Greening the African Continental Free Trade Area

Recently, the Africa Growth Initiative at Brookings has published a policy brief titled “Greening the AfCFTA: It is not too late.”

Environmental sustainability is a key component of Africa’s Agenda 2063: The Africa We Want. Yet, the recently launched African Continental Free Trade Area (AfCFTA) contains only minimal references to the environment. The policy brief, thus, highlights various ways in which State Parties can strengthen the linkages between the AfCFTA and the environment, with a focus on concrete approaches and strategies. It also encourages the AfCFTA Secretariat to explore the possibility of adding a Protocol on the Environment and Sustainable Development.

REGlobal presents the key findings from the policy brief…

Key Findings:

• Creating an intra-African market can provide businesses the opportunity to develop green technologies, goods, and services; thereby building intra-African value chains that minimize the continent’s dependency on imported green technologies, goods, and services from outside the continent.

• Trade agreements can discourage or prohibit environmentally harmful practices that impact trade. This can be done by requiring that the Parties comply with multilateral environmental agreements (MEAs), such as the Convention on International Trade in Endangered Species (CITES) or the Basel Convention that controls transboundary movements of hazardous wastes and their disposal.

• In recent years, an upward trend has been witnessed in both the number and type of environmental provisions in trade agreements. In 2018, free trade agreements contained an average of 73 different environmental provisions, covering exceptions and preambular references, but also more substantive environmental provisions.

• Bans on plastic bags have been particularly popular on the African continent. About 34 out of 54 states have passed laws to ban plastics—with various degrees of success.

• Effectively digitalizing customs authorities and border controls could significantly facilitate PIC procedures for trade in certain types of waste. The AfCFTA contains various trade facilitation provisions that can be harnessed to strengthen customs processes, including by digitizing and automating the PIC process.

• Disciplining anti-competitive practices would be particularly important for Africa’s green growth agenda. Adopting competition provisions across the African continent would ensure that the benefits associated with the creation of an intra-African market would not be undermined by restrictive or anti-competitive practices adopted by a handful of powerful firms.

• To date, only four African countries—Algeria, Egypt, Morocco, and South Africa—have filed renewable energy technologies patents. In total, these four countries filed 5,031 patents, which compares unfavorably to the three leading countries in this area: China (240,054), the United States (106,171), and Japan (84,316).

• Critical innovation in digital trade leads to the decarbonisation of long- distance transport. Africa’s green agenda will be heavily reliant on digital technologies and solutions, the uptake of which will be facilitated by an enabling digital environment that a Protocol on e-Commerce could seed and nurture.

• Artificial intelligence (AI), 3D printing, and other emerging technologies will be foundational in facilitating a transition from current linear economic models to circular ones. Moreover, big data analytics and algorithms can enhance environmental monitoring of air and soil quality and provide early warning systems for wildfires and extreme weather events. Connecting sensors to the internet can prevent deforestation.

• With respect to protocols and annexes that have already been finalized: State Parties can strengthen the link with environmental objectives by removing non-tariff barriers on trade in environmental goods and services, and through strengthening controls on the import of environmentally harmful products.

• With respect to intellectual property rights: It would be important for AfCFTA State Parties developing the Protocol on IP to address the misappropriation of genetic resources in order to preserve biodiversity, whereas in the context of investment, State Parties could consider adopting a more balanced approach with respect to investors’ rights and obligations.

Trade agreements and the environment

Trade agreements can have both positive and negative impacts on the environment. On the one hand, trade agreements seek to increase trade and enhance economic growth, which tends to accelerate climate change by, inter alia, generating emissions related to transportation and deforestation. On the other hand, trade agreements can advance environmental objectives. By creating new markets, trade agreements present an opportunity to create economies of scale and share know-how, thereby promoting economic efficiency and innovation in support of environmental outcomes. The AfCFTA does not currently feature a Protocol on Environment and Sustainable Development.

Environmental provisions in the AfCFTA

The AfCFTA contains only minimal environmental references. The preamble of the agreement establishing the AfCFTA reaffirms the right of State Parties to regulate within their territories and provides flexibility for achieving legitimate policy objectives, including in areas related to the environment. However, the preambular references do not set out legally binding obligations and cannot, therefore, be interpreted as reflecting a strong commitment to the environment on the part of AfCFTA State Parties.

Removing market access barriers on environmental goods and services

Environmental goods: By reducing or fully removing, tariffs on environmental goods, FTAs can facilitate trade in goods that advance environmental objectives.  A key challenge to reducing tariffs on environmental goods concerns disagreement as to the definition of an environmental good. According to recent estimates, lowering tariffs on a broad set of environmental goods could reduce CO2 emissions as much as 10 million tons by 2030, while increasing world trade by 1.1 percent

Environmental services: The ongoing services negotiations can also be leveraged to advance Africa’s green growth agenda. Protecting the environment is contingent upon access to various different services, including services that reduce exhaust gases and improve air quality; services that treat and clean-up polluted water; and services that dispose of solid and hazardous waste.  Services are also critical for facilitating a transition towards a green economy

Removing non-tariff barriers on environmental goods and services

To enhance alignment between the AfCFTA and Africa’s green growth agenda, State Parties are also encouraged to adopt a proactive approach to removing non-tariff barriers to trade in green products and services.

The AfCFTA’s Technical Barriers to Trade (TBT) Annex, which is based on the WTO TBT Agreement, aims to reduce non-tariff barriers by encouraging (i) cooperation in standards, technical regulation, conformity assessment, accreditation, and metrology; and (ii) the elimination of unnecessary and unjustifiable technical barriers to trade; and the promotion of mutual recognition of results in conformity assessments. The AfCFTA also contains an SPS Annex, which covers a sub-category of technical regulations that relate to the protection of human, animal, and plant life and health.

A significant number of African countries have underdeveloped Sanitary and Phytosanitary (SPS) systems. To enhance environmental protection, State Parties are encouraged to use the SPS Annex to upgrade their SPS systems, including by taking advantage of cooperation and technical assistance opportunities. Doing so would better position State Parties to respond to environmental threats to crop production that are expected to become more acute as a result of climate change.

Control over the importation of environmentally harmful products

In addition to facilitating trade in environmental goods and services, trade agreements can also be harnessed to restrict trade in products that exacerbate environmental challenges. The AfCFTA can play an important role in controlling the import of waste. Rules for trade in waste are set out in the Basel Convention—signed by all African countries except South Sudan. The adoption of a “climate waiver” would also allow countries to justify trade- restrictive climate response measures, provided they are applied in a non-discriminatory manner and do not constitute a disguised restriction on trade. Developing an effective climate waiver is currently being explored by scholars in the context of the World Trade Organization.

Greening phases II and III protocols on investment, competition, intellectual property, and e-commerce

The ongoing negotiations for the adoption of Phase II Protocols cover intellectual property rights, investment, and competition policy, and the expected Phase III negotiations on e-commerce. This brief provides a high-level overview of ways in which Phase II and Phase III Protocols can advance Africa’s green growth agenda.

• Protocol on Investment: It will likely be modelled on the Pan-African Investment Code. The Protocol on Investment can be expected to cover not only traditional topics in investment agreements, like investment protection and promotion, but also newer issues such as investment facilitation and investors’ obligations. To advance the environmental agenda, the Protocol on Investment should require investors to protect the local environment and comply with environmental regulations in the host country.

• Protocol on Intellectual Property: There are different approaches that the Protocol on Intellectual Property (IP) could take—from establishing regional cooperation in intellectual property, to creating a regional intellectual property filing system, to harmonizing IP legislation across the continent, to developing a unifying law on a regional basis. The protocol will, inter alia, address a number of different issues relevant to the preservation of biodiversity. The Protocol has the potential to advance green innovation across the African continent by strengthening IP protection.

• Competition Policy Protocol: Negotiations are currently ongoing for a Protocol on Competition Policy in the AfCFTA. State Parties may seek to regulate cartels, mergers, abuse of dominance, and anti-competitive agreements tailored to Africa’s particular circumstances. The Protocol on Competition will likely also contain provisions that seek to coordinate policy among competition authorities that exist nationally and regionally within the continent, while promoting the establishment of domestic competition regimes through the provision of technical assistance and mutual cooperation.

• Protocol on e-Commerce: The AfCFTA will also include a Protocol on e-Commerce. Such a protocol will cover a number of e-commerce and related issues by including provisions on data localization, cross-border data flows, consumer protection, electronic transaction frameworks, paperless trade administration, electronic authentication, and technology and related matters.

The complete report can be accessed here