Download Overview of the CFTA - CSOs Consultations in Accra - twn

The CFTA: Elements, Expectations,
Schedules and Challenges
Prudence Sebahizi
Lead Technical Advisor on the CFTA
1 March 2016
Accra, Ghana
Outline
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Why the CFTA?
Background
The Road Map for Establishment of the CFTA
Objectives of the CFTA
Negotiating Structure and Stakeholders
Participation
Implications of MRTAs
The Scope of the CFTA
Challenges
Policy Recommendations
Why The CFTA?
•The CFTA is critical NOT ONLY for its
potential benefits, BUT ALSO to mitigate the
costs associated with inaction.
Why The CFTA? (Cont’d…)
Africa is the world’s poorest and most
underdeveloped continent with a continental
GDP that accounts for just 2.4% of global GDP.
Africa has approximately 30% of the earth’s
remaining mineral resources.
The Continent has the largest reserves of precious
metals with over 40% of the gold reserves, over 60%
of cobalt, and 90% of platinum reserves.
Why The CFTA? (Cont’d…)
Intra- African trade is about 12%.
In North America it is 40%, and 63% between countries in
Western Europe, 30% in ASEAN;
It is estimated that 40% of intra-African trade is informal trade
46% of goods traded between countries are manufactured
goods such as garments, leather goods, etc.
Africa is the world’s second largest continent
Key to improving low intra-African Trade
The CFTA will bring 54 countries with combined population of
over 1 billion people and combined GDP of USD3.4 trillion.
Why The CFTA? (Cont’d…)
Developments in Africa
Africa on the rise, and must rise with its people (70% of cross
border traders are women)
Demographic dividend (Africa is the Second most populous
continent with about 1.1 Billion people. About 70% of Africans
under 30 years of age and over half are females).
Over 55% of Africa’s labour force is working in food production
with vast areas of arable and pastoral lands supporting
agricultural economies.
Almost 40% of adults in Africa are illiterate – two-thirds are
women.
Why The CFTA? (Cont’d…)
Africa's biggest economies trading on MFN basis
Better terms when exporting overseas under such
programs as EPAs, AGOA, GSP
Africa remains 3% of global trade and DDA at the WTO,
AGOA, EPAs have not enabled Africa’s successful
integration into the Global Economy
Europe and USA are major destination for African
products, Asia and China are becoming more
important;
Why The CFTA? (Cont’d…)
Positioning Africa to benefit:
• Many of Africa’s 54 countries are small, with populations of
fewer than 20 million and economies of less than $10 billion.
• National markets are therefore too small to justify investments,
since both adequate supply of inputs and sufficient client bases
(demand) remain too expensive or out of reach.
CFTA as a tool for Structural Transformation
• Dynamic impact of increased trade among African countries for
industrial development, better infrastructure connectivity,
economies of scale, enhanced competitiveness and structural
transformation.
Why The CFTA? (Cont’d…)
Achieving the African Economic Community
under the Abuja Treaty of 1991
• The Treaty provides for establishment of African Economic
Community through the following stages:
• Strengthening of Regional Economic Communities;
• Establishment of a Continental Customs Union;
• Implementation of Common Sector Policies; and
• Establishment of a Continental Common Market and
ultimately African Economic Community.
Background: The Continental Free Trade Area (CFTA)
• The Continental Free Trade Area (CFTA) initiative is in line
with the Abuja Treaty (signed on 3rd June 1991) – the Treaty
Establishing the African Economic Community.
• That’s why the January 2012 Summit of Heads of States and
Government endorsed the Action Plan on Boosting Intra
African Trade (BIAT) and decided on the establishment of a
Continental Free Trade Area by an indicative date of 2017.
Background: CFTA Framework
June 2015 Summit Launched the Negotiations
Adopted Decision and Declaration launching the
negotiations
• Endorsed the following documents:
• The Negotiating Principles for the CFTA
• Institutional Arrangements for the CFTA negotiations
• The Terms of Reference for the CFTA-NF
• The Indicative Roadmap for the CFTA negotiations.
CFTA Road Map (Timelines)
The Assembly 18th Ordinary Summit in January 2012, decided that the
CFTA should be operationalized by the indicative date of 2017, with the
following milestones:
Finalization of the EAC- COMESA-SADC Tripartite FTA initiative by 2014;
The four other AU-recognized RECS (ECOWAS, CEN-SAD, ECCAS and
UMA), to negotiate a parallel FTA – should they wish to do so, by 2014.
They could also choose to join the CFTA directly
Consolidation of the Tripartite and other regional FTAs into a
Continental Free Trade Area (CFTA) initiative between 2015 and 2016;
Establishment of the Continental Free Trade Area (CFTA) by 2017 with
the option to review the target date according to progress made.
The CFTA Negotiations Roadmap
RATFICA
FINLSE
TION
AGMNT
RATIFICATION
ENTRY INTO FORCE
DEC
2017
Oct
2017
FINISH
NEG
FINALISATION PHASE
LEGAL SCRUBBING
SIGNATURE
TR
TT
Ro
O
Apr
2016
2nd NF
Feb
2016
START
NEG
JUNE
2015
LAUNCH
Objectives of the CFTA
Achieve a comprehensive and mutually beneficial trade agreement among the
Member States of the African Union.
• Enhance competitiveness at all levels and more specifically at the industry
and enterprise level through exploiting opportunities for scale economies,
reducing business costs, continental/global market access and better
reallocation of resources including through the development of trade-related
infrastructure;
• To overcome dependence on exportation of primary products and promote
social and economic transformation for inclusive growth, industrialization and
sustainable development in line with Agenda 2063;
• Resolve the challenges of multiple and overlapping memberships and
expedite the regional and continental integration processes;
Objectives of the CFTA (Cont’d)
• Realize the potential to expand and accelerate the growing diversification
and dynamism of intra-African trade including the aim to increase by 50 %
trade among African countries by 2022 through better harmonization,
coordination and implementation of trade liberalization and facilitation
regimes and instruments across RECs and across Africa in general; and
• In the context of boosting intra-Africa trade and realizing the
transformational potential of increased trade among African countries, to
create a freer market for goods and services, building upon the trade
agreements within the regional economic communities and associated
commitments and thus pave the way for accelerating the establishment of
the Continental Customs Union;
CFTA Negotiating Structure
Assembly of Heads of States and Government (HATC)
African Union Ministers of Trade (AMOT)
Committee Senior Officials
CFTA-Negotiating Forum (CFTA-NF)
Stakeholders
Participation
Technical Working Groups (TWGs)
Continental
Task
Force
MRTAs and their Implications for Africa’s Continental Integration
•
The rise of Mega-Regional Trade Agreements (MRTAs) is reshaping global trade with
meaningful implications for Africa.
•
There are currently three major MRTAs: the Trans-Atlantic Trade and Investment
Partnership (TTIP), the Trans-Pacific Partnership (TPP), and the Regional Comprehensive
Economic Partnership (RCEP).
•
Trans-pacific partnership (TTP) – 12 countries incl. US, Japan, Canada, Australia, Singapore, Mexico, Chile, New Zealand, Brunei, Peru,
Vietnam and Malaysia.
•
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Transatlantic Trade and Investment Partnership (TTIP) between EU and US
•
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TPP members’ share of global trade is significant: approximately $2 trillion, or
about 40 percent of global trade, in 2012.
Trade between the EU and the US accounts for nearly 30 percent of world merchandise
trade, 40 percent of global trade in services, and almost half of global GDP.
Regional Comprehensive Economic Cooperation (RCEP), 16 countries of which 10 ASEAN countries (Brunei, Myanmar, Cambodia,
Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam); Australia, China, India, Japan, S. Korea, New Zealand.
If successful, RCEP would constitute the world’s largest trading bloc. The
agreement would comprise more than three billion people (over 45% of the global
population) and a combined GDP of over $17 trillion (about one third of current
global GDP).
• The rise of MRTAs brings significant economic and geopolitical implications for Africa.
• The CFTA is Africa’s own MRTA
•
Implications of the MRTA
• First, MRTAs would fragment the global trading system. This
would leave larger countries to negotiate the future of that system
without granting Africa a seat at the table.
•
Preference Erosion in Key markets including EU, US and China African total exports would be reduced by USD 2.7 bn in all main
categories of products with industrial goods affected the most
negatively;
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Impact on international rules and standards. Independently, each
MRTA could drive the global rule and standard-making agenda.
Implications of MRTAs: EPA
• The EPA process may pose challenges to Africa’s integration agenda
because of two main issues.
• African countries negotiate the EPAs in five different blocks, of which only
two replicate existing African Regional Economic Communities (EAC and
ECOWAS) may create institutional complication on the roadmap
enshrined in the Abuja Treaty.
• At the end of the transition period, African countries may end up granting
a more favourable treatment to a number of EU-originating imports, than
to similar African products originating outside their own REC.
MRTAs contd
Key recommendations
• Establish the Continental Free Trade Area (CFTA)
• The establishment of the CFTA will strengthen the geopolitical position of African countries in
global trade negotiations.
• It will also increase market size, economic development, and job creation, making African
countries less dependent on the policies of their developed-country trading partners.
• It is critical in offsetting potential negative effects MRTAs will have on African economies and
to support Africa’s structural transformation.
• Promote African Competitiveness
• African countries will need to take steps to increase their global competitiveness.
• This will include making necessary investments in increasing productivity, improving
infrastructure, and making it easier to trade across borders.
• It will also include the monitoring of MRTA negotiations, so that African countries can design
policy that best takes advantage of new opportunities that arise.
• Engage in Global MRTA Discussions–
• African countries should advocate on their own behalf with regards to the MRTAs
• Regarding TTIP, for example, African countries should leverage their relationships with the
EU and US to encourage that preferences and standards be harmonized in a way that does
not threaten African growth and development.
Scope of the CFTA
Trade in goods
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Trade in Services
Tariff liberalization,
• Transportation
NTBs,
• Air, maritime
RoO,
• Financial Services
Trade Facilitation
• banking,
• Customs cooperation
• Harmonization of Doct
• insurance,
Transit & Transit facilities,
• Tourism,
Trade remedies,
• Energy,
Safeguards
Standards,
Technical Barriers 2 Trade
Sanitary and phytosanitary
Dispute settlement
Institutional arrangements
Other Issues
• Competition policy
• Intellectual
Property Rights,
• Investment
• Movement of
business persons,
Phase I: Trade in goods and trade in services will
be negotiated concurrently.
Phase II: Other Issues (Investment, IPR,
Investment)
Africa We Want:
AU Agenda
2063
Boosting IntraAfrican Trade –
BIAT
1. A prosperous Africa based on
inclusive growth and sustainable
development
Trade Policy
2. An integrated continent, politically
united and based on the ideals of Pan
Africanism and the vision of Africa’s
Renaissance
Trade Facilitation
3. An Africa of good governance,
democracy, respect for human rights,
justice and the rule of law
Productive Capacity
4. A peaceful and secure Africa
Trade Related
Infrastructure
5. An Africa with a strong cultural
identity, common heritage, values and
ethics
6. An Africa where development is
people-driven, unleashing the potential
of its women and youth
7. Africa as a strong, united and
influential global player and partner.
Trade Finance
Trade Information
Factor Market
Integration
Continental Free
Trade Area – CFTA
AIDA, PIDA,
CADAAP, Etc.
Trade in Goods
Agricultural
Transformation
Trade in services
Food Security
Investment
Energy
Intellectual
Property Rights
Transport
Competition Policy
ICT
Industrial
Development
Water Resources
Key Challenges
• Lack of a Productive capacity is one of the barriers to Intra African Trade. There is
the question of what to trade between African countries.
• The absence of critical connecting infrastructure as well as Non Tariff Barriers is
another challenge to overcoming fragmentation of African markets.
• For example, one study estimated that regional trade could increase by $10 billion to $30
billion per year if the road connections between the Central African Republic and the
Democratic Republic of the Congo were upgraded.
• Commitment to integration varies across countries. Some countries have not
undertaken any liberalization within their respective RECs FTA. Accordingly if they
cannot commit themselves to a smaller FTA, it will be difficult for them to commit
to a CFTA.
• Some countries also remain skeptical of regional integration fearing domination
by richer or more powerful states or ceding power to a supranational body.
Policy Recommendations
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Addressing supply-side constraints and weak productive capacities.
Addressing infrastructural bottlenecks.
Eliminating trade barriers through improved trade facilitation.
Promoting free movement of people as an important ingredient of cross
border trade.
• Involvement of key stakeholders: Through closer collaboration between
the AUC and RECs, the private sector and member states, the engagement
of civil society, parliamentarians, and the private sector through innovative
means, we foresee a different approach and outcomes for the CFTA.
• An advocacy and communication strategy has been developed to ensure
that there is a buy in from all these stakeholders, so that they can play their
respective roles in this critical process.
“The CFTA is critical NOT ONLY for its potential benefits, BUT ALSO to
mitigate the costs associated with inaction”
Thank You