The Continental FTA should develop its own REC acquis

By Gerhard Erasmus, founder and associate at tralac

THE notion of the “REC acquis” has become a notable feature of intra-African trade negotiations. What is the acquis and how could it help to design trade arrangements suitable for 21st century conditions and challenges? A recap of recent negotiations will shed light on how the acquis has been introduced into the African trade and integration debate. We also offer ideas on how to utilize this concept in a more imaginative manner.

When the Tripartite FTA idea was launched in October 2008 the expectation was that an inclusive FTA would be formed. This would have resolved “the challenges of multiple membership and expedite the regional and continental integration processes”, as stated in the draft version of this Agreement. It did not happen.

The process started to go awry when, in 2011, the TFTA Negotiating Principles were adopted. One of them introduced the novel concept of the REC acquis into the vocabulary and practice of the TFTA negotiations. This Principle and its clarification provided as follows:

Building on the acquis of the existing REC FTAs in terms of consolidating tariff liberalisation in each REC FTA
Acquis is a French term meaning “that which has been agreed”. In the context of the Tripartite Free Trade Agreement it means that the negotiations should start from the point at which of the COMESA, EAC and SADC trade negotiations have reached. Tariff negotiations and the exchange of tariff concessions would be among Member/Partner States of the Tripartite FTA that have no preferential arrangements in place between them. This will both preserve the acquis and build on it.

This was simply a sui generis formulation of a negotiating strategy. There was no legal obligation to approach the negotiations in this manner. African RECs do not have, as part of their legal obligations, anything resembling this European Union acquis concept. It never figured in any REC case law or the jurisprudence of African tribunals.
In the TFTA context the acquis has been formulated with a very specific and rather limited objective in mind; to steer the negotiations in order to ensure a particular set of tariff offers; which were to be exchanged only between those tripartite states which have not concluded FTAs with each other. Those who are in existing FTAs continued to trade in terms of their existing obligations and would not negotiate additional trade liberalization schedules. The outcomes would amount to new FTAs in their own right; with more overlapping regional arrangements and a more complicated continental trade picture.

There was another noteworthy angle to the TFTA negotiations; it started off with a traditional trade in goods agenda. Services were to be negotiated separately and only after having concluded the goods agreement. This schizophrenic approach suggested that services are a separate and different agenda. This was a mistake. Modern FTAs are comprehensive arrangements which recognise the essential and complementary role of those services which make for competitive production processes and efficient trade facilitation. There is a real danger that the CFTA will repeat this error. The latest draft of CFTA Guiding Principles also mentions two separate agreements for goods and services.

The CFTA Initiative

The negotiations for the Continental Free Trade Area (CFTA) will be launched in June 2015. The original idea was that it should build on the results of the TFTA and other regional integration endeavours. It has now become obvious that that it will not be a good idea to copy the TFTA.

The decision to use the TFTA as a kind of blueprint for the CFTA emerged right at the outset; when it was still believed that one single FTA, consisting of the 26 members states of the EAC, COMESA and SADC, would have emerged. In January 2012 the Assembly of Heads of State and Government of the African Union (AU) took certain decisions to enhance intra-African trade and set a continental agenda for the 21st century. It endorsed an Action Plan for Boosting Intra-African Trade and agreed on a roadmap to establish a Continental Free Trade Area (CFTA). The CFTA had to be built on new trade arrangements still to be constructed. The latter consisted of the following milestones:

• Finalization of the Tripartite FTA by 2014
Completion of FTAs by non-Tripartite RECs through parallel arrangements similar to the TFTA or reflecting the preferences of their Member States; between 2012 and 2014.
• Consolidation of the TFTA and other FTAs into the CFTA between 2015 and 2016.
• Establishment of the CFTA by 2017.

Where do we stand?

The TFTA negotiations have been difficult and cumbersome. At the beginning of June 2015 a final agreement (which will only cover trade in goods and comprising of limited tariff offers) is still to be concluded.

One of the lessons to be learned is that the traditional trade in goods agenda, under the direction of the tariff based acquis employed in the TFTA, brings with it major policy and technical challenges and very few benefits. There are also inherent challenges in reaching agreement on sensitive issues (trade remedies, dispute settlement, and movement of business persons), finalizing tariff offers between key players and adopting the concomitant rules of origin. The reason is the fact that the TFTA approach is inherently conservative and protectionist. The establishment of a new and inclusive FTA proved to be beyond the reach of the TFTA negotiators.

The immediate implication for the CFTA negotiations is that the TFTA is not a ready-made launching pad for a meaningful continental trade deal. If the CFTA is to enhance intra African trade in any significant manner it cannot come about by simply adding on to what TFTA produced.

The other milestone mentioned in 2012 of “parallel arrangements similar to the TFTA consisting of FTAs by non-Tripartite RECs” is also missing. The same applies to the “consolidation of the TFTA and other FTAs into the CFTA between 2015 and 2016”. It should be recognized that these objectives should actually be pursued as part of the CFTA process. It will be possible if the negotiations are conducted differently.

A new acquis for the CFTA

The CFTA initiative will have to find its own unique formula for clarifying its aims and for conducting its negotiations. For this it needs the right Guiding Principles. If the TFTA Negotiating Principles are copied, we will see the same inflexibilities.

If the notion of the REC acquis is to be used again, it requires a new understanding. The REC acquis can be helpful if used in a more comprehensive and technically sound manner.

In the EU context the acquis means: The acquis is the body of common rights and obligations that is binding on all the EU member states. It is constantly evolving and comprises:

• the content, principles and political objectives of the Treaties;
• legislation adopted pursuant to the Treaties and the case law of the Court of Justice;
• declarations and resolutions adopted by the Union;
• instruments under the Common Foreign and Security Policy;
• international agreements concluded by the Union and those entered into by the member states among themselves within the sphere of the Union’s activities.

The essential point to decide is one about ambition and scope – whether the CFTA should be REC plus. It if will not be, why bother? Unlike the EU members, African states do not belong to one single legal compact. The CFTA has to become this common home. The RECs are separate legal entities, albeit with significant overlapping memberships. It means there are different sets of acquis. We will have to blend them in a meaningful and comprehensive manner. The CFTA notion of the acquis should not be limited to tariffs only.

It will be a useful starting point for developing a fresh understanding of the REC acquis by recognising the inclusive element in the EU definition cited above. We should find the commonalities among the African RECs and use them as the platform from where to start with extending offers. This should include all those disciplines necessary to allow intra-African trade to flourish; including an effective and common dispute settlement arrangement. Exciting developments are occurring in e.g. COMESA and in the EAC with regard to the recognition of “community law” as a distinct corpus of law and why it is necessary, as part thereof, to develop effective remedies for all parties involved in intra REC trade, commerce and investment.

The CFTA negotiations have not yet started. Those responsible for launching the process and for proposing Guiding Principles should learn from the TFTA negotiations. And they should make use of a clean slate when embarking on this challenging task. The can start doing so by revisiting the meaning of the REC acquis.