Impact of Africa's seat at G20 on the African Free Trade Area.

Reuel Emmanuel Konyi Student; Department of Theory and History of International Relations; Patrice Lumumba Peoples' Friendship University of Russia (RUDN) 117198, Russia, Moscow, miklukho-maklaya str., 15, 22 reuelkonyi@gmail.com

Aua Jeremaih Acuro ORCID: 0000-0002-8085-0894 Postgraduate student, Department of Theory and History of International Relations, Patrice Lumumba Peoples' Friendship University of Russia 117198, Russia, Moscow, Miklukho-Maklaya str., 15, sq. 14 acuro96@gmail.com Other publications by this author

THEORETICAL FRAMEWORK

The theory of Institutionalism forms the foundation of this work. Institutionalism, as a theoretical framework, provides a lens through which the behaviour of states and individuals within institutions can be understood. The theory argues that the rules, norms, and regulations established by institutions shape not only individual and organizational behaviour but also international trade relations. According to Hanna17, the formal rules set by international institutions govern how states interact in global trade, setting the parameters for cooperation and competition. These institutions create a structured environment where trade agreements are negotiated and enforced, thereby reducing uncertainty and fostering predictability in state behaviour.

The role of international institutions is pivotal in governing state behaviour and facilitating cooperation between nations. Hanna emphasizes that the presence of formal institutions helps regulate international interactions, especially in the context of trade. Without these structured systems, states may resort to unilateral actions or protectionist measures that could harm global economic stability. Institutions thus, by providing platforms for negotiation, dispute resolution, and the enforcement of trade agreements, promote collective action and prevent the risk of conflict in trade relations.18

Furthermore, the institutional environment significantly influences social choices, directing them within the frameworks established by these institutions. As Shrum19 notes, the institutional environment shapes how decisions are made, particularly in the realm of social and economic choices. The behaviours and preferences of actors are moulded by the established norms and regulations of the institution, ensuring that choices align with institutional goals and processes rather than individual preferences alone.

Institutionalism also seeks to explain why nations commit to scientific institutions and the forms these institutions take20. This dimension highlights how institutional structures, even in scientific fields, create binding commitments for states.

Two key approaches within institutionalism are the normative and rational approaches. The normative approach posits that individuals involved in policymaking are guided more by the rules and processes of the institution than by their personal goals. As such, loyalty to the institution and its regulatory framework supersedes individual preferences21. This approach highlights how institutional rules shape decision-making processes, ensuring that actors comply with established procedures rather than pursuing personal gains.

On the other hand, is the rational approach to institutionalism. It argues that individuals’ decisions are influenced by their personal norms and values. Individuals choose to affiliate with institutions that align with their pre-existing beliefs and objectives, rather than being guided primarily by institutional rules22. This perspective suggests that institutions do not shape behaviour in isolation but operate in conjunction with individual preferences and external influences.

Institutionalism also provides insights into how organizations are influenced by their broader environment. Roszkowska-Menkes argues that organizational behaviour is deeply embedded in, and shaped by, the institutional and environmental contexts in which organizations operate. This underscores the importance of understanding institutions not as isolated entities but as actors situated within complex networks of norms, rules, and external forces that collectively shape their behaviour.

This theory helps us understand how the AU, depending on the environment it participates in could potentially be influenced as a player. In times of tough decisions like preferential trading, while it is expected that the AU will go by provisions of the AfCFTA, the question remains which one the AU will be willing to allow?

INTRODUCTION

At an Extraordinary Summit of African leaders in 2018, Africa decided to merge its markets in the African Continental Free Trade Area (AfCFTA) under the auspices of Africa’s continent’s governing organisation, the African Union (AU). Tipped to be the largest trading area according to the number of countries involved, the AfCFTA seeks to reduce tariffs among member countries and cover policy areas such as trade facilitation and services and regulatory measures such as technical trade barriers. In its implementation, the AU seeks to ensure the free movement of persons, capital, goods and services with the aim of deepening economic integration, and promoting agricultural development, food security, industrialisation and structural economic transformation^[1].

Following this development, the AU was admitted to the Group of 20 (G20) countries in September 2023 at the G20 Summit held in New Delhi, India. Before this, South Africa was the only country on the continent that was a member of this prestigious body. Formed in year 1999, the G20 is a convening of the world’s largest economies that discusses economic issues^[2]. The first of its kind, it brings together some of the world’s biggest and richest economies including Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, United States of America and the European Union. G20 now has a total of 21 members with countries like Spain joining as permanent guests. Global economic forums and groups like the World Bank, International Monetary Fund and the World Trade Organization play various roles in the build-up to the summit as well as attending as invitees.

The AU’s inclusion in the group has been highly welcome because prior to the AU’s membership, the G20 represented around 85% of global GDP and 75% of global trade, as well as two-thirds of the world’s population^[3]. It has thus been projected that Africa stands to benefit in ways including, having a voice its voice heard as touted by leaders like South African president Cyril Ramaphosa.

Although not governed by statutes and treaties, member countries, with their influence play a critical role in world trade and influence their direction. Meanwhile, its activities are directed by a combination of annual declarations, frameworks, work programs, and the rotating presidency's agenda, all of which are influenced by the broader international economic and political context.

While trading in the African Continental Free Trade Area will be governed by the AfCFTA Treaty, that of G20 economies is largely guided by WTO’s principles on reducing tariffs and trade barriers which has had its fair share of clashes as a result of the economic competition between world powers like that of US-China trade wars^[4]

This work seeks to examine how the African Union, officially joining the G-20 means for AU's liberalized markets agenda. It looks beyond the opportunities to particularly explore how joining the G20 can influence trading in the Free Trade Area.

The researcher seeks to, by this work, contribute to informing some of the strategic lines of engagement Africa can take in its dealings at the G20 while getting the best out of its vision regarding the AfCFTA.

Benefits of AfCFTA to the African Market

The implementation of AfCFTA is tipped to be a boost in the African market, eventually leading to poverty alleviation, economic growth, and potential increased gains for African nations^{[5] [6]}. Economic integration and liberalization under the AfCFTA are expected to attract investments, boost trade, create jobs, and foster shared economic objectives^[7]. According to insiders and experts^{[8] [9]}, it is estimated that the agreement could lift 30 million Africans out of extreme poverty and raise incomes for 68 million people living on less than $5.50 per day. The AfCFTA could also lead to a 7% increase in Africa's income, amounting to $450 billion by 2035, while adding $76 billion to global income and increasing African exports by $560 billion, primarily in manufacturing. It is projected to boost wages for both unskilled (10.3%) and skilled workers (9.8%), with women possibly seeing larger wage gains than men.

Foreign Direct Investment (FDI) is expected to rise by 111% to 159% under the AfCFTA^[10], although challenges such as the continent's insufficient human capital capacity may hinder its full potential^[11]. To ensure long-term success, the AfCFTA must be complemented with structural and policy reforms, fostering peace, security, and confidence among participants^{[12] [13]}. Additionally, the agreement is expected to enhance competitiveness at the industry and enterprise levels by providing opportunities for scale production, access to continental markets, and better resource allocation^[14].

The AfCFTA Treaty

The African Continental Free Trade Area (AfCFTA) aims to achieve the free movement of persons, capital, goods, and services, essential for deepening economic integration and promoting agricultural development, food security, industrialization, and structural economic transformation. AfCFTA seeks to address the need for an expanded and secure market for goods and services across Africa by enhancing infrastructure and progressively eliminating tariffs and non-tariff barriers to trade and investment.

Once these goals are realized, AfCFTA will establish grounds for cooperation in all trade-related areas, providing a framework for dispute settlement and ensuring the effective operation of the trade area. The agreement will serve as a reference for future trade agreements and activities. Additionally, AfCFTA promotes transparency by requiring member states to disclose the agreements and activities they engage in independently, ensuring a unified and open approach to trade relations.

Transparency is further provided for in the AfCFTA with provisions for notifying member states on agreements with members and even third parties^[15]. Preferential treatments are encouraged for member states under conditions that are clear and can be measured and in some cases reciprocal.^[16]

DISCUSSION

While the AU’s inclusion at the G20 has been celebrated by many with several projections made to benefit the continent, this work has found some areas where the continent can look at in a strategic approach to its engagements at the G20.

1. Trade Policies and Tariff Regulations

One of the key goals of the African Continental Free Trade Agreement is to reduce tariffs. With the goal to progressively eliminating tariffs on trading among member states, there may be concerns about the impact of reduced tariffs on exports from G20 countries to Africa. For the AfCFTA to be successful, it is expected that trading among partner countries will be measured by “clear, transparent, predictable and mutually advantageous rules” in their engagement. This would mean at every point in time, the AfCFTA must pass the test of trading being this smooth among the member countries. In effect, AfCFTA gives priority to member countries although third parties are considered.

G20 economies might see this as reducing their competitive advantage in the African market, leading to potential conflicts over trade terms.

2. Regulatory Standards and Compliance

The AfCFTA promotes the harmonization of regulations across member states, which could differ from global standards. G20 nations might advocate for adherence to international regulatory standards, which could be stricter or different from those agreed upon within the AfCFTA. This could lead to disputes over product standards, environmental regulations, and labour laws. Works like that of Oyedele et al^[17] have highlighted how African countries are unable to make gains in exports to the European Market under facilities like the EUs Economic Partnership Agreement (EPA). They note that a country like Nigeria is unable to make the gains it expects in imports due to the imposition of strict measures that make African economies fail regarding compliance. If these continue to become a challenge under the G20, it would mean that while more economies could potentially have access to Africa’s markets, the continent would not be able to export more.

3. Global Trade versus Regional Trade Commitments

The AfCFTA, although gives room for preferential treatment to third-party countries, also encourages African nations to prioritize regional trade commitments, which might take precedence over global trade agreements. Articles 4, 18 and other provisions give room for nations to set preferences among themselves and on basis of reciprocity.

“Notwithstanding paragraph 1, two (2) or more State Parties may conduct negotiations and agree to liberalise trade in services for specific sectors or sub-sectors in accordance with the objectives in this Protocol. Other State Parties shall be afforded opportunity to negotiate the preferences granted therein on a reciprocal basis.”

This could potentially conflict with G20 protocols that emphasize the importance of global trade liberalization and adherence to multilateral trade agreements, which might be compromised by regional arrangements. It is worth noting that a number of frictions that come up between G20 member countries are often on the lines of trade. These have over the years included the US-Chnia trade war where the U.S. imposed tariffs on Chinese goods, citing unfair trade practices and intellectual property theft. There has also been a number of frictions including non-compliance with the WTO dispute settlement mechanisms.

4. Dispute Resolution Mechanisms

While the AfCFTA includes its own dispute resolution mechanisms for trade-related issues among African countries whiles the G20 does not have a formal dispute settlement system. It operates largely on the basis of consensus and voluntary compliance although mechanisms of the WTO are for instance emphasized as routes to use. This could conflict the binding nature of the AfCFTA’s dispute resolution mechanism. G20 members may resist strict enforcement measures from AfCFTA rulings in favor of diplomatic resolutions.

5. Environmental and Sustainability Standards

While AfCFTA includes some provisions on sustainability, African nations might prioritize development goals that could conflict with more stringent environmental standards advocated by G20 countries. G20 countries, particularly those in Europe, may push for stricter adherence to global environmental standards, which could lead to conflicts if AfCFTA nations prioritize economic development over these standards.

6. Africa’s advocacy at the global level

Africa has taken a number of strong positions at the global level in a bid to boost its economic fortunes and improve life’s against the many statistics that continually spell of economic hardships on the continent. Over the past years, Africa has made a number of calls including the payment of reparations to the continent for slavery. At the global environmental level, there are calls for the global north, as the biggest polluter to compensate the global south on the lines of mitigation and adaptation to the effects of climate change. In its current state, the continent is requesting for trillions of dollars from the global north.

For the effective participation of Africa at the G20, some of these stances could be potentially compromised as it becomes part of the club whose members are at the center of the advocacy calls at the global level. In the end, these positions Africa seeks to take might be shaky or compromised to allow it play a significant role or benefit from the group. These could trickle down to actions being taken against multinational corporations in some African countries where citizens are protesting heavily against the operations of these organizations. Recognizing role some of these multi-national corporations play in these global economies, there will be course for governments to protect the interest of these corporations in countries they operate in. The AU joining the G20 club now represents the closest these economies might come on a global platform away from them highly populated groupings like the World Trade Organization and United Nations. As a result, influence and pressure could be easily built to affect some of the strict stance Africa could take.

CONCLUSION

Africa as much as is exposed to many opportunities after joining the prestigious G20 club is also exposed to a number of potential issues that can affect its aspiration in the African Continental Free Trade Area. For the continent to make the best out of this association, it will have to be firm and ready to take positions that might be unpopular among member countries in the G20 group. There is a potential risk of Africa’s late joining of the G20 group contributing to its inability to fully appropriate the mechanisms G20 due to structures that might not be sensitive to the peculiar situations of the continent. For effective implementation of the protectionist and favoured approach, the AfCFTA offers thus, the continent must take a more rational than normative approach to help it effectively boost trade and economic integration.

It is also evident that for proper implementation of the AfCFTA, the continent needs to speed up development in areas including human capital development to ensure ownership and full benefits. This takes the conversation back to moving from a raw-material-based economy to a production economy and moving away from being constant consumers. For an effective implementation of the AfCFTA, Africa would need to take some bold steps.