25 November 2022
Guest Interview: Trudi Hartzenberg Executive Director Trade Law Centre (tralac)
"The AfCFTA is indeed ambitious, and integrating unequal partners makes it even more complex. Poverty does likewise. Africa counts 33 of the world’s 46 least-developed countries, and a third of African countries are landlocked.
Unsurprisingly, tariff concessions and rules of origin are proving the most difficult elements to finalise. Both are trade policy instruments that can be used to achieve industrial (and agricultural) development objectives. In addition, tariffs are a source of fiscal revenue. This is especially important for least-developed countries, whose tax base is small and which have few opportunities to diversify fiscal income.
Fortunately, several complementary initiatives are being developed. These include the AfCFTA Adjustment Facility which is supported by Afreximbank. This facility is available to mitigate significant adjustment costs associated with opening domestic markets to import competition under the AfCFTA."
"The AfCFTA has indeed enjoyed high-level support from the outset— ever since January 2012, when the African Union’s Heads of State and Government agreed to establish free trade across the continent.
Without that support, it would have been impossible for the AfCFTA to be where it is today. But it is not until each country’s trade negotiators get together and start negotiating that real concessions must be made. That’s when a new wave of challenges begins.
Yet we know by now that eliminating non-tariff barriers—inefficient customs and border crossing processes, the excessive documentation demanded of traders, compliance processes that are poorly coordinated among different agencies—would greatly reduce the transaction costs of cross-border trade. Indeed, research shows that it would do more to facilitate trade, than eradicating tariffs would do. We also know that facilitating trade within Africa would have a multiplier effect: it would reduce the costs of trading with global partners, too, and make Africa’s producers and traders more competitive.
So yes, the AfCFTA will improve market access for traders on the ground. But high-level support for ratification isn’t enough. We need support for negotiating, too."
"The AfCFTA is very important to boosting intra-Africa trade. Just as important, is to expand and diversify Africa’s productive capacity. Doing so would change the profile of intra- Africa trade as well as Africa's trade with global trade partners, which is still dominated by commodity exports.
This has become even more important in the wake of the COVID pandemic. We know to expect more crises, some of which will definitely be climate- related. To cope, we need to expand and diversify our productive capacity. That is why we welcome the launch of “AfCFTA as a Framework for Africa’s Industrialisation.”
The framework for industrialization needs to reflect the role of small, medium, and microenterprises (SMMEs) which are the predominant form of businesses on the continent. Too often, SMMEs struggle to access the finance, skills, and other support they need to develop their production capacity. Certain obstacles to cross- border trade disproportionately impact small-scale traders, most of whom are women. They face not only cumbersome border procedures, but also harrassment. Yet these small- scale traders contribute directly to livelihoods and food security.
Competitively priced, reliable supply of producer services such as finance, transport and communication are pariticulary important to support SMME development. They are also key to facilitate cross-border trade. The AfCFTA trade in services agenda includes these among the priority services sectors. The delivery of these services may well require the cross- border movement of persons, either to deliver or to consume these services. Such movement may well be governed by domestic regulations requiring the issue of visas or work permits. This is an example of the connections between the trade-in-services agenda and the visa openness agenda of this report.
The AfCFTA Simplified Trade Regime can address these issues. The regime is still under negotiation: it should be very careful to include everyone."
"The movement of persons is essential to regional integration, to cross-border business linkages, to the cross-border supply or consumption of specific services, and to sectors such as tourism.
Some of the links between the AfCFTA and the free movement of people are found in the discussions on the trade in services: namely, the domestic regulations that apply to the cross-border movement of people for different purposes. Each country’s immigration laws mandate, for example, the conditions under which foreign nationals may enter the country’s territory to consume or supply specific services. These details are subject to negotiation (on a request and offer basis) and require concessions and commitments in the AfCFTA.
For example, cross-border movement of persons is required for consumption of tourism services in foreign jurisdictions. Equally we see the creation of regional services markets for healthcare and education. This cross-border movement usually requires visas and study or other permits from the host country. The requirements are enshrined in domestic regulations, and feature in the commitments made in the trade in services negotiations to permit cross-border movement.
The establishment of commercial presence in a foreign jurisdiction is about foreign direct investment. The regulations governing the establishment, for example, of a branch of a commercial bank, may permit the issue of work permits for senior bank managers to set up the branch. These permits are usually for a specified period of time. The trade-in-services negotiations also covers the temporary presence of services suppliers such as lawyers or engineers in a foreign country, to supply those services. Again, the terms and conditions will be found in domestic regulation of the host country.
The trade-in-services negotiations involve negotiations of requests and offers of concessions to permit such cross-border movement and temporary presence to supply services. In this context, the AfCFTA’s trade- in-services agenda can contribute to addressing some skills shortages across the continent.
The movement of persons remains a sensitive issue, raising concerns about border integrity, safety and security, and access to job opportunities.
The AfCFTA trade-in-services agenda is not suprisingly still under negotiation. Implementation of the AfCFTA also deserves attention in this context. Cooperation among customs, standards, immigration and other border agencies is essential to ensure integrity of borders, but also to facilitate cross-border movement."
Trudi Hartzenberg is the executive director of tralac. She serves on the WTO Chairs Advisory Committee and is a member of the Committee for Development Policy of the United Nations Economic and Social Council (ECOSOC).
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