The AfCFTA, the Benefits, the TBTs Challenges, the Opportunities and the role of ARSO.

Due to their Mandate and Influence on the establishment of the Legal and Institutional Framework for Regulatory Compliance, Quality Governance Institutions in Africa, like ARSO, PAQI Institutions, RECs SQAM, and the National Bureau of Standards have a decisive influence on the question “to what degree Technical Barriers to Trade presents a stepping stone or rather a stumbling block towards the implementation of a African Continental Free Trade Area.

The AfCFTA Benefits

The news, therefore, that, at the AU Head of States Extraordinary Summit on 21st March 2018 in Kigali, Rwanda, 44 heads of delegation ratified the land mark African Continental Free Trade Area (AfCFTA) treaty, and that, 27 leaders signed the second protocol establishing the African economic Community relating to the free movement of people, the right of residence in the signatory countries and right of establishment ,  in addition to 43 Heads of delegations signing the third protocol dubbed the “Kigali Declaration” to formally launch the AfCFTA, were truly the best for Africa’s Integration Agenda.

The African Continental Free Trade Agreement, is lauded, as probably the biggest trade agreement since the establishment of the World Trade Organisation (WTO), and a concrete, provable culmination of the goals of African Renaissance and Afro-optimism.  The optimism about the TFTA and CFTA is presumably a sign that, in Africa, there is support for a new generation of intra-African trade agreements and a belief that the TFTA and CFTA fall in this category.  The public debate about what the Tripartite Free Trade Area (TFTA) and the Continental Free Trade Area (CFTA) will bring about portrays an optimistic picture. Many commentators claim that these agreements will bring significant benefits to millions of consumers and a marked reduction in poverty in many countries. The United Nations Economic Commission for Africa (UNECA) predicts that the AfCFTA, which is prioritizing the production of value-added goods and services that are “Made in Africa”, has the potential to increase intra-African trade by 52.3% by eliminating import duties, and to double this trade if non-tariff barriers, especially the Technical Barriers to Trade  (TBTS) are also reduced (UNECA 2018).

As the largest single free Trade area in the world, a computable general equilibrium (CGE) analysis by Cheong, Jansen and Peters (2013) estimates that the CFTA could stimulate intra-African trade by up to USD 35 billion per year, or 52% (above the baseline) by 2022. It could also lead to a USD 10 billion decrease in imports from outside the continent, while boosting agriculture and industrial exports by up to USD 4 billion (7%) and USD 21 billion (5%) respectively. The continent’s gross domestic product will rise from USD 1.7 trillion (2010) to USD 2.6 trillion (2020) pushing up consumer spending from USD 860 billion (2010) to USD 1.4 trillion (2020) and thus potentially lifting millions out of poverty (McKinsey Global Institute, 2010)..

Experts (Mevel, Simon and Karingi, Stephen – 2012, Dr. Mukhisa Kituyi – 2016, Henri J. Nkuepo, 2012) highlight the fact that the AfCFTA is poised to contribute significantly to increased competitiveness of Africa’s industrial products through harnessing the economies of scale of a large continental market; increased rate of diversification and transformation of Africa’s economy and better integration of the continent into the global economy.

The TBT Challenges

With the emphasis of Quality and compliant to standards Requirements, as a major determinant of trade in a Free Trade Area, Experts, leaders and policy makers already anticipate that, under AfCFTA, African countries will continue to be confronted with the main TBT issues given the fact that under the TBT Annex 6, article 3:  “the State Parties reaffirm their rights and obligations under the WTO TBT Agreement in respect of the preparation, adoption, and application of standards, technical regulations, conformity assessment procedures and related activities”.

This means that the challenge of mandatory regulations set by governments to meet their objectives regarding health, safety, and the environment, and for market-driven standards, set within the private sector, will continue (John Keyser 2012 – Policy Note no. 33, July 2012, www.worldbank.org/afr/trade). Based on this article, to successfully access the African Common Market, under the AfCFTA, or meet local technical regulatory requirements, including those intended to protect human, animal or plant life and health from imported pests and diseases:

  • Governments will introduce more and more regulatory requirements to address inter-lia health, safety or environmental issues in accordance with the WTO TBT Agreement and the rights and obligation of members
  • Consumers will demand safety and quality assurance
  • Private and public authorities will continue to scrutinise imported/exported goods for compliance
  • Producers increasingly will need reputable evidence that their products and services meet regulatory, technical and other requirements.
  • African countries, would be confronted with the main challenge of the need to improve the quality of regulation to remove the NTMs (TBTs) in goods, and to deliver competitive markets, while achieving essential public policy objectives relating to issues such as health and safety, and protection of agriculture from pests and disease;

Documented threat of TBTS to intra-African Trade and to the AfCFTA

That African countries, due to the challenge of the TBTs, do not trade much with each other, the TBT issue has remained an issue of interest and focus for scholars, leaders and development partners in Africa:

  • The Panel (African Progress report 2014) reports that in the SADC region, NTBs are seen as the most significant constraint on the growth of intra-SADC trade (AECOM 2011).
  • A World Bank (2011) study finds that notified NTBs affect products accounting for 20% of regional trade. Between 2000 and 2010, the total number of NTBs in Zambia, Malawi and Mozambique increased from 400 to over 1,400 (Kalaba 2012).
  • In the ECOWAS region, Traders travelling from Ghana to Nigeria are reported as having to pay 40 different fees Keyser (2012).
  • The World Food Programme, which is the largest purchaser of food in West Africa, has reported frequent problems obtaining export permits, quality certificates and other documents from different countries in order to process transactions (Keyser 2012).
  • In the EAC, region, on one estimate, eliminating NTBs in maize trade between Kenya, Tanzania and Uganda would generate benefits of US$5 billion (Africa Progress Report 2014).
  • World Bank (2012) underlines the magnitude of the problem. Food producing companies in Kenya can export to developed markets in Japan, Europe, and Singapore, which each have strict regulations, yet are unable to export to countries on the continent because of regulations. For example, the allowable moisture content for imports of maize is set at 13 percent in Tanzania, 13.5 percent in Kenya, and 14 percent in Uganda. The tolerance for insect damage is one percent in Uganda, two percent in Kenya, and three percent in Tanzania.15 Malawi requires that maize should meet the following requirements: maximum of 14 percent moisture content, maximum of 2.6 percent of foreign matter, maximum of 11.5 percent of broken grains, and aflatoxin of 3ug per kilogram.
  • Among key trading corridors between Burkina Faso, Ghana and Benin, the cost of obtaining an SPS certificate for maize has been calculated at US$40/ton, equivalent to nine percent of the farm gate price (USAID 2011).

So, unless the AfCFTA is shaped as a comprehensive legal framework suitable for the 21st century challenges, including reducing Technical Barriers to Trade (TBTs) – Standards, technical regulations and Conformity assessment regimes), which have been long standing challenges to Africa’s integration, given the different trade policy Challenges among the RECs and African countries, the trade benefits of the AfCFTA, will remain hard to achieve.

The AfCFTA Opportunities to address the TBTs

It is important to underline that the elimination of tariff and non-tariff barriers, and Regulatory compliance, called for by the ACFTA initiative offers African countries a great long-term opportunity to address the TBTs issues:, for example:

  • The AfCFTA binds all State parties to commit to the progressive elimination of tariffs and non-tariff barriers to trade in goods,
  • The TBT Annex, under Article 5: Fields of Cooperation, has provided that States Parties shall cooperate in the development and implementation of standards, technical regulations, conformity assessment procedures, accreditation, metrology, capacity building and enforcement activities in order to facilitate trade within the African Continental Free Trade Area (AfCFTA).
  • Further in Article 6.2 b, c, d and f respectively, calls on the State parties to adopt the harmonised African standards by ARSO and AFSEC.
  • This is aligned with the provisions of Article 8.1 of the SPS annex on Harmonisation where States Parties shall cooperate in the development and harmonisation of sanitary or phytosanitary measures based on international standards, guidelines and recommendations taking into account the harmonization of SPS measures at the regional level.

The Role of ARSO

There is therefore a corresponding drive to create a more robust, adaptive, cost-effective, user-friendly and sustainable quality infrastructure (QI) system that provides access to appropriate standardization, metrology, accreditation, conformity assessment, and market surveillance capability and capacity, along with attendant education and promotion programmes, and based on a Quality Policy. UNIDO (2018) in its document, QUALITY POLICY Guiding Principles Vienna, highlights the need for a Quality Policy as one of the basic cornerstones for ensuring good governance of the Quality Infrastructure, which is a combination of the policies, relevant legal and regulatory framework, and practices needed to support and enhance the quality, safety and environmental soundness of goods, services and processes.

Of importance therefore, to the AfCFTA Implementation,  are the ARSO Collaborative efforts in ensuring the harmonisation of African standards (through ARSO THCs) as a basis Technical Regulations; Conformity Assessment and Mutual Recognition Arrangements (ARSO COCO); Awareness creation and promotion of the Culture of Quality among policy makers, SMEs and Consumers on the benefits of standards (African Day (21st March) of Standardisation, African Quality Award); Standards and Trade Requirements Information dissemination and outreach (ARSO DISNET/African Trade Web portal); Capacity Building and Training (Education about standardisation, Workshop, Seminars). ARSO is also currently working with the African Union to fast-track the development of African Quality Policy.

ARSO-RECs collaborative efforts in standards harmonisation as a basis for African Integration Agenda and Roadmap and sustainable development

The ARSO REC’s Co-operations, directly aligned with the provisions and aspirations of Chapter XI Article 67 of the Treaty Establishing the African Economic Community (the “AEC Treaty”), as a means of attaining a coherent and effective continental harmonisation of standards and conformity assessment regime.

The Africa-wide development agenda, as championed by the African Union (AU), is focused on regional integration and the formation of an African Economic Community (AEC) as laid out in the 1980 Lagos Plan of Action for the Economic Development of Africa and the Abuja Treaty of 1991 (AU 2013), which put the Regional Economic Communities (RECs) as the building blocks with a time-bound schedule and Roadmap:

  1. 1994 – 1999: Establish and strengthen African Regional Economic Communities.
  2. 2000 – 2007: Eliminate Tariff Barriers (TBs) & Non-Tariff Barriers (NTBs) in RECs.
  3. 2008 – 2017: Establish Free Trade Areas (FTAs) & Customs Union (CUs) in RECs.
  4. 2018 – 2019: Establish a Continental Level CU & Common External Tariff (CET).
  5. 2020 – 2023: Establish an African Common Market (CM), including the free movement of factors of production and the right of establishment.
  6. 2024 – 2028: Establish a Pan-African economic and monetary union that includes the establishment of an African Central Bank and a single African Currency.

As the level of continental integration deepens, under the AfCFTA, the trade-related functions of RECs are expected to be consolidated at the continental level, in line with the eighteenth ordinary session of the Assembly of the African Union decision for “consolidation of the Tripartite and other regional Free Trade Areas, into a Continental Free Trade Area”.  But the Challenge remains the TBTs at the RECs level and the need for harmonised regulatory frameworks and African standards.

To tackle this challenge, through a Consultative meeting of 22nd to 24th October, 2018 at Intercontinental Hotel Nairobi, Kenya ARSO and the RECs have agreed to, among others:

  • The Formation of a common front on the harmonisation of African Standards and Conformity Assessment through the review of the ARSO’s African Standards Harmonization Model (ASHAM) to reflect the joint ARSO-RECs harmonization, RECs treaties and protocols and reflection of the adoption of the African Standards at RECs levels with the rrevised ASHAM expected to be rolled out to different stakeholders for visibility, awareness and buy in (AUC, Governments, Private Sector, academia etc.)
  • Analysis of existing standards catalogues within RECs versus ARSO catalogue to identify Common standards that require harmonisation.
  • The Establishment of ARSO-RECs Joint Advisory Group (JAG), which is tasked to recommend priority sectors and topics for harmonies. ARSO host the Secretariat currently.
  • Development of a Roadmap, through the RECs SQAM structures for the establishing New Work Item Proposals (NWIP) for standards Harmonisation where using their own mechanisms, RECs will work with their National NSBs and stakeholders to determine priority areas and share with ARSO for the standards harmonisation.

Understanding the Mandate of ARSO in the Context of Africa’s Trade performance

The chief principle mandate of ARSO is to facilitate intra-African and World Trade through Harmonisation Standards and Conformity Assessment which directly aims at reducing Technical Barriers to Trade in Africa.

The intra-Africa trade, which is expected to enhance the absorptive capacity of the continent and mitigates its exposure to global volatility, and which at 15% compares unfavourably with Europe (67%), Asia (58%), North America (48%) and Latin America (20%) (Afreximbank 2018). On the global scale the African countries, though, have equally made considerable progress in their economic transition towards a market-based system and inclusion, the challenge to adjust to the standards, norms and regulations (TBTs) which are used in international trade, remains. The report highlights that the Continent continues to engage at the periphery (3%) of the global economy, with a prediction of 4% by 2030. (AfDB et al. 2014.). This dismal performance in Africa’s external and internal trade, therefore, has remained a major focus of much enquiry, with the Africa Progress Panel (African Progress report 2014) and World Bank 2013, giving evidence that NTBs, especially the Technical Barriers to Trade (Standards, Technical Regulations, Conformity Assessment (Inspection, Testing and Certification) present substantial obstacle to increasing intra-regional and intra-African Trade.

The African Development Bank’s (AFDB 2019) African Economic Outlook projects Africa’s GDP growth to accelerate to 4.0 percent in 2019 and 4.1 percent in 2020 but only if there will be growth of industrial activities to spur intra-African Trade and among other things and mostly of great relevance to the mandate of ARSO, the removal of all nontariff barriers on goods and services, especially the Technical Barriers to trade that have been a great hindrance to the free movement of Goods and services in Africa. The Bank also calls for the elimination of the applied bilateral tariffs in Africa, keeping rules of origin simple, flexible, and transparent. The report highlights that the Gross domestic product reached an estimated 3.5 percent in 2018, about the same as in 2017 and up from 2.1 percent in 2016 ((AFDB 2019).

With different Regional Economic Communities (RECS – EAC, SADC, COMESA, EAC) African countries face the challenge of variation in certification, testing, inspection practices, and standards used by different countries on the basis of the WTO obligation and rights. The African Development Bank’s (AFDB 2019) African Economic Outlook gives Africa a picture of a continent with a general economic performance that continues to improve.  The resultant divergence of standards and technical regulations make trade between African countries difficult, contentious, and expensive.

Formed in 1977 by the African Union (formerly OAU) and the United Nations Economic Commission for Africa (UNECA), and currently with a membership of 37 African countries, (Algeria, Benin, Botswana, Burkina Faso, Cameroon, Cote d’Ivoire, Congo Brazzaville, Democratic Republic of Congo, Egypt, Ethiopia, Gabon, Ghana, Guinea Bissau, Guinea, Kenya, Liberia, New State of Libya, Madagascar, Malawi, Mauritius, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, Sudan, South Sudan, South Africa, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia and Zimbabwe, with Zanzibar as an observer member), the ARSO mandate of coordinating the harmonisation and implementation of African Standards and conformity assessment procedures continues to be a strategy for promoting the intra-African Trade and integration Agenda.

The Organisation’s key programmes such as Standards Harmonisation based on thirteen (13) Technical Harmonisation Committees, with Experts from all over Africa ensures the harmonisation and implementation of African standards (in reference to Africa Standards Harmonisation Model-ASHAM)  across the continent. The ARSO Conformity Assessment Programme under the ARSO COCO drives the harmonisation of Conformity Assessment regimes in Africa, promoting Mutual Recognition Arrangements and Common Regulatory Framework. The ARSO DISNET, including the African Trade Web Portal ensures the dissemination Trade and Standards information to facilitate compliance to standards and trade requirements across the continent. Harmonisation of African Standards was recognised at the very beginning as a means of promoting not only trade among African countries but also enabling African enterprises to participate effectively in the global trading system. This still remains the core mandate of ARSO.

AFREXIM Bank set to fund the Harmonisation of Standards to Facilitate Intra-African Trade and Development of Pan-African Quality Infrastructure

PRESS RELEASE

The African Export-Import  (AFREXIM) Bank in partnership with  Physikalisch-Technische Bundesanstalt (PTB)  has funded a project on the introduction of Pan-African Quality Policy (PAQP) with support from African Organisation for Standardisation (ARSO), African Union Commission (AUC), Regional Economic Communities (RECs) and other Pan-African Quality Infrastructure (PAQI) Pillars namely African Accreditation Cooperation (AFRAC), Intra-Africa Metrology Systems (AFRIMETS) and African Electro-technical Standardization Commission (AFSEC) with an aim of facilitating African Continental Free Trade Area (AfCFTA).

This policy, in regards to the 1991 treaty that established African Economic Community will ensure that member states;

(a) Adopt a common policy on standardization and quality assurance of goods and services.

(b) Undertake such other related activities in standardization and measurement systems that are likely to          promote trade, economic development and integration within the Community; and

(c) Strengthen African national, regional and continental organizations operating in this field.

In many African countries, there is evidence of lack of clarity on the roles of institutions involved in the setting and implementation of standards and technical regulations, they need to be synchronized and work closely to facilitate free movement of goods and services. There aren’t enough accredited laboratories nor inspection bodies and this is a major problem that faces many African countries in their efforts to expand and diversify their export bases.

Notably, most technical regulation regimes of African countries are non-compliant with WTO-TBT and SPS Agreement requirements and this constitutes a major impediment to industrialization and trade. It is important to note that the technical regulation regime and a country’s national quality infrastructure go hand in hand and therefore systematic streamlining is required in order for coordination and efficiency to be achieved.

This Joint effort sponsored by AFREXIMBANK and PTB and spearheaded by the African Union and ARSO will fulfil the AEC Treaty and AfCFTA requirements mainly Technical Barriers to Trade and Sanitary and Phytosanitary annexes (TBT & SPS) which are essential tools in promoting efficiency in all facets of Africa’s integration agenda. It will be adopted by member states with an aim of being at par in matters quality.

In addition to the Pan-African Quality Policy (PAQP), African Organisation for Standardisation (ARSO) will harmonize standards in the automotive sector and conformity assessment. This initiative is fully funded by the African Export-Import (AFREXIM) Bank in partnership with and African Union Commission (AUC) in a bid to support the implementation of the African Continental Free Trade Area (AfCFTA) and boost intra-African Trade while contributing to African industrialization as key pillars of Africa’s Agenda 2063.

The automotive sector is essential and will cause an uproar in the automotive industry (vehicle and parts makers) and support a wide range of business segments, both upstream and downstream, along with adjacent industries. This leads to a multiplier effect for growth and economic development across many sectors in the continent. The key concerns with respect to the automotive industry in Africa include the following

(i)   Restrictions of manufacturing while regulatory frameworks encouraging importation.

(ii)  Safety of motor vehicles

(iii) Availability of quality fuels for modern engine technologies

(iv) Availability of certified component/spare parts: Regional automotive value chains have not developed to a significant extent.

(v)  Manufacturing capabilities.

Factors to be considered with regards to AfCFTA include Elimination of tariff and non-tariff barriers to widen the markets for the automotive industry, local manufacturing/assembly with value addition which meets the rules of origin in the AfCFTA, creating a reliable network of automotive component and spare parts suppliers to service customer needs, harmonization of standards for fuels, parts and environmental performance in line with international agreements and lastly construction of motor vehicles meeting established safety standards to create confidence among Member States.

ARSO will convene meetings of the ARSO/THC 08-4, Technical Working Group on Automotive Technology and Engineering to serve as the platform for the harmonization of standards for the automotive sector in Africa. NSBs will nominate two suitable experts (one internally and another from the manufacturing sector) with appropriate qualifications matching the scope of the Working Group to participate in the harmonization of standards including formulation of workshop agreements, review of international standards for adoption and also handle the harmonization work of the listed preliminary new work items during the first meeting to be held in June 2019. The scope of the working group will revolve around Road vehicles, tyres, rims & valves, Caravans, Electric road vehicles and electric industrial trucks with a vast collection of standards to be harmonized.

Harmonization of the automotive standards will play a big role in the economic development of the African automotive sector through elimination of trade barriers among the member states hence allowing free movement of automotive goods with quality on check. The project has a timeline of one year from the date of countersigning (April 2019).