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The African Continental Free Trade Area Agreement: A Step Closer Towards Achieving Integration

The African Continental Free Trade Area Agreement “AfCFTA” is an agreement amongst African Union member states who have signed and ratified the agreement, to create a single liberalized African market. It was approved by the 18th ordinary Session of Assembly of Heads of State and Government, held in Addis Ababa, Ethiopia in January 2012. Zimbabwe signed the AfCFTA in March 2018 and subsequently ratified it on 25th April 2019.

                                

Harmonisation of existing trade rules

The AfCFTA, as one its main objectives, seeks to create a single market for goods. The agreement contains a protocol on Trade in Goods to this effect. Most of the measures included under the protocol focus on eliminating tariffs and other non-tariff barriers on goods originating within the trading bloc.

 

Article 7 of the protocol provides that states should;

 

progressively eliminate import duties or charges having equivalent effect on goods originating from the territory of any other State Party.”

 

Article 5 also provides that goods originating from another member state must be afforded the same treatment as like domestic products of national origin. Harmonising existing rules to this effect will enable all member states to have direct access to each other’s markets.

 

Favourable treatment of members

The protocol also provides that member states of the AfCFTA should afford each other with Most Favoured Nation treatment. This means that if any member state enters into a Preferential Trade Agreement (PTA) with a third party, the third party cannot be granted more favourable terms under the PTA than those extended to member states under the AfCFTA. If a third party is granted more favourable terms, those terms must also be extended to AfCFTA member states on a reciprocal basis. In simpler terms, goods originating within the trading bloc will be offered preferential treatment to those of non-AfCFTA member states.

 

A unified customs union

The AfCFTA also seeks to establish a Continental Customs Union whereby member states will club together and agree to apply the same tariffs to goods manufactured within the trading bloc and to those originating from outside the AfCFTA. A unified customs union approach would ensure that once goods originating from a member state have cleared customs in one country, then they will be capable of being sold in all the other member states without further tariffs and onerous standards being imposed.

 

Technology and the laissez-faire effect

The AfCFTA also aims at adopting the vast growth of technology by aligning technology and the manners of doing business. It establishes the African Trade Observatory (ATO) which aims to create a continent-wide trade information portal to facilitate intra-African trade and to support the roll-out of the AfCFTA. In this case, the ATO will seek to collect trade-related data from member states and provide trade intelligence to both market players and governmental and non-governmental agencies. This has an effect of liberalizing the market. The ATO also seeks to include services such as trade, exchange rate and competitiveness indicators, internal tax data and foreign direct investment data.

 

Protection of Intellectual property rights 

The AfCFTA aims at advancing protection of intellectual property rights associated with such goods and services. The AfCFTA has realised the significance of protection of intellectual property rights as key in advancing African economies.  In this regard, it is crucial to note that in its very nature, intellectual property is territorial, notwithstanding this fact, the AfCFTA seeks to guarantee protection of intellectual property rights in goods and services among member states and across the continent at large. A particular example is Article 4 of the AfCFTA which specifies the specific objectives of the agreement, one being the advancement of protection of intellectual property rights. The AfCFTA also provides dispute resolution mechanisms on intellectual property disputes.

 

Enhancement of competitiveness

The AfCFTA also aims at enhancing competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources (www.au.int). In so doing, the AfCFTA provides mechanisms that regulate competition. For example, Article 4 of the agreement provides for the setting up a competition policy. The aspect of anti-competitive business practices is addressed in Article 12. The AfCFTA further aims at regulating monopolies among member states in a manner that harmonises trade.

 

What is next for the member states?

In conclusion, the AfCFTA presents major opportunities for the African continent to grow. Its success hinges on cooperation by the member states. If its member states can adopt a uniform approach to trade and investment, then the AfCFTA will create a significant free trade area in the world with vast opportunities for both local and international investors.