By Sunday Oghayei, Ph.D.
The Heads of States and Government of Economic Community of West African States (ECOWAS) have repeatedly underscored the importance of market integration to unlocking greater gains from trade in West Africa. Several policy initiatives have been embarked upon to deepen trade among ECOWAS Member States.
The ECOWAS revised Treaty of 24th July, 1993 provided for an integrated development strategy for the region. The recently signed African Continental Free Trade Agreement (AfCFTA) is also geared towards deepening trade integration in Africa through market integration and trade facilitation reforms that would have positive impacts on investments.
The specific Objectives of the AfCFTA can be categorized into three, namely; market access issues: (a) progressively eliminate tariffs and non-tariff barriers to trade in goods and (b) progressively liberalise trade in services; Cooperation areas on: (a) investment, intellectual property rights and competition policy, (b) all trade-related areas, (c) customs matters and the implementation of trade facilitation measures; and Institutional provisions: (d) establish a mechanism for the settlement of disputes concerning their rights and obligations, and (e) establish and maintain an institutional framework for the implementation and administration of the AfCFTA.
The formation of ECOWAS and the signing of the AfCFTA are both designed to benefit the Region’s citizens by providing more opportunities to produce and sell goods, services and attract investment. Although, at the ECOWAS regional level, much more can be achieved in the area of integration, particularly, the free movement of persons and goods.
While noting that the AfCFTA do not explicitly mention regional economic bodies contributing meaningfully to the implementation of the provisions of the agreement except for Regional Economic Communities (RECs) being represented in the Committee of Senior Trade Officials in an advisory capacity; Article 19 on Conflict and Inconsistency with Regional Agreements of the signed AGREEMENT ESTABLISHING THE AFRICAN CONTINENTAL FREE TRADE AREA provides that State Parties that are members of other regional economic communities, regional trading arrangements and custom unions, which have attained among themselves higher levels of regional integration than under this Agreement, shall maintain such higher levels among themselves.
It is therefore important to acknowledge that RECs may rightly be the channel towards an effective implementation of the AfCFTA. In view of the status of various regional integration particularly ECOWAS, including the nature of respective economies within ECOWAS, such as uneven development; varying challenges will continue to exist, if implementation of the AfCFTA do not leverage on the gains of integration in ECOWAS for the implementation of the AfCFTA.
Hence, the need for African countries to make provision for a mechanism for super-national initiatives in the current framework of the AfCFTA that would ensure effective implementation of the agreement.
While the AfCFTA provides the countries of the region with a better chance to contend with the ferociousness of the global market, Regional institutions are still germane to the AfCFTA implementation because regional objectives exist to exploit economies of scale and attain economic efficiencies.
The various Customs Union must function properly to promote regional integration and enhance the type of cooperation that AfCFTA envisages. Only the regional institutions could guarantee the gains of AfCFTA to Member States through achieving coherence, efficacy and ensure compliance and implementation of country commitments.
Although, there are challenges facing the ECOWAS region with respect to the full implementation of the various integration initiatives, a regional approach to the implementation of the AfCFTA is desirable to achieve the specific objectives of the agreement.
Notwithstanding the fact that some initiatives were started since 1990 but are yet to achieve intended goals. The agenda needs to move along much faster because the time it takes to get things done is a cost to the private sector and it’s a cost in terms of the credibility to the community at large. The region should see the AfCFTA as an agreement that will spur the region into accelerating implementation of regional integration initiatives particularly the single economy that is needed as envisaged by 2020.
In the same cein that the EPA with the EU accelerated implementation of some regional initiatives in the region, AfCFTA would assist the region deepen integration and achieve more success within the broad objectives of the AfCFTA.
Enhanced Competitiveness and Effective business facilitation:
The public good arising from effective implementation of the AfCFTA will be from the perspective of the competitiveness of the region.
Competitiveness is germane to benefiting from the gains of the AfCFTA. The competitiveness of the ECOWAS region is anchored on reducing trade cost for traders. The key challenge to intra-African and regional trade are non-tariff barriers that stifle the movement of goods, services and people across borders.
Notwithstanding the elimination of tariffs, Non-Tariff Measures (NTMs) would deprive the countries from the gains of the AfCFTA. Currently, trade in intermediate goods accounts for 60 percent of global commerce, and 30 percent of global trade is intra-firm. For firms that rely on just-in-time production, long waiting times at borders are unacceptable.
High trade cost arising from NTMs need to be addressed. Unfortunately, trade costs are still – on average – 1.8 times higher in developing than in developed countries.
The Revised Treaty of ECOWAS makes explicit provision for market integration. This is on the presumption that a fully liberalized and integrated market in the region would create favorable conditions for sustained growth in output of regionally and internationally competitive goods and services, and spur the economic and social development of all of the participating Member States.
The focus is anchored on improving the business and trade Facilitation environment which is important to becoming more competitive and create the conditions for economic growth. In fact, red tape, inefficiencies, and corruption in cross-border trade can add as much as 15% to the price of goods which can undermine the competitiveness of developing country like ECOWAS’ exports. The gains from trade facilitation go beyond efficiency gains. Business and trade facilitation also has a direct bearing on good governance. It has measures that involve new technologies and institutional reforms that can improve governance and formalise the informal sector. With less paperwork and fewer palms to grease, public revenue goes up and new resources is generated for spending on essential services. All of these make trade facilitation according to UNCTAD, “a new frontier of competitiveness. Regional initiatives have been developed to address some of the challenges to cross border trade. The AfCFTA of course will not address these issues from zero level but would leverage on what the regions have accomplished to be successful. Some quick wins will come from what have been done at the REC level. While others that have long term implementation implication should also leverage on the RECs platform for effective implementation of the AfCFTA.
Further, the relationship between business and trade facilitation and development is dynamic. Countries that trade more and have more financial resources are in a better position to invest in reforms that make trade faster and more transparent. At the same time, faster and more transparent trade leads to yet more trade, higher revenues, and greater institutional development. The ECOWAS region has trade and market integration as the cornerstone of its integration and worthy to be leveraged upon by ECOWAS Member States for the implementation of the AfCFTA.
Adoption of regional approaches in the construction of market access offers: Differing national and regional initiatives within the various customs union in Africa particularly ECOWAS could distort gains from the AfCFTA and affect effective implementation of the agreement. It could also adversely affect regional trade and hamper the proper functioning of the Regional Economic Community like ECOWAS particularly the application of the CET to construct the market access. A regional approach to market access would have served the RECs and AfCFTA well in achieving its objectives on market access issues.
Bilateral cooperation and agreements: While the AfCFTA recognize the need for bilateral cooperation and agreements with each other to coordinate and apply some trade and trade-related provisions of the AfCFTA, this approach may create problems. It would be difficult for traders to export to other countries in the region if they must comply with the specific procedures set down in each country (54 countries) bilateral agreement. There is also a risk of conflicting legal requirements for a country that has entered into several overlapping bilateral agreements. Hence, implementation at the ECOWAS sub-regional level will reduce such bilateral agreements to only 5 REC instead of the 54 countries.
Complementary reforms: Every trade agreement provides for reforms at national level. The AfCFTA will require countries to embark on complementary reforms to be able to benefit from the gains of the agreement. Some countries, due to size and resources, may lack the required instrument to undertake certain reforms because of inadequate budgets or other macroeconomic constraints but it will be less expensive if countries in the region share the costs.
Implementation of the AfCFTA in ECOWAS: There are four ideas in the conception of regional role or approach for the implementation of the AfCFTA in ECOWAS sub-region. ECOWAS could be:
• An enabling power, seeking to establish a loose concert of the principles and practices on the core issues of the AfCTFA, so that commitments are exercised in a spirit of self-restraint by its dominant entities like Nigeria.
• A law-abiding power, seeking to entrench respect for municipal and international law, so that a new regional order that AfCFTA seeks to create can be constructed by a sense of obligation to rules rather than by the creeping assertion of power.
• A pluralistic power, facilitating the involvement of the widest spectrum of participants in regional endeavors, eschewing exclusivist mini-lateral constructs that smack of bloc-based politics and economic alignment towards the effective implementation of the AfCFTA.
• A stabilizing power, prepared to use its geopolitical weight to craft a ‘balance of interests within the region. The ECOWAS Commission have been playing this role since its inception toward deeper integration and movement towards a single market and economy in the sub-region. Notwithstanding the challenges within the sub-region, the AfCFTA provides an impetus to further deepen integration in same manner as the EPA to the region.
African countries signed the AfCFTA with the belief that a fully liberalized and integrated market would facilitate sustained economic growth and development in the Member States through the production and export of internationally competitive goods and services. While the present architecture of the framework agreement for the AfCFTA do not recognize a role for RECs apart from advisory, in order to pre-empt and to mitigate the adverse consequences of disparities and polarization in the Continent, the RECs can play direct and indirect roles for the effective implementation of the AfCFTA. The role of Regional bodies like ECOWAS in the implementation of the agreement should be recognized early and appreciated. The fact is, in most areas of the AfCFTA, particularly market access issues and cooperation areas, RECs can play a leading role.
A dual governance structure is recommended for the AfCFTA. Taking cognizance of developments at RECs and Customs Union already formed, the AfCFTA should leverage on this gains to achieve its objectives of a Continent wide market integration. Having missed that from the beginning of the architecture of the CFTA, ECOWAS may adopt a regional approach to drive the implementation of the AfCFTA in the sub-region.