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54-599: The African Continental Free Trade Area ( AfCFTA ) is a free trade area encompassing most of Africa . It was established in 2018 by the African Continental Free Trade Agreement , which has 43 parties and another 11 signatories, making it the largest free-trade area by number of member states, after the World Trade Organization , and the largest in population and geographic size, spanning 1.3 billion people across

108-467: A customs union , parties to a free trade area do not maintain common external tariffs, which means they apply different customs duties, as well as other policies with respect to non-members. This feature creates the possibility of non-parties may free riding preferences under a free trade area by penetrating the market with the lowest external tariffs. Such risk necessitates the introduction of rules to determine originating goods eligible for preferences under

162-626: A digital payment system ; and the African Trade Observatory." Phase II and III negotiations are expected to be initiated by all AU member countries and held in successive rounds. In February 2020, the AU Assembly of Heads of State and Government decided that Phase III would begin immediately following the conclusion of Phase II negotiations, which were initially scheduled to conclude in December 2020. However, this deadline

216-456: A single, liberalised market ; reducing barriers to capital and labor to facilitate investment; developing regional infrastructure; and establishing a continental customs union . The overall aims of AfCFTA are to increase socioeconomic development, reduce poverty, and make Africa more competitive in the global economy . On January 13, 2022, the AfCFTA took a major step towards its objective with

270-407: A free trade area would divert trade away from more efficient suppliers outside the area towards less efficient ones within the areas. Whereas, trade creation implies that a free trade area creates trade which may not have otherwise existed. In all cases trade creation will raise a country's national welfare. Both trade creation and trade diversion are crucial effects found upon the establishment of

324-452: A free trade area, a need that does not arise upon the formation of a customs union. Basically, there is a requirement for a minimum extent of processing that results in "substantial transformation" to the goods so that they can be considered originating. By defining which goods are originating in the PTA, preferential rules of origin distinguish between originating and non-originating goods: only

378-563: A free trade area. Trade creation will cause consumption to shift from a high-cost producer to a low-cost one, and trade will thus expand. In contrast, trade diversion will lead to trade shifting from a lower-cost producer outside the area to a higher-cost one inside the area. Such a shift will not benefit consumers within the free trade area as they are deprived the opportunity to purchase cheaper imported goods. However, economists find that trade diversion does not always harm aggregate national welfare: it can even improve aggregate national welfare if

432-649: A number of depositories of free trade agreements available either at national, regional or international levels. Some significant ones include the database on Latin American free trade agreements constructed by the Latin American Integration Association (ALADI), the database maintained by the Asian Regional Integration Center (ARIC) providing information agreements of Asian countries, and the portal on

486-507: A number of other fields, from services to e-commerce and data localization . Since transactions among parties to a free trade area are relatively cheaper as compared to those with non-parties, free trade areas are conventionally found to be excludable. Now that deep trade deals will enhance regulatory harmonization and increase trade flows with non-parties, thus reduce the excludability of FTA benefits, new generation free trade areas are obtaining essential characteristics of public goods. Unlike

540-497: A party to a free trade area has the incentive to use inputs originating in another party so that their products may qualify for originating status. Since there are hundreds of free trade areas currently in force and being negotiated (about 800 according to ITC's Rules of Origin Facilitator , counting also non-reciprocal trade arrangements), it is important for businesses and policy-makers to keep track of their status. There are

594-696: A series of ten negotiating sessions which took place over the next three years. The first negotiation forum was held in February 2016 and held eight meetings until the Summit in March 2018 in Kigali. From February 2017 on the technical working groups held four meetings, where technical issues were discussed and implemented in the draft. On March 8–9, 2018 the African Union Ministers of Trade approved

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648-490: A summit on July 7, 2019, and officially commenced January 1, 2021. AfCFTA's negotiations and implementation are overseen by a permanent secretariat based in Accra , Ghana . Under the agreement, AfCFTA members are committed to eliminating tariffs on most goods and services over a period of 5, 10, or 13 years, depending on the country's level of development or the nature of the products. General long-term objectives include creating

702-409: Is affirmed within the trade treaties. The second way in which free trade areas are considered public goods is tied to the evolving trend of them becoming "deeper". The depth of a free trade area refers to the added types of structural policies that it covers. While older trade deals are deemed "shallower" as they cover fewer areas (such as tariffs and quotas), more recently concluded agreements address

756-652: Is expected for the January 2020 AU Assembly. In 2018, the United Nations Economic Commission for Africa estimated that AfCFTA will boost intra-African trade by 52 percent by 2022. A 2020 report by the World Bank anticipated that AfCFTA could lift 30 million Africans out of extreme poverty, boost the incomes of nearly 70 million people, and generate $ 450 billion in income by 2035. The following institutions were established to facilitate

810-478: Is formed, to the trade with non-parties to such free trade area shall not be higher or more restrictive than the corresponding duties and other regulations existing in the same signatory parties prior to the formation of the free trade area. In other words, the establishment of a free trade area to grant preferential treatment among its member is legitimate under WTO law, but the parties to a free trade area are not permitted to treat non-parties less favorably than before

864-430: Is their approach to third parties. While a customs union requires all parties to establish and maintain identical external tariffs with regard to trade with non-parties, parties to a free trade area are not subject to this requirement. Instead, they may establish and maintain whatever tariff regime applying to imports from non-parties as deemed necessary. In a free trade area without harmonized external tariffs, to eliminate

918-549: The Organization of African Unity was founded by the independent states of Africa. The OAU aimed to promote cooperation between African states. The 1980 Lagos Plan of Action was adopted by the organization. The plan suggested Africa should minimize their reliance upon the West by promoting intra-African trade. This began as the creation of a number of regional cooperation organizations in the different regions of Africa, such as

972-580: The Rules of Origin Facilitator . It is expected to become a versatile tool which assists enterprises in understanding free trade agreements and qualifying for origin requirements under these agreements. African Union Passport The African Union Passport is a common passport document that is set to replace existing nationally issued African Union member state passports and exempt bearers from having to obtain any visas for all 55 states in Africa . It

1026-776: The Southern African Development Coordination Conference . Eventually this led to the Abuja Treaty in 1991, which created the African Economic Community , an organization that promoted the development of free trade areas, customs unions, an African Central Bank, and an African common currency union . In 2002, the OAU was succeeded by the African Union (AU), which had as one of its goals to accelerate

1080-615: The "economic integration of the continent". A second goal was to "coordinate and harmonize the policies between the existing and future Regional Economic Communities for the gradual attainment of the objectives of the Union." At the 2012 African Union summit in Addis Ababa , leaders agreed to create a new Continental Free Trade Area by 2017. At the 2015 AU summit in Johannesburg , the summit agreed to commence negotiations. This began

1134-450: The 2018 Kigali summit, areas of agreement were found on trade protocols, dispute settlement procedures, customs cooperation, trade facilitation, and rules of origin . There was also agreement to reduce tariffs on 90% of all goods. Each nation is permitted to exclude 3% of goods from this agreement. This was part of Phase I of the agreement, which covers goods and services liberalization. Some Phase I issues that remain to be negotiated include

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1188-608: The AU. The Council of Ministers responsible for trade will decide on the location of the headquarter, structure, role and responsibilities. The Assembly of the African Union Heads of State and Government is the highest decision-making body. It is likely to meet during the AU Summits. The Council of Ministers Responsible for Trade provides strategic trade policy oversight and ensures effective implementation and enforcement of

1242-498: The AfCFTA Agreement. Several committees have been established, for trade in goods, trade in services, on rules of origin , trade remedies, non-tariff barriers, technical barriers to trade and on sanitary and phytosanitary measures. Dispute resolution mechanisms and procedures are still being negotiated, but will presumably include designation of a dispute resolution body. The Committee of Senior Trade Officials implements

1296-660: The African Continental Free Trade Agreement initially seeks to reduce trade barriers between the different pillars of the African Economic Community, and eventually use these regional organizations as building blocks for the ultimate goal of an Africa-wide customs union. Negotiations continued in 2018 with Phase II, including policies of investment, competition and intellectual property rights. In January 2020, AU Assembly negotiations are envisaged to be concluded. A draft

1350-655: The CFTA may contribute to tackling poverty and inequality as its wide scope will facilitate structural changes in African economies. It is seen as a step towards meeting the African Union’s Agenda 2063 and the Sustainable Development Goals . The document was targeted to ensuring human rights were considered within the negotiations. According to Food and Agriculture Organization , recognizing

1404-485: The Council's decisions. The Committee is responsible for the development of programs and action plans for the implementation of the AfCFTA Agreement. The AfCFTA is set to be implemented in phases, and some of the future phases still under negotiation. Phase I covers trade in goods and trade in services. Phase II covers intellectual property rights , investment and competition policy. Phase III covers E-Commerce . At

1458-628: The European Union's free trade negotiations and agreements. At the international level, there are two important free access databases developed by international organizations for policy-makers and businesses: WTO's Regional Trade Agreements Information System As WTO members are obliged to notify to the Secretariat their free trade agreements, this database is constructed based on the most official source of information on free trade agreements (referred to as regional trade agreements in

1512-471: The GATT allows WTO members to establish free trade areas or to adopt interim agreements necessary for the establishment thereof, there are several conditions with respect to free trade areas, or interim agreements leading to the formation of free trade areas. Firstly, duties and other regulations maintained in each of the signatory parties to a free trade area, which are applicable at the time such free trade area

1566-587: The Protocol on Free Movement of People at the end of the 2018 Kigali Summit. Benin , Botswana , Eritrea , Guinea-Bissau , Nigeria , and Zambia were among the 11 countries that did not initially sign the agreement. After the 2018 Kigali summit, more signatures were added to the AfCFTA. At the 31st African Union Summit in Nouakchott on 1 July 2018, South Africa (the second largest economy of Africa), Sierra Leone , Namibia , Lesotho and Burundi joined

1620-539: The WTO language). The database allows users to seek information on trade agreements notified to the WTO by country or by topic (goods, services or goods and services). This database provides users with an updated list of all agreements in force, however, those not notified to the WTO may be missing. It also displays reports, tables and graphs containing statistics on these agreements, and particularly preferential tariff analysis. ITC's Market Access Map The Market Access Map

1674-457: The agreement, because a key concern was whether the agreement adequately prevented anti-competitive practices such as dumping . In July 2019, just months after being re-elected to a new term , Buhari agreed to adhere the Africa free trade at the 12th extraordinary session of the assembly of the union on AfCFTA. At the same meeting, Benin also committed to signing the agreement, leaving Eritrea as

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1728-515: The agreement. In February 2019, Guinea-Bissau , Zambia and Botswana also joined. Kenya and Ghana were the first nations to ratify the agreement, depositing their ratification on 10 May 2018. Of the signatories, 22 needed to deposit the instrument of ratification of the agreement for it to come into effect, and this occurred on April 29, 2019 when both Sierra Leone and the Sahrawi Arab Democratic Republic deposited

1782-667: The agreement. As a result, the agreement came into force 30 days later on May 30, 2019. President of Nigeria Muhammadu Buhari was particularly reluctant to join the AfCFTA, fearing it would hurt Nigerian entrepreneurship and local industries, and his decision not to was praised by some local groups including the Manufacturers Association of Nigeria and the Nigeria Labour Congress . The Nigerian government intended to consult further with local businesses in order to ensure private sector buy-in to

1836-427: The area was established. A second requirement stipulated by Article XXIV is that tariffs and other barriers to trade must be eliminated to substantially all the trade within the free trade area. Free trade agreements forming free trade areas generally lie outside the realm of the multilateral trading system. However, WTO members must notify to the Secretariat when they conclude new free trade agreements and in principle

1890-476: The depository by May 2020. Eritrea is the only AU member state which had not signed the agreement by 2019. Eritrea has not signed due to tensions with Ethiopia, but as of 2019, following the 2018 Eritrea–Ethiopia summit , the AU Commissioner for Trade and Industry expected that Eritrea would eventually sign the agreement. A July 2017 United Nations Economic Commission for Africa report argues that

1944-680: The draft. In March 2018, at the 10th Extraordinary Session of the African Union on AfCFTA, three separate agreements were signed: the African Continental Free Trade Agreement, the Kigali Declaration ; and the Protocol on Free Movement of Persons . The Protocol on Free Movement of Persons seeks to establish a visa-free zone within the AfCFTA countries, and support the creation of the African Union Passport . At

1998-479: The establishment of the Pan-African Payment and Settlement System (PAPSS), which allows payments among companies operating in Africa to be done in any local currency. In April 2024, the African Union announced that the AfCFTA entered into its operational phase of the agreement. The operational phase, which effectively puts the agreement into force, is characterized by the following actions: In 1963,

2052-404: The former will be entitled to preferential tariffs scheduled by the free trade area, the latter must pay MFN import duties. It is noted that in qualifying for origin criteria, there is a differential treatment between inputs originating within and outside a free trade area. Normally inputs originating in one FTA party will be considered as originating in the other party if they are incorporated in

2106-468: The implementation of the free trade area. As a result of Phase II negotiations more committees may be established via protocols. The AfCFTA Secretariat will be responsible for coordinating the implementation of the agreement and shall be an autonomous body within the AU system. Though it will have independent legal personality, it shall work closely with the AU Commission and receive its budget from

2160-432: The intersections of gender, agriculture, and trade, it is critical to ensure that the implementation of the AfCFTA addresses the nuanced and varied challenges that women face. It is vital that the operationalization of the AfCFTA agreement ensures that future trade policies, practices, and regulations promote gender equality and the empowerment of women and girls on the African continent, especially in supporting women to seize

2214-403: The manufacturing process in that other party. Sometimes, production costs arising in one party is also considered as that arising in another party. In preferential rules of origin , such differential treatment is normally provided for in the cumulation or accumulation provision. Such clause further explains the trade creation and trade diversion effects of a free trade area mentioned above, because

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2268-506: The new opportunities created ‘in agriculture’ by the AfCFTA. Implementation of the agreement that is not inclusive of women could result in a widening gender gap by negatively affecting women-led micro, small, or medium-sized enterprises and those who rely on informal trade (including cross border) for their livelihoods. [REDACTED]  This article incorporates text from a free content work. Licensed under CC BY-SA 3.0 ( license statement/permission ). Text taken from Seizing

2322-556: The only of the 55 African Union Member States not to sign up to the deal. Formally, Eritrea was not part of the initial agreement due to an ongoing state of war , but the 2018 peace agreement between Ethiopia and Eritrea ended the conflict and ended the barrier to Eritrean participation in the free trade agreement. As of August 2024, there are 54 signatories, of which 48 have deposited their instruments of ratification. Additionally, one country ( Somalia ) completed its domestic ratification, but had not yet deposited their ratification with

2376-513: The opportunities of the African Continental Free Trade Area for the economic empowerment of women in agriculture​ , FAO, FAO. Free trade area Customs unions are a special type of free trade area. All such areas have internal arrangements which parties conclude in order to liberalize and facilitate trade among themselves. The crucial difference between customs unions and free trade areas

2430-593: The risk of trade deflection, parties will adopt a system of preferential rules of origin . The term free trade area was originally meant by the General Agreement on Tariffs and Trade (GATT 1994) to include only trade in goods. An agreement with a similar purpose, i.e., to enhance liberalization of trade in services, is named under Article V of the General Agreement on Trade in Services (GATS) as an "economic integration agreement". However, in practice,

2484-494: The schedule of tariff concessions and other specific commitments. The 12th Extraordinary Session of the African Union on AfCFTA was called to launch the new agreement into its operational phase, which was hosted in Niamey on July 7, 2019. At its launch, five operational instruments that will govern the AfCFTA were activated: "the rules of origin ; the online negotiating forum; the monitoring and elimination of non-tariff barriers;

2538-628: The summit in Kigali on March 21, 2018, 44 countries signed the AfCFTA, 47 signed the Kigali Declaration, and 30 signed the Protocol on Free Movement of People. While a success, there were two notable holdouts: Nigeria and South Africa , the two largest economies in Africa. One complicating factor in the negotiations was that Africa had already been divided into eight separate free trade areas and/or customs unions , each with different regulations. These regional bodies will continue to exist;

2592-413: The term is now widely used to refer to agreements covering not only goods but also services and even investment. The formation of free trade areas is considered an exception to the most favored nation (MFN) principle in the World Trade Organization (WTO) because the preferences that parties to a free trade area exclusively grant each other go beyond their accession commitments. Although Article XXIV of

2646-480: The texts of free trade agreements are subject to review under the Committee on Regional Trade Agreements. Although a dispute arising within free trade areas is not subject to litigation at the WTO's Dispute Settlement Body, "there is no guarantee that WTO panels will abide by them and decline to exercise jurisdiction in a given case". Trade diversion and trade creation In general, trade diversion means that

2700-447: The volume of diverted trade is small. Free trade areas as public goods Economists have made attempts to evaluate the extent to which free trade areas can be considered public goods. They firstly address one key element of free trade areas, which is the system of embedded tribunals which act as arbitrators in international trade disputes. This system as a force of clarification for existing statutes and international economic policies

2754-544: The world's second largest continent. The agreement founding AfCFTA was brokered by the African Union (AU) and signed by 44 of its 55 member states in Kigali , Rwanda on March 21, 2018. The proposal was set to come into force 30 days after ratification by 22 of the signatory states. On April 29, 2019, the Saharawi Republic made the 22nd deposit of instruments of ratification, bringing the agreement into force on May 30; it entered its operational phase following

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2808-454: Was delayed due to the COVID-19 pandemic in Africa , and a new date (December 31, 2021) was set as the deadline for the conclusion of Phase II and III negotiations. The AfCFTA officially but largely symbolically launched on January 1, 2021. Among the 55 AU member states , 44 signed the African Continental Free Trade Agreement (consolidated text), 47 signed the Kigali Declaration and 30 signed

2862-837: Was developed by the International Trade Centre (ITC) with the objectives to facilitate businesses, governments and researchers in market access issues. The database, visible via the online tool Market Access Map, includes information on tariff and non-tariff barriers in all active trade agreements, not limited to those officially notified to the WTO. It also documents data on non-preferential trade agreements (for instance, Generalized System of Preferences schemes). Up until 2019, Market Access Map has provided downloadable links to texts agreements and their rules of origin. The new version of Market Access Map forthcoming this year will provide direct web links to relevant agreement pages and connect itself to other ITC's tools, particularly

2916-691: Was launched on July 17, 2016, at the 27th Ordinary Session of the African Union that was held in Kigali in Rwanda by Rwandan President Paul Kagame and the late Chadian President Idriss Déby . As of June 2018, the passport was planned to be rolled out and ready for use at borders worldwide by 2020, however the rollout has since been delayed into 2021. There are three types of African Union passport that will be issued: The passport has inscriptions in Arabic , English , French , Portuguese , and Swahili . The African Union anthem's lyrics are printed on

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