual Conference: International Trade Governance quo vadis?

16 Annex D: Rules and Procedures on Dispute Settlement Rules and Procedures on Dispute Settlement Section 1: Objectives (Peaceful Settlement and Recourse to DSM) Section 2: Alternate DS Procedures (Good Offices, Negotiation and Mediation) Section 3: Arbitration Section 4: Judicial Process tralac Annual Conference: International Trade Governance quo vadis?

17 Lessons from the Tripartite FTA: Overview of the TFTA The Tripartite FTA is by far the largest FTA in Africa 26 countries from the Cape of Good Hope to the Mediterranean Sea Trade between and among Tripartite member/partner States has grown from US$62 billion in 2008 to US$98 billion in 2013 Has a combined population of 632 million people and a GDP of US$1.3 trillion It is envisaged that the Continental Free Trade Area launched in June 2015 will build on the successes of the TFTA

18 Lessons from the Tripartite FTA: The TFTA Agreement 45 Articles 10 Accompanying Annexes Covering Tariff Liberalization, NTBs, SPS, TBT, Rules Of Origin, Customs Cooperation, Trade Facilitation, Trade Remedies and Dispute Settlement etc. and Phase II in-built. Annex 1 on Tariff Schedules, Annex 2 on Trade Remedies, Annex 3 on NTBs, Annex 4 on Rules of Origin, Annex 5 on CP, Annex 6 on TF, Annex 7 on Transit, Annex 8 on TBT, Annex 9 on SPS and Annex 10 on Dispute Settlement

Lessons from the Tripartite FTA: Contentious Issues Tariff Offers Low Ambition: Member States agreed to liberalize 60-85 % of tariff lines upon entry into force of the agreement- and negotiate the

19 Lessons from the Tripartite FTA: Contentious Issues Tariff Offers Low Ambition: Member States agreed to liberalize % of tariff lines upon entry into force of the agreement- and negotiate the rest over 5-8 year period; Ambiguity of the principle of building on the acquis; Outstanding work on this Annex (Annex 1 of the TFTA Agreement) Rules of Origin Member States agreed to negotiate product specific rules instead of agreeing on a general rule for processed or manufactured products which led to prolonged negotiations. Trade Remedies One of the Annexes that were developed late in the process; Most countries do not have the legislation and institution for trade remedies- only Egypt, South Africa and Mauritius have these- and they utilize the WTO mechanism

20 Lessons from the Tripartite FTA: Built in Agenda Article 44 Negotiations on Outstanding Issues on Phase I Tripartite Member/Partner States undertake to conclude negotiations on outstanding issues under Phase I as set out in Annex I on Elimination of Customs Duties, Annex II on Trade Remedies and Annex IV on Rules of Origin after the launch of the Tripartite Free Trade Area. Article 45 Phase II Negotiations Recognising the need to conclude Phase II Negotiations, and to provide flexibility in the implementation of the Agreement, the Tripartite Member/Partner States agree to negotiate and endeavour to conclude the following protocols within 24 months upon entry into force of this Agreement: a) A protocol on trade in services; and b) Protocols on trade-related matters, including Competition policy, Cross-Border Investment, Trade and Development, and Intellectual Property Rights. The Tripartite Member/Partner States may conclude protocols in any other trade- related matter agreed to by the Tripartite Member/Partner States.

21 tralac Annual Conference: International Trade Governance quo vadis? CFTA Within AUC Policy Framework (5) AU Agenda 2063 Boosting Intra- African Trade BIAT Continental Free Trade Area CFTA CFTA Enablers: AIDA, PIDA, CAADP, Etc. 1. A prosperous Africa based on inclusive growth and sustainable development 2. An integrated continent, politically united and based on the ideals of Pan Africanism and the vision of Africa s Renaissance Trade Policy Trade Facilitation Trade in Goods Trade in Services Agricultural Transformation Food Security 3. An Africa of good governance, democracy, respect for human rights, justice and the rule of law 4. A peaceful and secure Africa 5. An Africa with a strong cultural identity, common heritage, values and ethics 6. An Africa where development is people-driven, unleashing the potential of its women and youth 7. Africa as a strong, united and influential global player and partner. Productive Capacity Trade Related Infrastructure Trade Finance Trade Information Factor Market Integration Investment Intellectual Property Rights Competition Policy Industrialization and Infrastructure Pillars Energy Transport ICT Water Resources

22 tralac Annual Conference: International Trade Governance quo vadis? Opportunities of the CFTA Some of the opportunities that could come about through the CFTA regional include: Food Security; Encouraging Industrialization, innovation, diversification, Technology Transfer and job creation; Market access; Demographic dividend; Elimination of NTBs; Free movement of people; There is enormous potential with African economies growing in excess of 5% i.e. Cote d Ivoire, Ethiopia, Senegal, Rwanda, Morroco and Kenya, etc.

23 tralac Annual Conference: International Trade Governance quo vadis? Challenges of the CFTA Different speed and priorities and of the different Regional Economic Communities; Overlapping Membership, Most African countries are parties to more than one REC, and convergence between different RECs should be made compatible with the goals and timelines set for the CFTA; Multitude and varied trade commitments undertaken by African countries. Institutional, organizational, and productive Capacities; Sensitive issues such as RoO, Level of ambition, Services Regulations, etc.

24 tralac Annual Conference: International Trade Governance quo vadis? Conclusion. It should be emphasized that besides establishing the Continental Free Trade Area, among the fundamental drivers of trade are development of productive capacity and industrial sophistication because a country cannot trade effectively unless it can produce and add value to its raw material endowments. Trade related infrastructure and services along with other trade facilitation measures such as removal of non-tariff barriers, simplification of customs procedures and documentation, and flawless operations of Africa s transport and transit corridors are also fundamental to Africa s internal trade. Lastly, given the imbalances in the levels of development in African countries, it would be a remise to talk about creating the CFTA without ensuring equitable outcomes for Member States through compensation mechanisms to address adjustment costs to greater trade opening, and help smaller and weaker countries build their production and trade capacities.

25 tralac Annual Conference: International Trade Governance quo vadis? There cannot be a good reason why it is easier for us to trade with Asia, Europe and the Americas, rather than with fellow Africans. Kenya s President Uhuru Kenyatta The CFTA is critical NOT ONLY for its potential benefits, BUT ALSO to mitigate the costs associated with inaction. - UNCTAD

Scope of the CFTA Negotiations, Principles, Objectives and Institutional Framework

Scope of the CFTA Negotiations, Principles, Objectives and Institutional Framework Prudence Sebahizi Lead Technical Advisor on the CFTA 9 March 2016 Accra, Ghana Outline 1. Why the CFTA? 2. Background