After a great conversation with the Exceptional Ricardo Machado of Aenergy, we wanted to discuss a very IMPORTANT topic for Africa, the AfCFTA: The Africa Continental Free Trade Agreement. This is literally a seismic and Historic Opportunity that the continent is pushing forward. With the operational phase launched this past Sunday, we wanted to mark the occasion our own way. We spoke to Christophe Bondy, one of the World most renowned legal minds of international trade, having advised the Canada Government in the NAFTA and CETA agreement and also givenb expert testimony to the UK House of Commons Brexit Committee on prospects for UK-EU trading arrangements post-Brexit. We wanted to capture his sentiment on the AfCFTA and we covered the points below
- General Information on International Trade Agreement
- Current status of AfCFTA and Brexit-type risk assessment
- Lessons learnt from other International Trade Agreement
Want to listen to the Live Interview? Click HERE
Good morning, Good afternoon, Good evening, my dear readers. I am Tony Tiyou from Renewables in Africa. On the 30th of May 2019, AFC FTA, the African Continental Free Trade Agreement came into form. Nigeria which is the largest economy in the continent ratified the treaty on the 7th of July 2019 during the African Union Summit in Niamey, Niger. This caused tremendous momentum for Africa and the world in trade. Where are we exactly in the AFC FTA? What can we learn from other big treaties? We spoke to Christophe Bondy, one of the world’s most experienced investment treaty’s counsel to get his impression and expand our knowledge of what is really at stake. Pretty deep conversation and you’ll definitely get invested!
RiA (Q1): Good morning, Christophe! It’s a pleasure to be seeing you today. We met in Tunisia at a conference and we talked about the Blue Economy. Today, it’s going to be a little bit different. We wanted to explore more on the international trade agreement especially what is currently happening in Africa which is the AFC FTA and pick up some insight and advice on how we can strengthen it. If you don’t mind me, just to give justice to your immense career, could we have a very short introduction of yourself for our audience?
CB (A1): My background is in international trade and investment. I was senior counsel to Canada for many years in the Trade Law Bureau and in that connection was involved as counsel for the negotiations for the Canada-EU Free Trade Agreement. As well as the negotiation of trade and investments agreements around the world, I also have a great deal of experience as senior counsel on international investment claims and so my practice in London at Cooley LLP focuses on international investment law and advising on international trade issues.
RiA (Q2): Very impressive career so far! You’ve worked on a number of free trade agreements; you’ve advised the Canadian government on NAFTA and that was recently negotiated. You also worked with them for CETA, the agreement with Europe, and I know you’ve made some appearances talking about BREXIT. So, for such a huge undertaking, we are the different steps that you can identify?
CB (A2): It’s a long process. You initially have a state deciding on its own the proposed targets for future trade expansion, doing its own internal analysis on where there are likely opportunities with other countries abroad. It will then seek to implement that by entering into a scoping agreement with a particular country or group of countries to see if that country or group is ready to pursue. There would be deeper analysis of that; what are the likely benefits to flow from liberalizing trade between the two economies and if those scoping discussions last over a year and go well, then the parties will set out to negotiate a free trade agreement. Modern free trade agreements are pretty all encompassing. They cover a vast range of activities reflecting the complexity of the modern economy so that then leads to a process of iterative rounds working on up to 25 or 30 different chapters each of which makes up part of that attempt at liberalization between the two economies.
RiA (Q3): So, we know that a negotiation only between two parties is already complex enough. Now, we are focused on international agreements about 52 countries in Africa which is quite huge. What are the key challenges that you can foresee?
CB (A3): Well, from an analysis point of view, it’s more than three dimensional chess , it’s like 52 dimensional chess because each country should be considering the implications, the opportunities for themselves to open their economy to any one of those other 50+ countries and what are the challenges that my own economy is going to face if we remove certain protections as barriers. All of a sudden remove a 30% tariff on a particular aspect of agricultural commodity for example, how is that going to impact our own domestic producers but then on the flip side, what are the opportunities for those producers across Africa? So, yes, it does become much more complex and it reflects the various substantial investment that is needed on the part of each state to really understand how their economy works and what are the opportunities across Africa. At the same time, it makes it all the more exciting because you’re not just slightly opening and liberalizing your economy but you’re opening your economy out to potentially enormous opportunities.
RiA (Q4): The trade opportunities and benefits are obviously huge and to enforce that trade there needs to be a number of legal rules and regulations. So, how do you balance the legal and economic objectives especially across that many countries?
CB (A4): Well, I think you start out with your economic objectives and you try to express them as clearly as possible in the agreement and that is reflected in certain things like liberalization, reduction of tariff, that’s where it actually becomes quite concrete. We used to charge a 15% tariff on ‘x’ category of agricultural goods, now we are going to reduce that to 2% or we used to have a rule that said in order to provide a service in our country, you had to be a national; we’re going to eliminate that or soften that requirement. So, you start in a sense with economic analysis, you try to express that as clearly as possible in a legal analysis and it ends up because of the complexity of the modern economies addressing a range of issues and I think the core issue in most trade agreements is getting rid of those discriminatory barriers like tariffs and rules that say only a national can apply but beyond that, you’ll see this is in more modern free trade agreements. What they are really trying to do is level the playing field between the different countries in that economic space by seeking to have common approaches or a common threshold for things like environmental protection, labor standards, intellectual property standards so that everyone is working in a roughly level playing field. That’s the interesting thing about these agreements. Many people think this is a way to reduce environmental or labor protection, actually to the contrary, if you look at something like the CPTPP, it’s actually a way to bring everyone in that economic space up to a certain standard. Often times you have engagements as part of a treaty to sign up to things like various ILO conventions.
RiA (Q5): So, looking at what’s currently happening in the African Union. We’ve learnt that the Nigerian president has announced that Nigeria is going to be ratifying the treaty, so we are already past the threshold of 22 countries for the agreement to come into force. However, we can see that there is still a lot to be done. From your understanding of the agreement and being an international expert, what needs to be done in order to start trading and see those benefits?
CB (A5): Right! I see the agreement itself as a very positive step in a politically strong direction in favor of opening up the African continent. It’s a terrific idea and many of the legal structures that one would expect in a trade agreement are set out in the African Continental Free Trade Agreement. What I see still needs to be done is the negotiation of the specific commitments each country is going to take in relation to tariffs applicable to certain categories of goods. More on the way rules of origin will work for goods coming into each of these countries, specific commitments with regards to national treatment and market access in services and those are all the really difficult bits. Those are the bits where you say ‘yes, we will actually offer this level of access’. The treaty right now provides a framework for those things to be addressed but the hard work of making concessions in order to gain certain advantages, I think it remains to be done.
RiA (Q6): It’s an important point that you just raised. One of the criticisms that we usually hear from these free trade agreements is that it is for big businesses. So, the little man and woman on the street doesn’t feel like they are connected to it and they feel left behind. You sat around the table with very important people. How do issues like that come into play? How do we safeguard the population in this kind of agreement where we can see the macro benefits? How do we still protect the little man/woman?
CB (A6): Well, in the development of each country’s offer typically from the experience I’ve had, you will engage in a series of consultations with stakeholders. Those stakeholders should include important parts of the economy and for individual producers like a farmer, for example, hopefully will be part of a certain association and that association of soy bean producers or cattle farmers would put forward their point of view in consultations with the government about the benefits they think might flow from the agreement or some of the challenges they think it might present. It’s out of that inter-action with civil society that the state will typically develop its position, offer in these agreements. So, I think that engagement on the part of civil society is very important and it is a way of reassuring that those voices are heard. Again, I think it’s awkward for any one individual in a particular sector to interact with the government and have their voices heard but I think with a ‘union fait la force’ you get those people together and they can make representations and influence policy.
RiA (Q7): To unlock the potential of these agreements, we need to boost certain key sectors like infrastructure in the case of Africa, infrastructure in energy especially clean energy which is very topical, and we are Renewables in Africa. We are advocating for more clean energy and renewables into the sector. From your experience, how much of it is highlighted in those discussions? Does it cause any friction usually from different parties?
CB (A7): There are several ways this could be reflected in a trade agreement and I actually haven’t seen some of these elements in this current agreement. So, they remain to be discussed but for example, in the CETA and most modern free trade agreement, there is a chapter on sustainable development, I think that is something to consider in terms of supplementing the current agreement. There is usually also a full chapter on environmental standards, and I think that remains to be done in the context of future iterations of this agreement. There is usually a chapter on energy and so those are things that can be hard wired into an agreement. On the other side, with regard to renewables, you also have to address the issue of subsidies and usually a free trade agreement will seek to impose a framework on the granting of subsidies not preventing them but certainly that they be notified and there be at least transparency with regard to the approach taken.
RiA (Q8): That’s fantastic! Now we’re living in a globalized world so we shouldn’t be isolated and ignore what is happening. In the UK, there is the issue of BREXIT. In current trade agreements, we cannot ignore such an issue occurring. In African union, we are looking at 52 countries and if they all come together, how can we prepare for a BREXIT type scenario? What would your advice be so that we would not be surprised when it happens?
CB (A8): Do you mean where one of the members of the current African Continental Free Trade Agreement might decide to leave?
RiA (Q9): Yes. Let’s use a scenario of Nigeria wanting to ratify which is great as it has the biggest economy in the continent. If they decide to leave ten years down the line, that will jeopardize the agreement across Africa. How do we prepare for that?
CB (A9): I think that the situation visibly between Britain and the EU is unique precisely because of the very deep integration between the UK and the rest of the European Union. The single market in the EU is not a free trade area, it’s goes well beyond that because it is an area with deep regulatory integration. It means that you can make a product in the north of England, ship it to Italy and have no concerns whether or not that complies with a common regulatory framework because it’s in place. What the AFC FTA is seeking to achieve is something arguably more modest than that because it’s simply trying to get rid of some of the main discriminatory barriers like tariffs or nationality rules in relation to the supply of services. So, I think that from that point of view, when any country in this agreement at some point chooses to step away from it, it wouldn’t create the kind of deep crisis that the UK-BREXIT situation has created because there isn’t that level of deep legal integration between the different members of the African continent. That being said, what would be an issue at that point is each member of that agreement saying to themselves ‘well, can I offer this level of openness to all members. Is it because I was thinking I was going to benefit from access to a big market like Nigeria?” So, there may be a rethinking at that point for some of the concessions that were made but I don’t see it as potentially catastrophic as the situation the UK is currently facing despite it being unfortunate. Half of its trade goes to the rest of the EU and it’s in the midst of blowing up the bridge to the continent of Europe.
RiA (Q10): I would say to some extent I agree with you. I would say that the EU started as an economic project, the EEA, then it evolved into a political project. I’m simply saying the African Union is an economic project as well but, in the text, there is provision to later on create a single currency and passport. For me, that shows a road going toward what the EU has done but your warning is still valid.
CB (A10): I see what you mean. The basic rule is the deeper the integration, the more difficult it is to exit that situation. I would hesitate to characterize the EU as heading towards a political union simply because many of the things that are characterized in the single market were really place in place to facilitate trade and ironically, they were put in place and largely driven by UK people. Back in the 80s and early 90s, 300 separate measures were put forward in the UK to better integrate trade and it ultimately comes down to regulation. It is one thing to say that there is no tariff barrier for you to sell into my market compared to saying that your product regulation is entirely compatible with mine and that second step is really what a single market is about. If the African Union can get to that level of integration that the EU has got to then that’s so much better because I think it’s led to immense prosperity on the part of the EU, but you have to walk before you can run.
RiA (Q11): Absolutely, I agree with you. So, let me just ask you the last set of questions. You’ve been part of many negotiation teams and it is very hard work especially when you come in and have long days and nights. How do you build an effective negotiation team in the context of Africa, especially for those small countries because a country like Cote d’Ivoire or Ghana are big enough so it would be easier for them to form a team? If you were a country like Sao Tome and principe, how do you build an effective team to still defend the interests of your country?
CB (A11): I think it is challenging. I think what you need for these teams are a combination of economic skills, negotiating skills, legal skills. Ideally each government is going to be building up a core of officials who really can take the time to deepen their knowledge of this very important area and seek in a kind of targeted way support from external services or suppliers. The World Bank certainly offers some support in that regard but there could be other suppliers. I think another approach could be for many of the smaller countries to pool their resources and try to band together in a regional way but that also depends on negotiations and collaboration. It does that an assessment of what do we have to work with and what realistically can we commit to this and if we can’t or don’t have those resources, we have to go out to get them somewhere. I was a government official for nearly a decade and I just thought we see it as a privilege to have the ability to help other government officials really get up to curve and empower themselves to be able to function effectively in this negotiation but also going forward.
RiA (Q12): So, if we’re talking about key trends, the TPP (Trans Pacific Partnership) is currently on hold or slowed down a little bit, the NAFTA was recently renegotiated with the arrival of President Trump and the CETA is signed but almost got derailed by Belgium. The little man/woman might be thinking about what he/she can learn from these big trade agreements and wondering if it’s really a good thing?
CB (A12): I think that there have been protectionists, nationalists, anti-globalist forces that have started to challenge this move towards liberalization and I think there is a real responsibility on the part of those who are engaged in these agreements to explain exactly how they function, the implications, the benefits and the challenges they present so that the people within the country can have an intelligent, informed discussion and reach a consensus on a policy way forward. We are lucky that in that while the TPP itself was stalled because of the US pullout when President Trump was elected, the 11 remaining members of the TPP pulled back and said that they really wanted it to happen so it led to the rebirth of the CPTPP (Comprehensive and Progressive TPP) which is all the 11 remaining member states and is now in force. The CETA is now provisionally in force. The original NAFTA is still in force and the parties were able to agree on a NAFTA 2.0 and I think if enough intelligent, dedicated and informed people are focused on what benefits can flow and also thinking of how they can be properly balanced to address some of the concerns people may have, they will continue to bring their benefits. We are certainly in a point right now where that has been challenged by a lot of nationalist, protectionist forces.
RiA (Q13): The last question is kind of two questions in one. When the AFC FTA comes into force would be the single largest free trade agreement since the establishment of the WTO in 1994. What does that mean for the big dogs like the US, EU, China and India and how does it help to drive the topic of universal access decided by the UN which should hopefully be in fruition by 2030?
CB (A13): I think the creation of a continental free trade area in Africa honestly has the potential of unlocking immense wealth. It’s a basic rule in trade that you trade with your neighbors and there’s a huge irony in this current situation in that often times European states or other non-African states have better access to African markets than African states have with their neighbors. I see this as not a problem for NAFTA or the EU but as a huge opportunity because the more wealth that is unlocked in Africa, the stronger Africa becomes as a partner with other parts of the world. I can only see that as being a benefit but really what needs to be done in the context of the current agreement is to give some real concrete commitment to the political undertaking that the agreement currently represents so that there are real reductions in tariff barriers. Also, there is better access in terms of services in market access and I think in that regard there is a lot of work that remains to be done but luckily there are a lot of people to do that.
RiA (Q14): Thank you very much for that. Christophe, it was a pleasure talking to you today! I can take the opportunity to say as well that we would be having you in one of our webinars where we would discuss this topic with a bit more detail and other questions that would come up. Thank you and have a great day!
CB (A14): Thank you very much! Pleasure to be here!
Listen to the interview HERE