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Which complementarity between the AfCFTA and the WTO TFA?

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Another policy brief from FERDI concludes that the implementation of the World Trade Organization (WTO) Trade Facilitation Agreement (TFA) by African countries could complement the African Continental Free Trade Area (AfCFTA) plans for boosting inter-Africa trade. The paper summarizes a previous study that analysed cross-border trade efficiency in 162 countries worldwide. These groups were clustered in 6 groups, including one of 43 African countries participating in the AfCFTA (referred to in the study as “Africa”), whose performances were compared with the other groups. It is important to clarify that each of such groups includes different States, with no overlapping presence  in more groups. They are the following:

  • landlocked LDCs (called “LL-LDCs”) – 16 States
  • Non-landlocked States, including least developed Small Island Developing States (SIDS), “NL-LDCs” – 19 States
  • Non-high-income SIDS and non-LDCs (called “SIDS”) 13 States
  • Other Developing Countries (called “ODCs”) – 60 States
  • High-Income Countries (called “HICs”) – 54 States

 

The results of such comparison, based mainly on the use of the OECD Trade Facilitation Indicators, showed that the 43 African countries member of the AfCFTA have among the highest time to import and export, performing much worse compared to High Income Countries (HICs), as shown in the cndlestick graphic below. This data, according to the study, is an indication of the relative (in)efficiency of Customs across Africa.

Since the main objective of the AfCFTA is to eliminate trade barriers (both tariff and non-tariff) and boost intra-Africa trade, the policy brief argues that implementing the measures listed in the Trade Facilitation Agreement’s would complement the AfCFTA tariff-reduction agenda, triggering reductions of delays in customs clearance by 2.7 days for imports and 1.7 days for exports. These reductions in time would translate into a tariff ad-valorem equivalent reduction (a reduction in the cost that traders encounter on imports and exports in/from Africa) in the range 3.6–7% for imports, with an 8.1% extra growth for exports, which is quite significant.

However, the study forgets that an Annex to the Protocol on Trade in Goods of the AfCFTA is specifically dedicated to trade facilitation, which basically is a verbatim copy of the WTO TFA. If the estimates in the paper are correct, the African countries signatories of the AfCFTA should point to the implementation of this Annex by committing adequate resources, as it would help to reduce import and export delays, slashing import costs and increasing competitiveness of African exports. A conclusion that seems to us like saying that water flows downhill... but at least the paper tries to quantify such delays' reductions.

However, an interesting information is that the average most-favored nation (MFN) duties (i.e. the duty rates applicable to countries with which no preferential trade agreement is in force) rates in Africa is 12.4%. This average is more accurate of the one calculated by African Union, which indicates it in 6.1 percent. In fact, the WTO World tariff profiles 2023 show that most of African states have average MFN tariff duty rates that are superior to 10%, the higher being in Central Africa and in some Horn of Africa countries (like Sudan, where the average MNF duty rate is 21.6%). On the other hand, in the United States and the EU, the average MFN tariff duty rates are between 3 and 5%. This means that currently, for an African country it is cheaper to import from these two trade blocks than importing from another African country. An exception, obviously, regards those African countries that are part of a Free Trade Area or a Customs Union, where customs duties on respective trade exchanges are removed. This argument, however, highlights how important is for African States to respect the AfCFTA engagements by completing the tariff dismantling process under the agreement, which is based on different liberalization calendards, according to the level of development of African States (respectively, 5, 10, 13 or 15 years). Only this factor, combined with the elimination of Non-Tariff Barriers among African States, can effectively lead to an explosion of intra-African trade in the next decades, without forgetting that for trading effectively and at a low cost, Africa needs critical infrastrure as well, at present still lacking.

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