January 1st is known as a historic day for trade and business in Africa. Right?
On January 1st, preferential trading began under the new AfCFTA rules. It is indeed a historic moment for Africa. Of course there was trade between African countries before that, but on a relatively small scale. The difference is that we now have a preferential arrangement that will frame the trade.
So can things really get going in all countries?
This question is asked again and again, and it irritates me a little. For comparison: the creation of a single European market took decades, but Africa is expected to be all set in five years.
What has been achieved so far?
34 of the 54 countries have ratified the agreement. 41 countries or customs unions have submitted their customs clearance lists. In other words: These contractual partners can trade with one another from January 1st onwards according to the agreed tariff advantages. Around 81 percent of the rules of origin are fixed. The states have until the end of June 2021 to negotiate the missing rules of origin and to submit pending customs offers.
Why have the heads of state and government of the African Union announced that they will start free trade on January 1st?
I don’t know of a single trade agreement in which everything was finally settled on the official start date. The negotiations are never finished. The Doha round of negotiations dragged on for many years. Negotiations on the Economic Partnership Agreement between the Southern African Development Community (SADC) and the EU lasted ten years, and negotiations continue even after that. Why are we expected to be faster? The rest of the world expects a lot more from Africa than from any other region.
How did the corona pandemic affect the negotiations?
The pandemic has disrupted many parts of the world. We originally wanted to start on July 1st, 2020. But that was not possible because of Covid-19. We lost four to five months on the topics of rules of origin and market access and had to negotiate on virtual platforms. But we tried to catch up as much as possible and requested a rescheduling.
Which questions were the most contentious?
The rules of origin and market access are always the most difficult issues in any trade agreement.
Poorer countries have been concerned about opening their markets to more developed economies. Nigeria, Egypt and South Africa account for more than half of the economic output in Africa. Are the worries justified?
Our agreement contains provisions to protect young industries. I’m not sure what the concerns are related to.
Eritrea has not yet acceded to the agreement.
I hope Eritrea will join. It is a separate country and it is up to the Eritreans whether they want to be part of the deal. It is their right to decide for themselves.
Kenya is in the process of negotiating a bilateral trade agreement with the United States. How long will it take for the AfCFTA signatory states to jointly conclude trade agreements with third countries?
Our agreement creates a free trade area. Each individual country can conclude trade agreements with third countries. A customs union is a long-term goal, but we have not got there yet. This requires a higher degree of harmonization. The heads of state will decide when the time comes.
Logistics companies repeatedly complain about long handling times, bureaucracy and corruption at border crossings. For example, in some places four forms must be completed for each delivery. Will that change in the foreseeable future?
It will take many years before the agreements on trade facilitation, transit rules and customs cooperation are consistently implemented. It can’t be done in six months or a year. We have achieved harmonization of customs procedures, trade facilitation and transit. Up until now there was no uniform procedure for customs authorities in Africa. Harmonization is a step in the right direction so that companies know how long clearances should take and what rights they have in the event of a dispute. The next, more difficult step is implementation.
Will digitization help? African countries are often pioneers in using new technologies.
The digitization of customs procedures is absolutely necessary, but there are countries with porous borders or borders in very remote areas. Again, this will take some time, even if digital platforms are introduced.
So the real work is just beginning?
The free trade agreement is a big step forward, but it is only the first step. Negotiating the rules was the easy part from my point of view. Now they have to be implemented and the necessary capacities have to be created. I’m not taking this lightly, the greatest challenges are still ahead of us.