Online tariff negotiation tool for Africa
The agreement to establish the African Continental Free Trade Area (AfCFTA) is the most ambitious trade agreement since the establishment of the World Trade Organization in 1994.
The AfCFTA represents an essential landmark for African economic integration and aims to increase intra-African trade, which remains low compared with other global regions. Nevertheless, individual countries need to make choices.
In 2018, African trade ministers endorsed the modalities for tariff liberalization, which set out the parameters for the negotiation process such as the trade regime and timeframes for implementation. Compared with other trade agreements between developing countries, which account for the liberalization of no more than 80% of tariff lines, the AfCFTA will eventually liberalize at least 97% of tariff lines accounting for 90% of imports at the end of the implementation period.
Yet, while these negotiations will form the cornerstone of the AfCFTA, undertaking them is complex.
African Union Member States were due to start trading under the AfCFTA from July 2020; however, the July 2019 deadline to submit proposals passed with only a few countries submitting their offers. Negotiations involve many bilateral tariff negotiations and a multiplicity of partners. Member States participating in Regional Economic Commissions (RECs) that are not customs unions need to negotiate as individual states, whereas members of customs unions (that is to say the Economic Community of West African States, the East African Community, and the Southern African Customs Union) negotiate collectively. Participating countries need a large set of data to run these negotiations successfully. The basis for negotiations is the Most-Favoured-Nation (MFN) rate in 2019, the year the agreement entered into force. Such factors can lead to significant challenges in terms of trade data availability. MFN tariffs may exist in differing versions of the Harmonization System (HS) that does not correspond to national tariff lines, and trade data for 2014-2016 or 2015-2017 may be incomplete, scarce, or expressed in different HS versions.
An online platform could greatly facilitate and accelerate the harmonization of data needed for negotiations and support African negotiators in the preparation and submission of offers based on countries’ priorities linked to sensitive criteria such as minimizing tariff revenue loss, temporarily protecting infant industries, and ensuring food security.
Under the umbrella of the African Trade Observatory project and building on ITC’s pioneering role in providing up-to-date market information, ITC launched the AfCFTA Tariff Negotiation Tool in 2019, the first tariff negotiation tool of its kind.
ITC developed the tool in close collaboration with the African Union and with the contribution of the European Union. The online tool facilitates the negotiation of tariff lines. It provides a secure exchange platform to chief negotiators to automatically generate and share tariff concession offers in a transparent, timely, and straightforward manner, as well as to formulate counterproposals.
The online tool allows parties to run negotiations simultaneously, with instant interactions among counterparts, either single countries or regional economic groups, and without the necessity of in-person meetings.
Also, the tool offers analytical features to compare, send and receive all proposals and counterproposals, and to verify their validity based on the criteria established in the AfCFTA. It also allows for tracking the history of the negotiations and for follow-up on all rounds.
Tha AfCFTA Tariff Negotiation Tool ensures that the tariff concessions on offer meet both the technical standards and quality required in negotiations. While ensuring confidentiality and technical soundness, the tool also contributes to enhancing transparency because it verifies data consistency and compliance with AfCFTA tariff modalities. For example, it validates the number of national tariff lines that should be included in each list – non-sensitive, sensitive, and exclusion – for each specific group of countries (LDC, non-LDC, and the so-called G6 of Ethiopia, Madagascar, Malawi, Sudan, Zambia, and Zimbabwe), as well as double-qualification and anti-concentration clauses.
The online tool is accompanied by a capacity-building component to ensure that it is fully and effectively implemented.
During the first quarter of 2020, more than 100 African negotiators took part in four technical training courses on tariff negotiations in Senegal, Namibia, Tunisia and Zimbabwe.
A similar tool could also be developed for the negotiation of concessions on trade in services, which comprises Phase I of the AfCFTA negotiations. The expertise gained in the use of this tool would facilitate its use in a similar context.
The online tool will also help the African Union in identifying countries that will require support in making orderly adjustments to sudden tariff revenue losses for which mechanisms and resources have already been identified.
Designed for negotiations among a large number of parties, the AfCFTA Tariff Negotiation Tool could be replicated for negotiations for other regional trade agreements and for preliminary intra-regional discussions to agree on a single offer before submitting it to counterparts.