Worldwide: Three African Regional Economic Blocs Take Major Step Towards Forging A Trans-Africa Free Trade Zone

Last Updated: June 23 2015
Article by Yohai Baisburd, Thomas W. Laryea, Noor Kapdi and J. Michael Lacey

On June 10, 2015, the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) agreed to expedite their efforts to unite into a single, trans-African free trade zone, to be known as the Tripartite Free Trade Area (TFTA). The TFTA would cover 26 countries stretching north to south from Egypt to South Africa and east to west from Mauritius to Namibia (see diagram below). According to the Communiqué of the Third COMESA-EAC-SADC Tripartite Summit issued at the conclusion of their recent meeting in Sharm El Sheikh, Egypt, the TFTA countries collectively account for 632 million people or 57 percent of Africa's population and nearly 58 percent of Africa's Gross Domestic Product (GDP). As noted in the Communiqué, the TFTA represents the "Market Integration" leg of the overall tripartite integration process that also includes "Infrastructure Development" and "Industrial Development." Implementation of the TFTA would be of significant economic interest to foreign investors seeking to trade into larger regional markets and to companies within individual countries seeking to expand into the continent, as well as to their governments.

The ambitious attempt to forge a trans-African free trade zone has long been a priority for African leaders seeking to reduce obstacles to intra-African trade and promote economic opportunities throughout the continent. The Communiqué cites TFTA as a "decisive step" to achieve the African Economic Community envisioned in the Lagos Plan of Action and the Final Act of Lagos of 1980.

The parties adopted a Post-Signature Implementation Plan to identify implementation activities at the national and regional levels and instructed that outstanding negotiations on Phase I issues "be concluded expeditiously." These Phase I issues include elimination of import duties, creating rules of origin, and addressing trade remedy rules. The parties also agreed to commence negotiations on Phase II issues covering trade in services, cooperation in trade and development, competition policy, intellectual property rights and cross-border investment. The TFTA will ultimately have to be ratified by member countries and will come into force once it is ratified by three-quarters of the member countries.

Perceptions of competition among the regions and member countries may become a factor in the negotiation process towards the TFTA. Notably, the two largest economies among the 26 countries envisaged to join the TFTA are South Africa and Egypt. For both of these countries, however, their trading partners are predominantly countries outside of the African continent and this dynamic may indicate that they could be aligned over the broader objectives of the TFTA, without being derailed by concerns of competition for the potential TFTA market.

Also, the significant discrepancies in GDP, levels of global integration, and economic development and priorities between the potential TFTA members will make finalizing the agreement a challenge. The similarly ambitious attempt at a Free Trade Area of the Americas (FTAA), which was launched in 1998 but ultimately failed to come to fruition after multiple rounds of negotiations, stands as a stark example of the challenges in forging trans-continental free trade zones.

One of the potential lessons learned from the FTAA experience is for negotiators to align ambitions more closely with achievable objectives to build momentum through successive achievements. For example, several of the TFTA Phase I issues, namely, lowering import duties and establishing rules of origin, can be some of the most complicated aspects of trade negotiations. In particular, they present both domestic challenges, such as opposition from organized industries/sectors that benefit from the current duties, and external challenges, such as trying to obtain uniform rules of origin among 26 countries that may have vastly different views. As the TFTA partners move forward with their ambitious goal, they may want to move less contentious issues to the front of the queue so that the negotiators can "harvest" these first fruits. This could build positive momentum that could help overcome some of the more challenging obstacles presented by lowering tariffs, addressing regulatory issues and opening markets to cross-border trade in services.

The expectation is that the TFTA could come into effect in 2017. In the process that will unfold, private sector stakeholders should consider taking a proactive approach at the national and regional levels to ensure that their interests are advanced and protected. The TFTA negotiations present an opportunity to help shape the economic rules that could govern intra-African trade and business for the foreseeable future.

A copy of the Communique is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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