AfCFTA Digital Trade Protocol workshop ongoing in Ethiopia

Today, 6 December 2023, a workshop was held in Addis Ababa, Ethiopia, on the African Continental Free Trade Agreement (AfCFTA) and the AfCFTA Digital Trade Protocol that is under negotiation. The purpose of the workshop was to help businesses in Ethiopia (especially those from the ICT sector) to understand the AfCFTA and the Digital Trade Protocol in particular, so to prepare them to seize the opportunities offered by this regulation to expand their operations to other African markets.

Negotiations of the AfCFTA Digital Trade Protocol started in December 2022 following a decision taken by the AU Assembly of Heads of State and Government in February 2022 to include in the AfCFTA framework a Protocol covering e-commerce and digital trade in general, given the growing importance of such phenomena globally and at continental level. So far, four meetings have been held by the negotiators of such Protocol, which is expected to be presented this week to the AfCFTA Council of Ministers for endorsement. Its final adoption is scheduled for 2024, by the AU Assembly, that will finally approve it together with the Protocol on Women and Youth in Trade, also under negotiation.

During the workshop, the International Trade Centre (ITC) provided interesting information about the expectations from the implementation of the AfCFTA. According to the estimates made by such organization, the removal of tariffs on 97% of tariff lines in trade among African States, will unlock an export potential of about 22 billion USD, with a growth of intra-African exports of 43 percent.

To support the development of intra-African trade, the ITC launched in 2021 the One-Trade Africa (OTA) programme which aims at empowering African businesses, especially micro, small and medium-sized companies, in seizing the new market opportunities offered by the agreement. Such a programme has led to the organization of several workshops and awareness campaigns to illustrate the agreement and its benefits to African businesses, which according to the ICT are currently little aware about this agreement, more than 50% of them still ignoring its existence.

The United Nation Economic Commission for Africa (UNECA) provided additional projections regarding the implementation of the agreement. UNECA calculates that the AfCFTA will increase intra-African trade by 33.5% within the year 2045. Moreover, it is expected that the AfCFTA will encourage the diversification of the export baskets of African countries, currently concentrated in a few tariff lines, mainly commodities (agricultural or mineral) or products with low level of value addition.

The UNECA representative also pointed out the importance of two Annexes to the Protocol on Trade in Goods to the AfCFTA, namely: the Annex 6 on Technical Barriers to Trade and the Annex 7 on Sanitary and Phytosanitary Measures. These Annexes basically tend to harmonize product conformity standards among African States, by promoting the mutual recognition of testing, inspection and conformity assessment results between the exporting and importing countries so to avoid rejections of goods exchanged at intra-continental level.

With regard to the Digital Trade Protocol, UNECA highlighted that it aims at promoting the engagement in digital trade transactions by African companies and population, as well as the development of a digital economy, whose size is still small compared to other regions, especially for what regards e-commerce penetration. The Tony Blair Institute explained, based on a survey conducted in the country, that in Ethiopia the internet and e-commerce penetration is particularly low, compared to other African countries. In this regard, it was also noted that apart from a few exceptions, most of e-commerce platforms in Africa still operate at national level. The AfCFTA Digital Trade Protocol will aim to facilitate such platforms to scale-up their operations at continental level. The Protocol, explained UNECA, will cover issues such as the development of digital infrastructure within the continent (e.g., promotion of development of internet broadband, data centres and data localization arrangements), as well as digital payments, taxation on digital transactions and cross-border data flows. With regard to digital payments, it was highlighted that the Protocol will deal with the interoperability between digital payment platforms, including mobile money systems (such as the Kenyan M-Pesa and the Ethiopian Telebirr), to allow acceptance of payments made through one of these platforms in other African countries. Lastly, the agreement will deal with the legal recognition of electronic documents, i.e., of electronic versions of documents used in trade, including their authentication systems, such as the electronic signature.

For what regards Ethiopia, it was noted that its trade with other African countries is minimal: only 19% of the total exports of the country are directed to such States, mostly being food commodities, A main reason for this low trade was indicated in the high tariffs and trade taxes that Ethiopia, and in general, African countries apply to each other, as well as in the high incidence of Non-Tariff Barriers that in Africa is higher, compared to other regions.

The Ministry of Innovation and Technology of Ethiopia listed the measures that the country already put in place to unlock digital trade in the country and to prepare the implementation of the AfCFTA Digital Trade Protocol in its territory. Among them, the adoption of a Digital Ethiopia Strategy 2025, the approval of an electronic transaction proclamation that regulates e-commerce activities in the country and created a legal framework for the acceptance of e-receipts and for recognition of digital signatures. Moreover, a draft personal data protection proclamation is pending before the Ethiopian Parliament for approval that aims at strengthening the data protection in the country.

Finally, the Ministry of Trade and Regional Integration, communicated that Ethiopia recently submitted the AfCFTA list of tariff concessions for goods, while the one for services is under finalization.

The full recordings of the AfCFTA Digital Trade Protocol workshop can be listened to this link. Discussions are still ongoing.