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Building capacity to help Africa trade better
tralac Newsletter • Issue 34 • September 2021

Welcome to the tralac newsletter

 

In the September 2021 tralac Newsletter, we focus on the settlement of disputes involving intra-African trade and economic integration. One of the reasons for doing so is that we want to draw attention to the African Continental Free Trade Area (AfCFTA) Protocol on Dispute Settlement and the role it could play in furthering a new rules-based trade regime.

The dispute settlement system envisaged for the AfCFTA amounts to a compulsory system of disputes settlement between the State Parties and offers them an option between a diplomatic or a legal solution but forcing them to comply with the requirements of the new organs in case of deadlock. This Protocol suggests that a formal dispute settlement mechanism is an essential part of the arrangement which the AfCFTA wants to put in place. It forms part of a comprehensive system and a single undertaking. All AfCFTA State Parties are bound by this Protocol.

Will the State Parties use this mechanism and declare disputes against each other about the interpretation or application of the AfCFTA legal instruments? This has not been the practice up till now. African governments prefer direct talks, the grating of derogations and devices such as variable geometry when it comes to compliance issues. Variable geometry, for example, allows member states to proceed at a different pace when it comes to implementation of trade-related obligations.

Litigation in respect of AfCFTA obligations would amount to an important new development and should cover all the AfCFTA Protocols, Annexes and Appendices for trade in goods and in services. The Protocols negotiated during Phase II of the AfCFTA negotiations (on Competition Policy, Intellectual Property Rights, and Investment) will also fall under this dispute settlement regime. Are things about to change? We take a look at some of the main features of the dispute settlement system established by this Protocol and mention some of the implications.

Why does the AfCFTA have a Dispute Settlement Mechanism? Article 20 of the AfCFTA Agreement (the Founding Agreement) provides for a Dispute Settlement Mechanism as part of the AfCFTA design. Article 4 of the Dispute Settlement Protocol says that the dispute settlement mechanism of the AfCFTA “is a central element in providing security and predictability to the regional trading system. The dispute settlement mechanism shall preserve the rights and obligations of State Parties under the Agreement and clarify the existing provisions of the Agreement in accordance with customary rules of interpretation of public international law.”

Recommendations and rulings by the Dispute Settlement Body must achieve a satisfactory settlement of a dispute in accordance with the rights and obligations of the State Parties (Art 2 AfCFTA Dispute Settlement Protocol). The Dispute Settlement Protocol “aims at ensuring that the dispute settlement process is transparent, accountable, fair, predictable and consistent with the provisions of the Agreement”. The benefits will be legal certainty and predictability, for the State Parties, and eventually for firms, importers, exporters, and consumers too. And it will apply to trade in services too. It means national regulators of service providers will have to respect the obligations in the AfCFTA Protocol on Trade in Services. Substantive rules and procedures will have to be harmonised.

However, private parties cannot access this dispute settlement system. In one of the Blogs, we discuss this aspect and mention what is required in order to expand the benefits of legal certainty and access to judicial review for private parties. It this does not happen (and it depends on national Governments whether they will act and litigate on behalf of firms suffering the consequences of illegal State behaviour) important systemic needs will not be accommodated. Private entities such as importers and exporters, service providers and even consumers will be affected if obligations to liberalise trade in goods and services and not to discriminate are violated, or if domestic industries are unfairly protected. Private rights and interests will not be protected if the State Parties refrain from tackling illegal governmental practices at home and in other member countries. Measured against the status quo it can be observed that much more needs to be done in order to bring about a rules-based continental trade regime.

The relationship with the Regional Economic Communities (RECs) needs to be mentioned. The more deeply integrated RECs have their own dispute settlement systems. Some of them allow private parties to file applications for legal remedies in their own names. These REC regimes will continue. There will, as a consequence, be important jurisdictional issues to be addressed. We discuss these in a Trade Report.

It is too early to predict exactly how the AfCFTA dispute settlement regime will impact on intra-African trade and integration, but the adoption of a dedicated Dispute Settlement Protocol is an important development. It has the potential to advance rules-based governance, certainty, and transparency. We hope this Newsletter sheds additional light on what remains to be done in order to make these outcomes a reality.

 

We look forward to your feedback.

The tralac team.

tralac Trade Report

How will Disputes be resolved under the AfCFTA Dispute Settlement Protocol?
 

One of the first accomplishments of the African Continental Free Trade Area (AfCFTA) negotiations was the adoption of the Protocol on Rules and Procedures on the Settlement of Disputes. It was agreed during Phase I of the AfCFTA negotiations, together with the Protocols on Trade in Goods and on Trade in Services. It has recently been expanded by adding rules of procedure for the AfCFTA Dispute Settlement Body (DSB) and a Decision to formally establish the Appellate Body and to consider an update on State Party nominations to the Indicative List of Panellists.

The Dispute Settlement Protocol is a detailed document that allows for the settlement of disputes among the State Parties about the interpretation or application of any of the AfCFTA’s legal instruments. The general design of this regime replicates that of the World Trade Organisation (WTO) but it also contains some unique elements. This paper discusses the main features of the Dispute Settlement Mechanism of the AfCFTA and some of the implications for trade governance. If this Dispute Settlement Mechanism modifies the traditional intra-African approach to how disputes about trade-related issues are resolved, it could bring about major changes to trade governance on the continent.

tralac Trade Brief


Dispute Settlement as a Trade Policy Choice
 

Trade policy is context specific. It is about choices and objectives pursued by a particular State acting unilaterally (the scope of which is limited in respect of reciprocal trade relations), as well as within the joint structures of regional and multilateral trade arrangements. It involves the pursuit of specific benefits and outcomes for domestic producers, importers and consumers, exporters of goods and services, as well as better opportunities for investors. There will be interactions with national, regional, and multilateral stakeholders and arrangements.

In the African context, policymakers face specific challenges, such as small domestic markets, low levels of industrialisation, and poor infrastructure. Economic integration makes sense for African nations and is an important trade policy objective. However, trade policies and policymakers must be flexible, and economies must be able to adjust to technological and political developments.

Recent Blogs

The AfCFTA Dispute Settlement Mechanism as part of a continental Trade Regime. Article 20 of the African Continental Free Trade Area (AfCFTA) Founding Agreement provides for a Dispute Settlement Mechanism as part of the overall AfCFTA design. When could formal disputes be expected to be heard under the AfCFTA Dispute Settlement Mechanism?

The Institutions of the Dispute Settlement Mechanism of the AfCFTA. The implementation of the Dispute Settlement Mechanism of the AfCFTA is governed the Protocol on Rules and Procedures on the Settlement of Disputes. It provides for the following institutions: The Dispute Settlement Body (DSB), Panels, and the Appellate Body (AB). The AfCFTA Secretariat will play an important role in terms of providing logistical and practical support services, including to AfCFTA State Parties when required.

How will Rulings regarding AfCFTA Disputes be implemented? Disputes declared in terms of the AfCFTA Dispute Settlement Protocol can be settled during the consultation phase, which comes first and is compulsory. The Parties involved in successful consultations will also decide how their settlement will be implemented and only they are bound by the terms of settlement agreed upon by them; it will not create a precedent for others.

Improving the Business and Investment Climate in Africa – Why and How? Developing economies are characterised by high costs of capital and limited sources of investment funds. This acts as one constraint on the potential growth rates of these economies, and so the attractiveness of these economies to foreign investors should be an important consideration of policy makers.

The benefits of trade facilitation measures: the Kazungula bridge project. The Kazungula Bridge, located on Zambezi River where Zimbabwe, Botswana, Zambia and Namibia borders interconnect, was identified as a significant connector on a strategic road network for inter-regional trucks within the southern African region. The Bridge connects the southern African region traffic to the middle parts of Africa. However, the Bridge has many challenges which hinder the movement of traffic.
 

Preparing for the WTO’s 12th Ministerial Conference

 

The WTO is getting ready for the 12th Ministerial Conference

The World Trading System is back on the agenda. Trade ministers from around the world met in Geneva, Switzerland, in July to review the progress in fisheries negotiations in preparation for the 12th trade Ministers Conference (MC12) that will take place in November/December this year. The July preparatory meeting was critical because trade ministers are anxious to deliver outcomes that are more tangible after the disappointing conference held in Argentina in December 2017. The Geneva ministerial meeting will be the first to be held since Dr Ngozi Okonjo-Iweala became the first African and woman to lead the World Trade Organisation (WTO).

WTO fisheries negotiations – A few but tough issues to resolve ahead of November 2021 Ministerial Conference (MC12)

The World Trade Organisation (WTO) held a ministerial meeting on 15 July 2021 to discuss the progress of the fisheries subsidies negotiations. The discussions emphasised that the current negotiating text can be used as a basis for finalising the negotiations ahead of the Ministerial Conference (MC12) in November 2021, committing to set the course of a successful outcome. True to the spirit of the Buenos Aires Ministerial Conference (MC11) in 2017, the ministers adopted a work programme to conclude the negotiations focussing on a fisheries subsidies agreement, which is aimed to deliver on the Sustainable Development Goal 14.6 at the upcoming MC12.
 

Regional Resources

tralac maintains a collection of regional and national trade-related resources including copies of the texts and annexes of regional and bilateral trade agreements, copies of various regional protocols, memoranda of understanding and tariff offers, and copies of national legislation and trade-related policy documents.


VIEW ALL TRALAC REGIONAL AND CONTINENTAL RESOURCES

Please note: Free registration is required to download resources.

AfCFTA Resources

Update on the status of ratification of the AfCFTA Agreement


Start of trading under the AfCFTA Agreement – which aims to boost intra-African trade by providing a comprehensive and mutually beneficial trade agreement among the AU member states, covering trade in goods and services, investment, intellectual property rights, competition policy and e-commerce – began on 1 January 2021.

As at 9 September 2021, 38 countries have both signed and deposited their instruments of ratification with the AUC Chairperson, the designated repository for this purpose.

VIEW MORE AfCFTA RESOURCES

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Latest AGOA news

2021 AGOA Forum

Following the cancellation of the 2020 AGOA Forum as a result of Covid-19, the AGOA Civil Society Organisations (CSO) Network is hosting a 2021 Civil Society AGOA Forum event in Miami alongside its AfriCANDO event on 6-8 October with the theme “US-Africa Trade and Economic Cooperation: The Way Forward”. According to the organisers, “the economic impact of the COIVD 19 pandemic on AGOA eligible countries in the Sub-Saharan region of Africa presents a threat to U.S.-Africa relations and strategic alliances. Progress made over the last two decades using the benefits of AGOA to strengthen US-Africa trade and economic cooperation is at risk…setbacks to global trade and economic activities due to the COVID 19 pandemic, and expansionism in Africa by China and Russia, it is (now) more important than ever to address the way forward”. The Forum discussions will also “include the ongoing negotiations between Kenya and the United States regarding the Free Trade Agreement and the onboarding of the African Continental Free Trade Area (AfCFTA) Secretariat in Accra, Ghana”.

Registration at this event is at the following link.
Related news article: here
Agenda: Download it here
 
The is to be followed by a Ministerial AGOA Forum on 20-21 October in Washington D.C. Both events will be hosted both physically and virtually.
 

Key trade stats for AGOA beneficiaries for the year to end July 2020 / 2021
 

 
2020 to end July
2021 to end July
% Change
Aggregate exports to US: $ 10.46 billion $ 15.82 billion + 51%
- - (Share) of AGOA exports: $ 2.14 billion $ 3.62 billion + 69%
Total US import duties on combined imports from AGOA beneficiaries: $ 23.08 million $ 36.14 million + 56%
 
Top 10 Exporters (AGOA trade only) 2020 YTD July exports to US 2021 YTD July exports to US Change 2020/21
South Africa 935.83m 1,692.91m 80.9%
Nigeria 259.74m 696.18m 168.0%
Kenya 248.48m 275.23m 10.8%
Angola 28.25m 206.54m 631.1%
Ethiopia 140.44m 155.17m 10.5%
Lesotho 124.16m 147.66m 18.9%
Madagascar 122.07m 138.79m 13.7%
Congo-Kinshasa 2.03m 104.38m 5041.9%
Ghana 111m 46.16m -58.4%
Côte d'Ivoire 44.25m 38.39m -13.2%
All AGOA countries $2.15 billion $3,62 billion +69%


US imports entering under AGOA/GSP preference increased by over 69% in the year to end July 2021, compared to the equivalent period in 2020. Of the leading ‘AGOA exporters’, South Africa’s year-on-year AGOA trade grew by 81% (+71% yoy to June), cementing its position as the leading exporter of AGOA-eligible goods.
 
The key driver for this performance is strong export growth in motor vehicles (+130% yoy, $692m) and articles of jewellery (+263% yoy, $250m), the two leading exports from South Africa that utilise AGOA preferences. Ferroalloys, the third largest AGOA product, saw a year-on-year increase of 31% (to $208m). Kenya, the third largest exporter of AGOA, saw an increase in AGOA exports by 11% to $275m while those from Ethiopia increased by 11% to $155m. Both Nigeria (Rank 2) and in particular Angola (Rank 4) have significantly increased their AGOA exports during 2021 due to higher oil exports to the US.

National AGOA Strategies
 

During the first part of 2021 a number of new or updated National AGOA Strategies have been published. These – and previous strategies from other AGOA beneficiaries – are available on AGOA.info in the AGOA Strategies section. The most recent publications involve Namibia’s (new) and Botswana’s (updated) AGOA Strategies, which were facilitated through the support of the USAID TradeHub.
 
Various AGOA-related infographic styled brochures have been updated recently and are available to download from AGOA.info, with others to follow shortly. See for example Namibia, Botswana, Kenya, Nigeria, Ghana, Ethiopia and Lesotho, as well as the textiles and apparel-specific sector document. 

AGOA Business Connector

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
> Register on AGOA.info and list your business or service

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