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Building capacity to help Africa trade better
tralac Newsletter • Issue 33 • August 2021

Welcome to the tralac newsletter

 

Burundi became the 38th State Party to the African Continental Free Agreement on 26 August 2021. Meanwhile the negotiations are continuing for the outstanding phase 1 issues, and meetings of the committees on investment, competition policy and intellectual property rights have begun. This is the start of the phase 2 negotiating process. The inclusion of the phase 2 issues and e-commerce and digital trade, as well as trade and women, youth and small and medium enterprises (SMEs) is important. In a new Trade Report, we examine new generation free trade areas, multilateral trade governance developments, including plurilaterals, with reference to the African Continental Free Trade Agreement (AfCFTA).
 
We reflect here on the status of the outstanding issues in phase 1 negotiations, specifically on the trade in goods negotiations, and are pleased to share a selection of Factsheets on aspects of the AfCFTA and the negotiations process.
 
On 5 December 2020, the Assembly of the African Union at the 13th Extraordinary Session on the AfCFTA took note of the outstanding negotiations on tariff concessions, rules of origin and specific commitments for trade in services, and endorsed the decision of the African Ministers of Trade that all outstanding issues in these areas be finalised by end June 2021, urging all parties to meet this deadline. This has not happened.
 
Tariff and rules of origin negotiations are closely linked – compliance with the applicable rules of origin permits market access under preferential rates of duty in a free trade area (FTA). These negotiations reflect important policy concerns, including fiscal and industrial policy matters. The trade-industrial-fiscal policy nexus is complex for all African countries. For some, especially least developed countries, the revenue implications of tariff liberalisation are a key concern. For others, the industrial development priorities find expression not only in resistance to liberalising tariffs for the goods in their priority sectors, but the of use rules of origin to buttress the protection of domestic industries from import competition. Rules of origin that are difficult to meet, for example because raw materials or other inputs are not available in sufficient quantities within the FTA member states to meet the originating criteria, will mean limited intra-FTA trade in the specific products. Such rules of origin effectively become a non-tariff barrier.
 
Negotiations on tariffs and rules of origin are continuing, with support, including proposals by the AfCFTA Secretary General H.E. Wamkele Mene to resolve the gridlock.
 
Some progress has been made, both as regards the submission of revised tariff offers and on the rules of origin negotiations. Rules of origin have been agreed for 86.1% of tariff lines, which still falls short of the 90% agreed level of ambition to tariff liberalisation. The dilemma is of course that many negotiating parties and customs unions (which submit a single tariff offer and negotiate collectively), are not prepared to make an offer of tariff concessions for those products for which rules of origin are not yet agreed. This is to be expected – since tariff and rules of origin negotiations are done in tandem. This is a Gordian knot of particular complexity.
 
The initial tariff offers are the opening bids in the negotiation process. Following these opening bids, negotiations will take place, with requests for and offers of further concessions, until agreement is reached. The Assembly, at the 13th Extraordinary Session, reiterated the point that the exchange of tariff concessions had to comply with the principle of reciprocity (see Article 5 of the Agreement establishing the AfCFTA). This could mean that the negotiated outcomes are multiple tariff schedules because, for example, the outcome of the negotiations between the Economic Community of West African States (ECOWAS) and Southern African Customs Union (SACU) – both of which are customs unions – may be different from the outcome of the negotiations between SACU and São Tomé and Príncipe. Another important issue relates to the time frame for implementation of tariff concessions. The principle of reciprocity is important here too. It would appear that the customs unions that include in their membership one or more least developed countries (LDCs) will, on a reciprocal basis with partners in a similar situation, and with LDCs, phase down their concessions over 10 years (the time frame for LDCs) and not 5 years (which is agreed for non-LDCs). The impact on overall AfCFTA liberalisation will have to be studied carefully.
 
Other important trade and related developments that we are monitoring at tralac include:

  1. Climate-related developments and preparations for COP26. Here is ‘A snapshot of the climate change agenda in 2021.’

  2. Preparations for the 12th WTO Ministerial Conference. We will be running a series of updates in preparation for MC12, and hosting a series of webinars. Here is the first Blog in the series.
     

We look forward to hearing from you.

The tralac team.

tralac Trade Report

Can the AfCFTA evolve into a New Generation Partnership for Africa?

Agreements to establish so-called new generation Free Trade Areas (FTAs) have become frequent. They are “new” because they liberalise not only trade in goods but also services, and they include other related disciplines. They liberalise trade among the relevant Parties in a WTO-plus manner. They typically deal with matters such as competition, investment, sustainable development, and intellectual property rights and aim to serve as platforms for preferential trade and market integration under 21st century conditions. These agreements also develop new approaches for reaping the benefits of technological developments (e.g. e-commerce and digitalisation) in regulating trade and managing customs administration and trade facilitation.

This Trade Report examines aspects of these new FTAs against the background of the negotiations to establish the African Continental Free Trade Area (AfCFTA). Are there lessons to be learned from developments elsewhere, or are Africa’s problems unique to the extent that home-grown solutions must be found? What exactly is the AfCFTA in terms of multilateral trade rules? The relevant World Trade Organisation (WTO) rules are briefly discussed.

New Trade Brief

A snapshot of the climate change agenda in 2021

The climate change crisis might have taken a backseat during the COVID-19 pandemic, but it has certainly again come to the fore with the release of the latest Intergovernmental Panel on Climate Change Sixth Assessment Report (IPCC 2021). This is a truly sobering report which puts into perspective the consequences of rapid and rampant climate change and the role humanity has played in it. This trade brief will provide a brief overview of currently available greenhouse gas emissions (GHG) data with a focus on its sectoral contribution. It will also provide a brief synopsis of promising climate-related developments in the fight against climate change. Finally, it will conclude with a brief discussion of the latest Intergovernmental Panel on Climate Change (IPCC) report.

More recent publications

 

From 1 to 100 Megawatt: a statutory context to President Ramaphosa’s bold step

An announcement on 10 June 2021 by South African President Cyril Ramaphosa that electricity generation up to 100 Megawatt (MW) would no longer require a license from NERSA – the National Energy Regulator of South Africa – was met with relief and some measure of excitement. The reaction was not surprising for more reasons than one.

The Framework for the Implementation of the AfCFTA

International trade is about commerce across the borders of sovereign States, which have jurisdiction over their own territory. Trade happens primarily through private initiative and funds. When States conclude trade agreements, they lay down the ground rules for unlocking new business opportunities beyond national boundaries. But the conclusion of a new trade pact is only a starting point; there must be follow-up action and harmonisation of national rules and policies.

The potential role for drones in Africa’s value chains

The potential role of drones associated with the rise of digital business in Africa and the accompanying decrease in the production costs may shape this aspiration into reality. Amongst the technologies of the FIR, drones may offer a new tool to the logistics industry and may be game changers for managers in the African value chain. This paper will provide a short definition of drones and Unmanned Aerial Vehicles (UAVs) and will demonstrate how this tool could fit into and work within the African value chain despite the current challenges faced by the region. Furthermore, this paper will demonstrate via three case studies that drone technology could be accessible to African states and could bring benefits to African societies through humanitarian, business, and public services.

Trade facilitation in Africa: Solutions and recommendations

Low intra-Africa and regional trade have historically been attributed to tariffs. However, recent evidence shows that non-tariff issues are the main reason for low intra-Africa and regional trade. This Trade Brief provides recommendations to governments for implementing measures that will facilitate transparency, increase compliance and simplification of cross-border trade procedures and reduce time and costs of doing business across borders. Recently, African governments have adopted an array of temporary measures to facilitate trade in essential food and health supplies during the coronavirus (COVID-19) pandemic. This Trade Brief commends such measures and provides practical recommendations that can support governments’ efforts to expedite trade during the pandemic and beyond.

Agricultural Issues in the African Continental Free Trade Area

The African Continental Free Trade Area (AfCFTA) aims to boost intra-African trade by providing a comprehensive and mutually beneficial trade agreement among the member states, covering trade in goods, services, investment, intellectual property rights and competition policy. It is widely anticipated that the agricultural sector would not only be the biggest contributor towards the success of the AfCFTA but also the greatest beneficiary, at least in the immediate to short-term. For the agricultural sector to make full use of the opportunities under the AfCFTA, a number of important issues need to be addressed.
 

Recent Blogs

 

Transforming African Trade Corridors for the Future: What Are the Key Priority Areas? Africa must prioritise the transformation of key trade corridors which connect the Regional Economic Communities (REC) if indeed the continent is to reap the full potential of the African Continental Free Trade Area (AfCFTA), and improve its economic performance.

Leveraging Technology to Improve Regulatory Compliance and Trade Efficiency: A Focus on Road Transport Road transport is an important mode for Africa’s trade, carrying over 90% of intra-regional and regional trade. This is likely to continue into the future in the absence of meaningful investment in alternative modes of transport such as rail and maritime transport.

Improving Customs Efficiency: What are the Gains and For Whom? It is imperative for Africa to transform its customs environment through fast-tracking implementation of interventions geared towards eliminating inefficiencies, if the continent is to make significant strides regarding trade between its regional economic communities (RECs), improving trade competitiveness and participation in the global trading system.

Improving Border Efficiency in sub-Saharan Africa: The Need to Look at ‘Beyond the Border’ Operations Border posts are one of the most important nodes whose performance has a significant bearing on corridor performance, efficiency of supply chains and trade competitiveness. In sub-Saharan Africa, border posts are associated with multiplicity of government departments and agencies on either side of the border.

Harnessing the potential of the AfCFTA The Potential of the AfCFTA The African Continental Free Trade Area (AfCFTA) agreement has been described as the continent’s most ambitious regional integration initiative. But it is not a magical concept that guarantees to change Africa’s trade landscape with a wand overnight.

Unrest in South Africa: food security and supply chain responses When South Africa’s most recent spate of civil unrest was at its height, the international media were unanimous on one issue – the looting and burning had fatally disrupted supply chains and this was destined to cause massive food insecurity and disruption of supply chains in the affected parts of the country.
 

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.

Latest AGOA news

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

 
2020 to June
2021 to June
% Change
Aggregate exports to US: $ 8.86 billion $ 13.33 billion + 50%
- - (Share) of AGOA exports: $ 1.8 billion $ 2.83 billion + 57%
Total US import duties on combined imports from AGOA beneficiaries: $ 20.96 million $ 28.91 million + 38%
 
Top Exporters (AGOA trade only) 2020 YTD June exports to US 2021 YTD June exports to US Change 2020/21
South Africa 744.99 1,271.79 70.71%
Nigeria 246.62 560.83 127.41%
Kenya 218.21 231.62 6.15%
Angola 19.68 140.24 612.60%
Ethiopia 118.57 128.69 8.54%
Lesotho 103.01 128.5 24.75%
Madagascar 101.88 117.99 15.81%
All AGOA countries $1.80 billion $2,83 billion +57%

US imports entering under AGOA preference increased by over 50% in the year to end June 2021, compared to the equivalent period in 2020. Of the leading ‘AGOA exporters’, South Africa’s year-on-year AGOA trade grew by 71% (+66% yoy to May), cementing its position as the leading exporter of AGOA-eligible goods.
 
The key driver for this performance is strong export growth in motor vehicles (+117% yoy, $470m) and articles of jewellery (+373% yoy, $202m), the two leading exports from South Africa that utilise AGOA preferences. Ferroalloys, the third largest AGOA product, saw a moderate year-on-year increase of 4% (to $161m). Kenya, the third largest exporter of AGOA, saw an increase in AGOA exports by 6% to $232mwhile those from Ethiopia increased by 9% to $129m. Both Nigeria (rank 2) and 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 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

Download: AGOA guides and info-graphics

Tralac has produced a number of info-graphic type brochures (see section on AGOA.info / Exporter Toolkit) covering a range of AGOA-related topics, including on AGOA’s legal provisions with regard to eligibility and annual/out of cycle reviews, rules of origin, AGOA FAQs, sector-focused brochures (textiles and clothing, agriculture), as well as national AGOA brochures relating to Botswana, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Mauritius, Namibia, Nigeria, South Africa and Tanzania.  
 
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