Three details to keep in mind when starting the largest free trade agreement in Africa

Business News for Tuesday, January 5, 2021

Source: face2faceafrica.com

2021-01-05

Based in Accra, Ghana, the African Continental Free Trade Area (AfCFTA) is now officially the largest free trade area by number of participating countries since the founding of the World Trade Organization (WTO) in 1995.

The AfCFTA is based on an agreement between 54 African countries. Negotiations began in 2012, but it was in 2018 at the 10th extraordinary session of the African Union (AU) in Kigali, Rwanda, that three separate agreements were adopted to establish the free trade area.

Despite initial problems, including the initial refusal of Africa’s largest single market, Nigeria, to join the AfCFTA, the agreement materialized on Friday, January 1, 2021. Some 30 of the 54 countries have ratified the agreement, which which means that from now on, Africans and other global stakeholders can look forward to a new era of doing business in Africa.

But it’s also important to view the January launch of the AfCFTA as a largely symbolic gesture. It will take a few years, even for the most optimistic, to see Africans overcome the challenges of a free trade agreement, including protectionism, national red ribbons, and poor infrastructure across the continent.

The new era of the AfCFTA brings to light certain structural changes and establishes new rules that must be known. Here are three things to keep in mind under the new dispensation:

African Trade Observatory

The African Trade Observatory (ATO) is an online mechanism created by the African Continental Free Trade Area (AfCFTA). The way the ATO should work is that it provides a dashboard to provide real-time business statistics to African users.

The ATO dashboard provides intracontinental trade flows (traded values, traded quantities, the use of tariff preferences, taxes and fees paid at the border) and information on market conditions, allowing stakeholders to make informed decisions in evidence and quickly.

Rules of origin

The rules of origin in the legal documents that established the AfCFTA refer, among other things, to the “Certificate of Origin” which means the documentary proof of origin; “Chapter”, which refers to the two-digit Chapter code used in the nomenclature; “CIF Value”, which is the price paid by the importer, as well as “Classified”, which refers to the classification of a Product or Material under a particular Title or Subtitle.

The rules of origin in the AfCFTA are supposed to standardize both IP ambitions and ambitions. These rules anticipate a major globalization process in Africa.

Freedom of movement of persons

The ambition for people to move around Africa as freely as goods has not seen the light of day, although it has been debated for more than two decades. Under the AfCFTA, the plan to allow the free movement of people comes with the establishment of a visa-free zone within the trade agreement area.

Obviously, this looks like a plan that would be fulfilled if there were enough willing African countries. The Economic Community of West African States (ECOWAS) has endeavored to employ a similar strategy for the citizens of the subregion.