AfCFTA to become a reality
The African Continental Free Trade Agreement (AfCFTA) is nearing reality as only one country is left to ratify the Agreement for the deal to reach the 22 countries required and effectively come into force.
The House of People’s Representatives on March 21, ratified the Agreement, bringing the number of countries that have done so to 21. A total of 22 countries are required to approve it. Those in agreement have deposited their Instruments of Ratification at the African Union Commission (AUC) – with Ethiopia ratifying the Agreement, only one more country is left to reach the number of countries required.
Fifty-two countries have signed the agreement, 21 of them have ratified it and 15 have deposited their Instruments of Ratification with the African Union Commission (AUC).
When the one country ratifies the Agreement and 17 other countries that have already ratified the Agreement deposit their Instrument of Ratification at the AUC, the Agreement will come into force within 30 days.
When it is implemented, the agreement is expected to eliminate tariffs on 90 percent of goods, allow autonomous movement of commodities, goods and services across countries in the continent, and will be the largest trade area in the world.
Kebour Ghenna, Executive Director of the Pan African Chamber of Commerce and Industry said that the ratification of the AfCFTA seems to be progressing as planned. “Last March, 2018, 44 countries signed the AfCFTA in Rwanda, since then that number has increased to 49. Of these countries 22 have to ratify the agreement by their parliament to put it into force, so far almost 21 countries have or are about to ratify including Ethiopia” Kebour said.
“This is good news for Africa, there may be winners and losers at country levels, obviously, any economic policy that facilitates imports and exports among member countries – with lower or no tariffs, free access to the market and market information, and the elimination of trade barriers – offers numerous benefits to small and medium enterprises. And as history’s largest free trade agreement, which has a market size in the region of USD 3 trillion, most people are excited at the development,” he added.
“Ethiopia, if well-organized can be a winner with the AfCFTA. It has the capacity to increase cross-border commerce. Government has to put in place programs to help uncompetitive domestic firms become efficient, including small farmers to immediately tap into lucrative markets. The AfCFTA, when fully implemented, will see Ethiopia eliminate import tariffs on about 95 percent of its products, it’s going to be challenging, still provided compensatory policies are implemented and adverse interactions with market failures are addressed through complementary policies, all countries can come out winners with AfCFTA,” Kebour said.
According to AfCFTA, Legal Texts and Policy Documents the implementation of AfCFTA aims to progressively reduce and eliminate customs duties and non-tariff barriers on goods. At this stage the goal is for 90 percent of tariff lines to have a zero duty within 5 years or 10 years for Least Developed Countries (LCDs). A special dispensation for 7 LDCs has also been tabled; providing for a reduced ambition for specific LDCs. Djibouti, Ethiopia, Madagascar, Malawi, Sudan, Zambia, and Zimbabwe will be expected, in terms of this dispensation, to meet a reduced level of ambition of 85 percent of tariffs at entry into force of the AfCFTA, with a 15-year period to reach 90 percent.
The modalities also provide for members to negotiate on sensitive products, on a request and offer basis, on which tariffs would reduce to zero over a longer period – 10 years for non-LDCs and 13 years for LDCs. The sensitive products and their schedules of tariff reductions may be different in each bilateral relationship.
In addition, the modalities provide for an exclusion list, products on which no reduction in tariffs would be proposed.
The AfCFTA, along with the free movement of persons and the single air transport market, is a flagship component of the broader Agenda 2063 program – the African Union’s framework for structural transformation and development. The African Union’s initiatives to Boost Intra-Africa Trade, the Programmes for Infrastructure Development for Africa and Accelerated Industrial Development for Africa are essential to realise the benefits of the AfCFTA.
The pact aims to boost intra-African trade by making Africa a single market of 1.2 billion people and a cumulative GDP over USD 3.4 trillion. The UN Economic Commission for Africa (UNECA) estimates that the implementation of the agreement could increase intra-African trade by 52 percent by 2022 and double the share of intra-African trade by the start of the next decade.
Ethiopia ratified the AfCFTA on Thursday March 21, 2019 and this push forward was applauded by delegates attending the 38th meeting of the Committee of Experts of the ECA Conference of African Ministers of Finance, Planning and Economic Development in Marrakech, Morocco which was held on March 22, 2019.