WHAT AFCFTA MEANS TO UGANDA.
By Joash Yose
Uganda is among 34 states in Africa to subcribe to the recent continental common market. The Agreement establishing the African Continental Free Trade Area (the “AfCFTA”) has continued to generate discussions following the commencement of trading under the new economic bloc. The Agreement was signed on 21 March 2018 at the Extra-Ordinary Summit of the African Union held in Kigali Rwanda and came into force on 30 May 2019 after the 22nd State to ratify it. It’s important to note that Uganda together with other East African countries subscribed as a region.
COVID-19 pandemic suffocated the phase 2 negotiations and commencement of trading under AfCFTA which was earlier scheduled to start on 1st of July 2020. Trading eventually kicked off on 1st January 2021. Assesing the impact of trading is yet to be appreciated as some countries are yet to ratify the treaty. The AfCFTA has been lauded as a game-changer and ambitious project capable of lifting over 30 million people out of poverty on the continent, through trade liberalization and economic integration in line with the Pan African Vision (Agenda 2063) of an integrated, prosperous and peaceful Africa.
In terms of structure, the main Agreement is divided into 7 Parts and 30 Articles. In addition, there are Protocols, Annexes and Appendices which equally form part of the AfCFTA Agreement. Three of these Protocols are
(i) the Protocol on Trade in Goods
(ii) the Protocol on Trade in Services (iii) the Protocol on Rules and Procedures on the Settlement of Disputes. Article 8 of the Agreement is to the effect that the Protocols, Annexes and Appendices shall, upon adoption, form integral of the Agreement.
The Phase Two Negotiations for both Trade in Goods and Trade in Services include
(i) the Protocol on Investment
(ii) the Protocol on Intellectual Property
(iii) the Protocol on Competition Policy as well as the associated Annexes and Appendices.
With no exception from other treaties, the AfCFTA Agreement is expected to be organic as future amendments and updates are possible, provided that any additional instruments deemed necessary are to be concluded in furtherance of the objectives of AfCFTA and shall upon adoption, form an integral part of the Agreement.
Crafted after the principles of the World Trade Organization/General Agreement on Tariffs and Trade and General Agreement on Trade in Services (WTO/GATT/GATS). This agreement from Conception fronts economic integration first and is classified into five stages: free trade area, Custom union, Common market, Economic union (single market) and Political union.
A key feature of Custom Union is the acceptance of a unified external common tariff against non-members. This means once a trader has a customs certificate as per the trading agreement they gain by having uniform tariff system for imports and exports in any country where the AFCFTA has been ratified. However the AfCFTA under its rules on Most-Favoured-Nations allows member States to conclude or maintain preferential trade arrangements including different tariff arrangements with Third Parties provided that such trade arrangements do not impede or frustrate the objectives of the Protocol on Trade in Goods
Main objectives of AfCFTA
The absolute objective behind the AfCFTA is the elimination or reduction of tariff and non-tariff barriers amongst the 54 Countries that agreed to be members of the bloc by providing a single market for goods and services, facilitated by movement of persons in order to deepen the economic integration and prosperity of the African continent. This key objective is to be achieved through successive rounds of negotiations that are to be done in phases.
In specific terms, the Agreement also seeks to
(i) lay the foundation for the establishment of a Continental Customs Union;
(ii) promote and attain sustainable and inclusive socio-economic development, gender equality and structural transformation of the State Parties,
(iii) enhance the competitiveness of the economies of State Parties within the continent and global market,
(iv) promote industrial development through diversification and regional value chain development, agricultural development and food security, and resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes. In order to actualize these noble objectives, Article 4 of the Agreement mandates State Parties to:
- Progressively eliminate tariffs and non-tariff barriers to trade in goods;
- Progressively liberalise trade in services;
- Cooperate on investment, intellectual property rights and competition policy;
- Cooperate on all trade-related areas;
- Cooperate on customs matters and the implementation of trade facilitation measures;
- Establish a mechanism for the settlement of disputes concerning their rights and obligations; and
- Establish and maintain an institutional framework for the implementation and administration of the AfCFTA.
How Uganda benefits
The AfCFTA is the second largest common market and offers a lot of benefits to member States particularly those with competitive advantage and enabling infrastructures. Africa has a population of 1.3 Billion people and a combined GDP of over $2.6 Trillion According to the Brookings Institution’s report, intra-African trade accounts for 17 percent of Africa’s exports compared to 59 percent in Asia and 69 percent in Europe.
The report projected that the removal of tariffs if well implemented could boost intra-regional trade up to 50 percent by 2040, from the current 17 percent. Uganda has a competitive advantage in a number of sectors and stands in a position to benefit from the newly enlarged market. This will further increase investment in the distribution and logistics supply chain as cross-border trades will spiral up. Uganda’s increasing unemployment rate which has been made worse by the pandemic is expected to reduce when trading starts in commercial quantity.
The AfCFTA will progressively reduce trade tariffs by over 90% by 2022 and by extension address the increasing inflation and infrastructural deficits within the continent. Uganda which is under the East African federation, with strong agricultural sector should position itself to benefit from the economies of scale that will follow the localization of industries. Agriculture, food processing, minerals, information technology and legal services have been identified as some of the critical sectors where Uganda has competitive advantage.
The fears around the issue of dumping and border security should not outweigh the huge benefits that AfCFTA offers to the member States. Rather, this should be a wake-up call for Uganda to invest heavily in rail and road transport, port infrastructure, border security, internal security, electricity, education, and other enabling infrastructures.
The AfCFTA Rules of Origin provision is meant to address this, and it is hoped that the AfCFTA member States should demonstrate the political will to ensure strict compliance. While the regime of Trade in Goods appears to be taking shape, particularly with the commencement of trading early this year, the progressive framework for the negotiations of specific commitments by the member-states.