AfCFTA and Trade in Services Protocols

AfCFTA and Trade in Services Protocols

Services are an important feature of any economy, both in industrialized and poorer countries. It is important to economic development, poverty alleviation, and competitiveness. It encompasses more than two third of the world economy. It has surpassed both the primary and secondary sectors in industrialized countries as a share of Gross Domestic Product (GDP). Recently developing countries have seen trade in services as a means to diversify and boost export. 

Trade in Service simply means the supply of service (which includes the production, distribution, marketing, sale, and delivery of a service). Trade in service includes financial service, construction, transport, Information and Communication Technology (ICT) services, energy, business service, legal service, and others.

Services can potentially improve many African nations’ economies as it provides employment for a large amount of youth. Services provide essential input in most other businesses, and as much as 30% of the value added in the export of goods is from the input of service. Inefficient services can partially be responsible for high prices. importing services can help to improve productivity through increased competition, better technologies, and access to foreign capital. But some obstacles make it difficult for African countries to take advantage of the opportunities trade in service presents.

AFCFTA AND TRADE IN SERVICES PROTOCOLS

The goal of the AFCFTA is to create a single continental market for goods and services, with free movement of businesspersons and investment, also promoting sustainable and inclusive socio-economic development and gender equality.

AFCFTA agreement officially commenced on January 1, 2021. The Agreement is comprised of three layers which serve as the framework agreement which are the protocols and the annexes, guidelines, and schedules to the protocol. The Agreement had two phases of negotiations. 

The Phase 1 negotiation which includes the protocol on Trade in Goods, Trade in Services, and Dispute Settlement entered into force together with the AFCFTA agreement. The Phase 2 negotiations will include the Protocols on Investment, Intellectual Property Rights (IPRs), and Competition Policy

Trade in Service Protocol is included in the Agreement and is aimed to create a more straightforward and easy flow of doing business between African countries. It focuses on five key areas which are financial services, transport, communication, tourism, and business services.

The purpose of the Protocol is to progressively liberalize trade in service across the African continent (lessen government restrictions and regulations on the important elements of the economy regarding production, distribution, export, and import in exchange for participation by private entities)

Liberalization creates import and export diversification, also improves the region’s development and in turn creates technological advancement, better service delivery, more access to foreign investments, and makes more room for structural transformation in the continent. The ease of service activities within and across Africa can create and facilitate industrialization, structural change can create and promote industrialization as we as creating a regional and continental value chain.

To ensure a competitive and secured business environment, the service sector is heavily reliant on regulations. Regulations are very essential for an elaborate trade arrangement and the AFCFTA which is a member-driven process, allows decisions to be taken based on consensus which made negotiations technically complex as all parties had to come to an agreement.

Most of the AFCFTA members belong to communities such as the Regional Economic Communities (RECs). The RECs have their own service protocol which is highly integrated and has a more common market than the AFCFTA. This means that different service-related regulations must be integrated. Therefore, these countries must ensure that they protect the integrity of the RECs services trade regimes when making offers to the rest of the continent as part of the AFCFTA negotiations.

In order to ensure increased and beneficial participation in trade in service by all parties, the AFCFTA in its protocol included a special and differential treatment article which says all state parties shall:

• Provide special consideration to the progressive liberalization of service sector’s commitment and modes of supply which will promote critical sectors of growth, social and sustainable economic development.
• Consider the challenges that may be encountered by state parties and may grant flexibilities such as transitional periods within the framework of the action plan, accommodate special economic situations and development, trade and financial needs in implementing this protocol for the establishment of an integrated and liberalized single market for trade in services.
• Accord special consideration to the provision of technical assistance and capacity-building through continental support programs.

Also, to avoid favoritisms the Protocol allows state parties upon entry into force to accord immediately and unconditionally service or service supplier of any other state but no less favorable than that is accord to like services or service supplier to any third party. State parties can enter a new preferential agreement with a state as far as it doesn’t impede the objective of the protocol.

To ensure transparency, each party shall, in a medium accessible, publish promptly and except in emergency situations, at the latest by the time of their entry into force, all relevant measures of general application which pertain to or affect the operation of this Protocol. International and regional agreements pertaining to or affecting trade in services to which a State Party is a signatory shall also be published.

In conclusion, a successful liberalization under the Protocol means the private sector will have information published by state parties regarding the requirements for trade in service, applicable taxes, barriers of entry, and legal and judicial protection in the member countries. Investors will be sure that their investment is protected under the AFCFTA, the national regulations. Also, the liberalization of services also means that companies will be treated the same way as other companies in other countries on the continent which will allow fair competition and prevent monopolies and exclusive suppliers.