Successful implementation of the African Continental Free Trade Area Agreement could be dependent on aspects such as provisions where countries grant each other trade preferences for goods produced in Africa rather than imports from outside the continent.
With the agreement already in force since May after meeting the minimum required ratifications.
Trade experts say that by scrapping import and tariffs and quotas among themselves on most traded goods, African countries would be well placed to make the most competitive advantage of firms within the Free Trade Area.
The provision, known as ‘Rules of Origin,’ is currently under negotiations with experts saying it is likely to be a huge determinant for the success of AfCFTA.
If well effected, the provision will see African products feature across the continent and becoming more competitive.
The provision will go beyond allowing goods from the continent access to markets to ensuring competitiveness.
But a recent study by United Nations Conference on Trade and Development showed that many of the AfCFTA gains could be undermined if rules of origin are not appropriately designed and enforced to support preferential trade liberalisation.
For instance, if the provision of rules of origin are favourable and ideal, East Africa’s tea exports to the rest of the continent, especially Northern Africa would likely become more competitive.
Between 2015 and 2017, about 43 per cent of the imports to Africa were shipped from China while 17 per cent was from India and Sri Lanka.
Well-designed preferential trade liberalisation could see East African countries – which are among the top tea producers globally – increase exports to the continent.
This would create ideal conditions to increase production, value addition and consequently increased job creation and industrialisation among other benefits.
Claudia Roethlisberger, Economic Affairs Officer at UNCTAD covering Africa, said that an effective Rules of Origin criteria would also see firms seeking to export to the rest of the continent source more materials from the continent so as to make them eligible for the provision.
Roethlisberger said that, from the study conducted, rules of origin ought to be easily understood and not too costly.
She said that studies have shown that if the rules are too stringent, complex and expensive, firms are likely to forego trading on the continent and choose partners outside the AfCFTA.
Effective rules of origin could also reduce concerns of some African countries such as those that have been hesitant to sign or ratify the agreement for fear that it could expose them to unfair competition and stifle their infant industries.
Others fear that products from outside Africa could easily be guised as made in Africa to be sold on the continent creating chances of dumping.
Andrew Mold, the acting Director for Eastern Africa at United Nations Economic Commission for Africa, said that rules of origin is an important component as it will allay fears countries have over the agreement.
If well designed, the provisions could see a phone produced in Rwanda receive preferential trade liberalisation in African markets gaining a competitive advantage .
Mounir Bakhressa, the Managing Director of the Bakhresa Grain Milling Factory Rwanda, said if well communicated to exporters and well designed, it could increase markets in Africa.
The National Agricultural Export Development Board’s Chief Executive, Amb. Bill Kayonga, said that they are already in talks with a number of African countries to find opportunities for the Rwandan exports which could benefit from the framework.
Rules of Origin are among aspects of the AfCFTA currently under negotiations. The agreement will be launched in Niamey, Niger next month during the African Union summit.
AfCFTA is expected to boost intra-African trade by 33 per cent once full tariff liberalisation is implemented, attracting additional intra-African investments and creating market opportunities to foster Africa’s industrialisation through regional value chains.
The agreement is ready for implementation having received 52 signatories and 24 ratifications.
The AfCFTA operationalisation will make the bloc the largest free trade area in the world.