Strategy ConsultingOctober 19, 2022by fieconAfCFTA Adoption of Quantitative Restrictions Under Article XI of GATT 1994

Trade

Africa’s economy is highly dependent on the international markets for both exports and imports. COVID-19 pandemic highlighted the continent’s extreme vulnerability to disruptions of international supply chains; as 53% of its imports originated from nations that were heavily impacted by the pandemic. With over 60% of the nation’s being importers of essential goods, global trade restrictions and cross border blockages was burdensome to many countries across Africa.

The global supply chain disruptions resulted in export earnings losses estimated to be over USD 101 billion. From a country perspective, the hardest hit were the oil producing nations; while from a sector perspective tourism, transport and logistics sectors dipped the most. The pandemic underscored the need for Africa to develop its value chains to become self-reliant. In response, nations took up trade-related measures with domestic and international implications.

Locally, governments directed industries to repurpose their activities and produce COVID-19 medical products with the help of incentives and subsidies. Kenya launched a textile industry in Kitui to manufacture face masks and personal protective equipment (PPE), South Africa issued a tender for domestic production of ventilators while Nigeria engaged its military in mass production of ventilators and PPE kits fulfilling the shortages of the essential medical equipment supply.

AfCFTA adoption of quantitative restrictions

Through the African Continental Free Trade Area (AfCFTA), Africa is taking on a regional approach; such that value chains will enable member states to use their comparative advantages to attract investment in the necessary infrastructure, and generate economies of scale. The AfCFTA will also encourage access to these products within the region by member state parties without the production capacity. These regional value chains would be accelerated through prioritization and coordination and liberalization of key inputs. Even with the regional approach, nations trading amongst themselves will still be tempted to hold onto their protectionism measures which might undermine AfCFTA efforts towards trade liberalization; through quantitative restrictions QRs which can be defined as non-tariff barriers.

The African Continental Free Trade Area (AfCFTA) agreement addresses Quantitative Restrictions (QRs) through the protocol on trade in goods. Article 4 of the Agreement explicitly states that one of AfCFTA’s objectives is to progressively eliminate tariff and non-tariff barriers. Article 9 of the Protocol on Trade in Goods, prohibits QRs, maintaining that state parties shall not impose quantitative restrictions on imports or exports on other member states except where it is provided for under the protocol itself.

These AfCFTA provisions borrow largely from Article XI of GATT 1994 which prohibits QRs on any products except when they relate to taxes, duties and any other. It has been argued that QRs which are perceived as Non- Tariff barriers limit free flow of trade due to their protective nature in comparison to tariff barriers. Under the GATT Article XI, exemptions relating to importation focus on restrictions necessary to the application of standards or regulations for the classification, grading or marketing of commodities in international trade. Other exemptions are provided in other articles which touch on economic and non-economic reasons.

For economic reasons, the restrictions are to safeguard Balance of Payments (BoP) for all Word Trade Organization (WTO) members; particularly those with developing economies. In addition, the restrictions are to promote development of a certain industry for a developing member state; as well as provide protection against over importation which can injure domestic producers among others.

For non-economic reasons, the restrictions are for the protection of health, life and morals or for security reasons. Article XI clearly states that the imposition of these exemption is only permitted under limited conditions or on a temporary basis, only if they are justifiable from a policy point of view under GATT, such as Balance of Payments issues. However, the exceptions can be criticized, as unfair trade measures if they are not invoked formally as per the provisions of GATT.

While under AfCFTA state parties are agreeing to progressively eliminate tariffs for 90 percent of goods being traded, doing away with quantitative restrictions calls for stronger tools to enforce such provisions. Even with the exceptions which make room for applying QRs under different circumstances with certain parameters that are to be met to avoid unjustifiable protectionism; disputes are expected to arise that may afflict certain nations.

Such disputes have been arising under Article XI of GATT 1994; case in point being Brazil vs the European Commission. In 2004, Brazil, raised concerns over increased cases of Malaria, as a result of importation of used tires that were breeding grounds for mosquitoes. It went ahead to ban the importation of the tires from the European Commission (EC) who was a net exporter. In its defense, EC argued that the ban was an infringement of GATT Article XI. EC initiated WTO dispute-settlement procedures, where the Appellate Body ruled in EC’s favor on the grounds that the restrictions were unjustifiably discriminatory as Brazil allowed imports of the tires from other countries.

To ensure equity and equality among member states, AfCFTA negotiators should be deliberate in customizing the Article XI of GATT 1994 for practical applicability in the African context.

Author: Inzillia Sasi

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