Summary

• The vast majority of state-to-state cyberattacks consist of persistent, low-level intrusions that take place below the threshold of use of force. International law, including the principle of non-intervention in another state’s internal affairs and the principle of sovereignty, applies to these cyber operations.
• It is not clear whether any unauthorized cyber intrusion would violate the target state’s sovereignty, or whether there is a threshold in operation. While some would like to set limits by reference to effects of the cyber activity, at this time such limits are not reflected in customary international law. The assessment of whether sovereignty has been violated therefore has to be made on a case by case basis, if no other more specific rules of international law apply.
• In due course, further state practice and opinio iuris may give rise to an emerging cyber-specific understanding of sovereignty, just as specific rules deriving from the sovereignty principle have crystallized in other areas of international law.
• Before a principle of due diligence can be invoked in the cyber context, further work is needed by states to agree upon rules as to what might be expected of a state in this context.
• The principle of non-intervention applies to a state’s cyber operations as it does to other state activities. It consists of coercive behaviour by one state that deprives the target state of its free will in relation to the exercise of its sovereign functions in order to compel an outcome in, or conduct with respect to, a matter reserved to the target state.
• In practice, activities that contravene the non-intervention principle and activities that violates sovereignty will often overlap.
• In order to reach agreement on how international law applies to states’ cyber operations below the level of use of force, states should put their views on record, where possible giving examples of when they consider that an obligation may be breached, as states such as the UK, Australia, France and the Netherlands have done.
• Further discussion between states should focus on how the rules apply to practical examples of state-sponsored cyber operations. There is likely to be more commonality about specific applications of the law than there is about abstract principles.
• The prospects of a general treaty in this area are still far off. In due course, there may be benefit in considering limited rules, for example on due diligence and a prohibition on attacking critical infrastructure, before tackling broad principles.

Internet regulation is increasing around the world creating positive obligations on internet providers and exerting negative unintended consequences on the internet infrastructure. In some ways, most of this regulatory activity is justifiable. Governments are concerned about the increased risk that the use of the internet brings to societies. As a response, many governments have been enacting regulations as their main approach to dealing with these concerns. The main challenge is that most of the current regulations are either ill-defined or unworkable.  

On the one hand, several governments have established procedures that seek to analyze the impacts of new regulatory proposals before they were adopted. However, there hasn’t been enough attention aimed at analyzing regulations after they have been adopted and only a few have measures in place to evaluate the impacts of the procedures and practices that govern the regulatory process itself.

On the other hand, much of the regulation creates unintended consequences to the internet itself. It undermines many of its fundamental properties and challenges the integrity and resiliency of its infrastructure.  

This event discusses current practices in internet-related regulation and the related challenges. Panellists will discuss how governments can enforce regulations that achieve their intended purpose while at the same time protecting the internet’s core infrastructure and its properties, including its openness, interoperability and global reach.

The development of governance in a wide range of digital spheres – from cyberspace to internet infrastructure to emerging technologies such as artificial intelligence (AI) – is failing to match rapid advances in technical capabilities or the rise in security threats. This is leaving serious regulatory gaps, which means that instruments and mechanisms essential for protecting privacy and data, tackling cybercrime or establishing common ethical standards for AI, among many other imperatives, remain largely inadequate.

A starting point for effective policy formation is to recognize the essential complexity of the digital landscape, and the consequent importance of creating a ‘common language’ for multiple stakeholders (including under-represented actors such as smaller and/or developing countries, civil society and non-for-profit organizations).

The world’s evolving technological infrastructure is not a monolithic creation. In practice, it encompasses a highly diverse mix of elements – so-called ‘high-tech domains’,[1] hardware, systems, algorithms, protocols and standards – designed by a plethora of private companies, public bodies and non-profit organizations.[2] Varying cultural, economic and political assumptions have shaped where and which technologies have been deployed so far, and how they have been implemented.

Perhaps the most notable trend is the proliferation of techno-national regimes and private-sector policy initiatives, reflecting often-incompatible doctrines in respect of privacy, openness, inclusion and state control. Beyond governments, the interests and ambitions of prominent multinationals (notably the so-called ‘GAFAM’ tech giants in the West, and their ‘BATX’ counterparts in China)[3] are significant factors feeding into this debate.

Cyberspace and AI – two case studies

Two particular case studies highlight the essential challenges that this evolving – and, in some respects, still largely unformed – policy landscape presents. The first relates to cyberspace. Since 1998, Russia has established itself as a strong voice in the cyberspace governance debate – calling for a better understanding, at the UN level, of ICT developments and their impact on international security.

The country’s efforts were a precursor to the establishment in 2004 of a series of UN Groups of Governmental Experts (GGEs), aimed at strengthening the security of global information and telecommunications systems. These groups initially succeeded in developing common rules, norms and principles around some key issues. For example, the 2013 GGE meeting recognized that international law applies to the digital space and that its enforcement is essential for a secure, peaceful and accessible ICT environment.

However, the GGE process stalled in 2017, primarily due to fundamental disagreements between countries on the right to self-defence and on the applicability of international humanitarian law to cyber conflicts. The breakdown in talks reflected, in particular, the divide between two principal techno-ideological blocs: one, led by the US, the EU and like-minded states, advocating a global and open approach to the digital space; the other, led mainly by Russia and China, emphasizing a sovereignty-and-control model.

The divide was arguably entrenched in December 2018, with the passage of two resolutions at the UN General Assembly. A resolution sponsored by Russia created a working group to identify new norms and look into establishing regular institutional dialogue.

At the same time, a US-sponsored resolution established a GGE tasked, in part, with identifying ways to promote compliance with existing cyber norms. Each resolution was in line with its respective promoter’s stance on cyberspace. While some observers considered these resolutions potentially complementary, others saw in them competing campaigns to cement a preferred model as the global norm. Outside the UN, there have also been dozens of multilateral and bilateral accords with similar objectives, led by diverse stakeholders.[4]

The second case study concerns AI. Emerging policy in this sector suffers from an absence of global standards and a proliferation of proposed regulatory models. The potential ability of AI to deliver unprecedented capabilities in so many areas of human activity – from automation and language applications to warfare – means that it has become an area of intense rivalry between governments seeking technical and ideological leadership of this field.

China has by far the most ambitious programme. In 2017, its government released a three-step strategy for achieving global dominance in AI by 2030. Beijing aims to create an AI industry worth about RMB 1 trillion ($150 billion)[5] and is pushing for greater use of AI in areas ranging from military applications to the development of smart cities. Elsewhere, the US administration has issued an executive order on ‘maintaining American leadership on AI’.

On the other side of the Atlantic, at least 15 European countries (including France, Germany and the UK) have set up national AI plans. Although these strategies are essential for the development of policy infrastructure, they are country-specific and offer little in terms of global coordination. Ominously, greater inclusion and cooperation are scarcely mentioned, and remain the least prioritized policy areas.[6]

Competing multilateral frameworks on AI have also emerged. In April 2019, the European Commission published its ethics guidelines for trustworthy AI. Ministers from Nordic countries[7] recently issued their own declaration on collaboration in ‘AI in the Nordic-Baltic region’. And leaders of the G7 have committed to the ‘Charlevoix Common Vision for the Future of Artificial Intelligence’, which includes 12 guiding principles to ensure ‘human-centric AI’.

More recently, OECD member countries adopted a set of joint recommendations on AI. While nations outside the OECD were welcomed into the coalition – with Argentina, Brazil and Colombia adhering to the OECD’s newly established principles – China, India and Russia have yet to join the discussion. Despite their global aspirations, these emerging groups remain largely G7-led or EU-centric, and again highlight the divide between parallel models. 

The importance of ‘swing states’

No clear winner has emerged from among the competing visions for cyberspace and AI governance, nor indeed from the similar contests for doctrinal control in other digital domains. Concerns are rising that a so-called ‘splinternet’ may be inevitable – in which the internet fragments into separate open and closed spheres and cyber governance is similarly divided.

Each ideological camp is trying to build a critical mass of support by recruiting undecided states to its cause. Often referred to as ‘swing states’, the targets of these overtures are still in the process of developing their digital infrastructure and determining which regulatory and ethical frameworks they will apply. Yet the policy choices made by these countries could have a major influence on the direction of international digital governance in the future.

India offers a case in point. For now, the country seems to have chosen a versatile approach, engaging with actors on various sides of the policy debate, depending on the technology governance domain. On the one hand, its draft Personal Data Protection Bill mirrors principles in the EU’s General Data Protection Regulation (GDPR), suggesting a potential preference for the Western approach to data security.

However, in 2018, India was the leading country in terms of internet shutdowns, with over 100 reported incidents.[8] India has also chosen to collaborate outside the principal ideological blocs, as evidenced by an AI partnership it has entered into with the UAE. At the UN level, India has taken positions that support both blocs, although more often favouring the sovereignty-and-control approach.

Principles for rule-making

Sovereign nations have asserted aspirations for technological dominance with little heed to the cross-border implications of their policies. This drift towards a digital infrastructure fragmented by national regulation has potentially far-reaching societal and political consequences – and implies an urgent need for coordinated rule-making at the international level.

The lack of standards and enforcement mechanisms has created instability and increased vulnerabilities in democratic systems. In recent years, liberal democracies have been targeted by malevolent intrusions in their election systems and media sectors, and their critical infrastructure has come under increased threat. If Western nations cannot align around, and enforce, a normative framework that seeks to preserve individual privacy, openness and accountability through regulation, a growing number of governments may be drawn towards repressive forms of governance.

To mitigate those risks, efforts to negotiate a rules-based international order for the digital space should keep several guiding principles in mind. One is the importance of developing joint standards, as well as the need for consistent messaging towards the emerging cohort of engaged ‘swing states’. Another is the need for persistence in ensuring that the political, civic and economic benefits associated with a more open and well-regulated digital sphere are made clear to governments and citizens everywhere.

Countries advocating an open, free and secure model should take the lead in embracing and promoting a common affirmative model – one that draws on human rights principles (such as the rights to freedom of opinion, freedom of expression and privacy) and expands their applications to the digital space.  

Specific rules on cyberspace and technology use need to include pragmatic policy ideas and models of implementation. As this regulatory corpus develops, rules should be adapted to reflect informed consideration of economic and social priorities and attitudes, and to keep pace with what is possible technologically.[9]

Notes

[1] Including but not limited to AI and an associated group of digital technologies, such as the Internet of Things, big data, blockchain, quantum computing, advanced robotics, self-driving cars and other autonomous systems, additive manufacturing (i.e. 3D printing), social networks, the new generation of biotechnology, and genetic engineering.

[2] O’Hara, K. and Hall, W. (2018), Four Internets: The Geopolitics of Digital Governance, Centre for International Governance Innovation, CIGI Paper No. 206, https://www.cigionline.org/publications/four-internets-geopolitics-digital-governance.

[3] GAFAM = Google, Amazon, Facebook, Apple and Microsoft; BATX = Baidu, Alibaba, Tencent and Xiaomi.

[4] Carnegie Endowment for International Peace (undated), ‘Cyber Norms Index’, https://carnegieendowment.org/publications/interactive/cybernorms (accessed 30 May 2019).

[5] Future of Life Institute (undated), ‘AI Policy – China’, https://futureoflife.org/ai-policy-china?cn-reloaded=1.

[6] Dutton, T. (2018), ‘Building an AI World: Report on National and Regional AI Strategies’, 6 December 2018, CIFAR, https://www.cifar.ca/cifarnews/2018/12/06/building-an-ai-world-report-on-national-and-regional-ai-strategies.

[7] Including Denmark, Estonia, Finland, the Faroe Islands, Iceland, Latvia, Lithuania, Norway, Sweden and the Åland Islands.

[8] Shahbaz, A. (2018), Freedom on the Net 2018: The Rise of Digital Authoritarianism, Freedom House, October 2018, https://freedomhouse.org/report/freedom-net/freedom-net-2018/rise-digital-authoritarianism.

[9] Google White Paper (2018), Perspectives on Issues in AI Governance, https://www.blog.google/outreach-initiatives/public-policy/engaging-policy-stakeholders-issues-ai-governance/.

This essay was produced for the 2019 edition of Chatham House Expert Perspectives – our annual survey of risks and opportunities in global affairs – in which our researchers identify areas where the current sets of rules, institutions and mechanisms for peaceful international cooperation are falling short, and present ideas for reform and modernization.

In recent years, there has been a growing debate around the influence of a few large internet technology companies on the internet’s infrastructure and over the popular applications and social media platforms that we use every day.

The internet which was once widely viewed as a collective platform for limitless, permissionless innovation, competition and growth, is now increasingly viewed as a consolidated environment dominated by a few. Such market dominance threatens to undermine the internet’s fundamental benefits as a distributed network in which no single entity has control.  

The panel examines the risks of consolidation throughout the internet’s technology stack such as the impact on complex supply chains that support applications, including cloud provisions, ‘as a service’.

It also explores the potential benefits, for example, when building out essential infrastructure to support faster and cheaper internet services in developing economies, consolidation can create economies of scale that bring the resource-intensive building blocks of the internet economy within the reach of new start-ups and innovators.

The panel provides an interdisciplinary perspective exploring the relationship between consolidation and evolutions in the internet infrastructure as well as unpacking its policy implications.

This event supports a special issue of the Journal of Cyber Policy as part of a collaboration between Chatham House and the Internet Society which explores the impact of the consolidation on the internet’s fundamental architecture.

• Political, economic, sociological and technological factors are poised to challenge EU and US ideological positions on internet governance, which will make it difficult to find consensus and common ground in the years to come.
• The EU and US share core values and perspectives relating to internet governance, such as openness, freedom and interoperability, as well as a human rights framework for cybersecurity. There have been many examples of successful multi-stakeholder cooperation between the EU and US, including the Internet Assigned Numbers Authority (IANA) transition and the European Dialogue on Internet Governance (EuroDIG).
• There are also subtle differences between the EU and US, and each has different reasons to support multi-stakeholderism. Cases that highlight growing tensions in EU–US coordination on internet governance include the controversies surrounding the EU General Data Protection Regulation (GDPR), the WHOIS system that governs domain name registration data, and the board of the Internet Corporation for Assigned Names and Numbers (ICANN), which undermined an independent cybersecurity review.
• Internet governance is becoming more complex, with a multiplicity of actors and no obvious authority for important emerging issues. Additionally, the rise of China and its authoritarian vision for the future of the internet is a threat to the current internet governance institutions that have been shaped by and reflect Western values.
• To bridge ideological gaps the EU and US should build capacity between likeminded stakeholders, create a taskforce on effective multi-stakeholder internet governance, and work through non-governmental stakeholders to improve participation.

Understanding the complexity and the wickedness of the situation allows analysts and strategic planners to approach these complex and intractable issues in new and transformative ways – with a better chance of coping or succeeding and reducing the divisions between experts.

Using complexity theory, a complex adaptive system representing the international system and its interaction with the environment can be represented through an interactive visualization tool that will aid thought processes and policy decision-making. 

Until recently, analysts did not have the tools to be able to create models that could represent the complexity of the international system and the role that nuclear weapons play. Now that these tools are available, analysts should use them to enable decision-makers to gain insights into the range of possible outcomes from a set of possible actions.

This programme builds on work by Chatham House on cyber security and artificial intelligence (AI) in the nuclear/strategic realms.

In order to approach nuclear weapons as wicked problems in a complex adaptive system from different and sometimes competing perspectives, the programme of work involves the wider community of specialists who do not agree on what constitutes the problems of nuclear weapons nor on what are the desired solutions.

Different theories of deterrence, restraint and disarmament are tested. The initiative is international and inclusive, paying attention to gender, age and other aspects of diversity, and the network of MacArthur Grantees are given the opportunity to participate in the research, including in the writing of research papers, so that the complexity modelling can be tested against a wide range of approaches and hypotheses.

In addition, a Senior Reference Group will work alongside the programme, challenging its outcome and findings, and evaluating and guiding the direction of the research.

This project is supported by the MacArthur Foundation.

Several governments have been moving towards a stronger sovereignty narrative when it comes to the internet with some trying to impose borders in cyberspace to extend their physical borders in cyberspace. From attempts to create isolatable domestic internets to data localization laws and to increased calls for sovereignty in the digital space, all these approaches are raising concerns regarding the fate of the internet.

While the impact of these approaches varies and the motivations behind them are arguably different too, all governments have been working towards the pursuit of greater technological independence and in some instances greater control.

The panellists will discuss the impact that these approaches have on the internet. They will address the question of whether the era of an 'open web' is drawing to an end and whether these territorialization efforts lead to a fragmentation of the internet, making a 'splinternet' inevitable?

This event is being organized with the kind support of DXC Technology.

This event will be followed by a reception. 

PLEASE NOTE THIS EVENT IS POSTPONED UNTIL FURTHER NOTICE.

After a summer of regional tensions and continued uncertainty regarding the future of the JCPOA, the Chatham House MENA Programme held a closed workshop to examine the impact of the Trump administration’s maximum pressure campaign.

Discussions focused on the domestic developments and challenges inside Iran, prospects for new negotiations with Iran, and the regional issues facing the country. Participants also considered the differences between American and European approaches towards Iran.

 

African states are well represented in intergovernmental organizations linked by official language and colonial history such as the Organisation Internationale de la Francophonie (OIF), the Comunidade dos Países de Língua Portuguesa (CPLP) and the Commonwealth. These organizations aim to provide support in addressing matters of mutual interest – in addition to responding to significant policy challenges such as improving sustainable growth prospects and opportunities to young populations – and citizens are increasingly vocal on key issues such as democracy, human rights and the rule of law. This event series examines the importance of these intergovernmental organizations in working with their members to responsibly and sustainably respond to policy challenges in Africa.

At this event, Louise Mushikiwabo, secretary general of the Organisation Internationale de la Francophonie (OIF), will discuss the organisation’s relevance to African states and the future of the organization on the continent.

THIS EVENT IS NOW FULL AND REGISTRATION HAS NOW CLOSED.

The conventional wisdom is that Africa is at the periphery of international affairs, and the perpetual subject – or victim – of decisions by powerful political or economic actors from outside the continent. The argument then goes on that the diversity of African countries, their atomization and fragmentation, further weakens the ability of the continent to act as a unified whole. As with much cliché about Africa, it does not tell the whole story. 

Soft vs hard power

There is no denying that the structure of international affairs, built on foundations which preceded the independence of the vast majority of African states, places limits on the continent’s ability to independently shape the course of its development and its international engagements. African countries lack the hard power that would typically allow them to be bolder in the global scene.

But Africa has long found softer approaches to exercise its agency, through international institutions and diplomatic arrangements. The collective mobilization at the level of the UN, leading up to the successful 1969 declaration by the General Assembly of apartheid as a crime against humanity, is a good example of early post-independence collective influence.

The last two decades have further empowered African countries, as economic development has been translated into increased diplomatic capacity, and socioeconomic potential has given weight to a more assertive leadership.

There are many examples, including: the successful integration of African priorities in the Sustainable Development Goals, notably financing for development; the push to include a substantial climate financing component for developing countries in the Paris Agreement; enhanced coordination between African non-permanent members of the UN Security Council; the condemnation of the International Criminal Court; or the solid resistance to reversals of the Doha Round at the World Trade Organization.

A fragmented unity?

It is also correct to note that individual African countries are quite diverse. Today, there are 55 member states of the African Union (AU); 30 are middle income economies with the rest towards the bottom of various indexes measuring progress and wellbeing. Socioeconomic and political divergences undeniably exist within the continent. But these factors have not prevented the continent from demonstrating some impressive feats of collective agency.

The internal processes put in place by the AU have created a level of continental diplomacy which is more coordinated than any other continental block bar the EU. African countries have also proved adept at using other diplomatic alliances to exercise collective agency, for instance as the most powerful voice within the G77, a coalition of developing nations.

This has allowed Africa to build tactical alliances with countries and blocs from across the globe, resisting being drawn into any one sphere of influence. It has thus retained ultimate control of decision-making, even on issues of traditional ‘hard’ politics, notably the establishment of the African Peace and Security Architecture and the subsequent building of African capacity to collectively manage its peace and security efforts.

Among other things, this collective political will has powered African opposition to a formal permanent presence of US Africa Command (AFRICOM) and helped resolve conflicts from West Africa to Zimbabwe and Lesotho.

Another extraordinary example of collective political resistance can be observed in the trade discussions taking place between Africa and Europe. The EU is Africa's number-one trading partner. It designed and aggressively promoted new bilateral economic partnership agreements (EPAs) at a time when Africans were busy putting together a continental free-trade area. The apparent imbalance between the collective weight of the EU and the weakness of African states seemed likely to end African aspirations to continental integration.

But, to the surprise of many, the majority of African countries were able to resist pressure to sign the EPAs. Almost 20 years into the negotiations, only 15 countries have signed them, with 5 of these being interim agreements. Comparatively, 54 African countries signed the African Continental Free Trade Area agreement in 2018, and 28 have so far ratified.

The ongoing debate between Europe and Africa on migration is an equally useful illustration of how the continent has become more protective of its interests. Despite pressure, the continent has collectively resisted attempts to externalize the EU’s internal migration management challenges to Africa. Rather, it has emphasized finding solutions that would also benefit its nationals through a mobility framework that privileges the management of intra-Africa migration.   

Diversity and unity

There are of course different levels of agency at work. The power of African countries is uneven both vis-à-vis the international community and within the continent itself, where development pathways are increasingly divergent. Achieving collective positions and joint action demands the careful balancing of regional and bilateral objectives and assuaging multiple – and sometimes contradictory – concerns. It is not easy in Africa, like for any other region.

However, there is no denying that Africans have realized the need for bolder action in the international arena, and the importance of unity in achieving their goals. The call by Africa’s leaders for the reform of their continental organization, the AU, demonstrates their recognition of its current limitations. This must now go beyond good intentions.

This article is the first of a series on African agency in international affairs.

The entry into force of the African Continental Free Trade Area (AfCFTA) on 30 May, after only three years of negotiations, is an economic, political and diplomatic milestone for the African Union (AU) and its member states, crucial for economic growth, job creation, and making Africa a meaningful player in international trade. But the continent will have to work together to ensure that the potential benefits are fully realized.

A necessary innovation

With its advances in maintaining peace and security, abundant natural resources, high growth rates, improved linkages to global supply chains and a youthful population, Africa is emerging as a new global centre of economic growth, increasingly sought after as a partner by the world’s biggest economies. Governments from across Africa have been taking a more assertive role in international markets, including through proactive diversification of trading partners, and the continent remains a strong advocate for the multilateral trading system.

However, this is not yet reflected in outcomes. The African Union does not have observer status at the World Trade Organization, despite diplomatic efforts in the past decade. Africa has less than a three per cent share of global trade, and the growing trend towards protectionism across the global economy may only increase the vulnerability of a disunited Africa. Its fractured internal market means that trade within Africa is lower than for any other region on the globe, with intra-African trade just 18 per cent of overall exports, as compared to 70 per cent in Europe.

The AfCFTA is the continent’s tool to address the disparity between Africa’s growing economic significance and its peripheral place in the global trade system, to build a bridge between present fragmentation and future prosperity. It is an ambitious, comprehensive agreement covering trade in goods, services, investment, intellectual property rights and competition policy. It has been signed by all of Africa’s states with the exception of Eritrea.

It is the AU's Agenda 2063 flagship project, brought about by the decisions taken at the January 2012 African Union Summit to boost intra-African trade and to fast track the establishment of the Continental Free Trade Area. It builds upon ambitions enshrined in successive agreements including the Lagos Plan of Action and the Abuja Treaty. Access to new regional markets and reduced non-tariff barriers are intended to help companies scale up, driving job creation and poverty reduction, as well as attracting inward investment to even Africa’s smaller economies.

The signing in 2018 of the instruments governing the Single Air Transport Market and the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment provided another step towards the gradual elimination of barriers to the movement of goods, services and people within the continent.

Tests to come

However, while progress is being made towards the ratification of the AfCFTA, much remains to be done before African countries can fully trade under its terms. The framework for implementation is still under development, and the creation of enabling infrastructure that is critical for connectivity will take time to develop and requires extensive investment.

So, the first test for the AfCFTA will be the level to which Africa’s leaders make it a domestic priority, and whether a consensus can be maintained across the AU’s member states as the costs of implementation become clear.

There is no guarantee that the gains of free trade will be evenly distributed. They will mainly depend on the extent to which countries embrace industrialization, liberalization of their markets and opening of their borders for free movement of goods and people – policies that some incumbent leaders may be reluctant to implement. Political will to maintain a unified negotiating position with diverse stakeholders, including the private sector, will come under increasing stress.  

A second challenge is how the AfCFTA relates to already existing trade arrangements, notably with the EU.  The AU has long preferred to pursue a continent-to-continent trading arrangement instead of the bilateral Economic Partnership Agreements being sought by the EU under the African, Caribbean and Pacific (ACP) framework to which, with the exception of Algeria, Egypt, Libya, Morocco, Tunisia and South Africa, all African states belong. The signing of the AfCFTA is one important step towards making this possible.

But there are currently negotiations under the ACP to replace the Cotonou Accord (the framework governing trade between ACP members and the EU, including Economic Partnership Agreements [EPAs], that is due to expire in 2020). Negotiations on the African pillar of the accord are due to take place after the AfCFTA has entered into force. So African states and the AU will face the challenge of balancing their commitment to the ACP bloc with pursuing their own interests.

And though the AfCFTA should supersede any other agreements, the EPAs or their successors, will continue to govern day-to-day trading, in parallel to the new pan-African market. It is not yet clear how these contradictions will be reconciled.

A new role for the AU?

The AU will need to play an active role as the main interlocutor with Africa´s international trading partners, with the AfCFTA secretariat being the arbiter of internal tensions and trade disputes. The AU´s engagement at continental level has to date revolved mainly around headline political diplomacy, security and peacekeeping. With the continental free market becoming a reality, an effective pivot to economic diplomacy will be critical for growth and development.

With the AfCFTA, the AU has endeavoured to address Africa’s unsustainable position in global trade, to stimulate growth, economic diversification and jobs for its growing population. Much will depend on the commitment of African leaders to maintaining a unified negotiating position to implement the agreement and the AU’s capacity to effectively move from political to economic diplomacy.

In this article, we examine China's promotion of the renminbi (RMB) in international oil trade and explore its implications for the international currency system in the short and the long term. The article traces the rise of the RMB in international oil trade in recent years and provides an analysis of its impact on the internationalization of the Chinese currency. We argue that despite the increasing use of the yuan in oil trade in recent years, in the short term it is highly unlikely that a petro-RMB system will emerge to rival the petrodollar system. Unlike the petrodollar, which combines the qualities of a master currency, a top currency and a negotiated currency, China lacks the economic leadership and the political and geopolitical leverages to make the RMB a major petrocurrency. Although the emergence of the RMB-denominated Shanghai oil futures is an important development, the absence of highly developed financial markets and a strong legal system in China hinders its potential. In the long run, the RMB may take on a more prominent role in the international oil trade as China's weight as an oil importer rises. More importantly, the overuse of financial sanctions by the US government has begun to undermine the role of the dollar within and beyond the oil trade. In addition, the rise of alternative energy sources will diminish the centrality of oil in the world economy, thus reducing the significance of petrocurrencies—whether the dollar or the RMB—in shaping the international currency system.

The entry into force of the African Continental Free Trade Area (AfCFTA) on 30 May, after only three years of negotiations, is an economic, political and diplomatic milestone for the African Union (AU) and its member states, crucial for economic growth, job creation, and making Africa a meaningful player in international trade. But the continent will have to work together to ensure that the potential benefits are fully realized.

A necessary innovation

With its advances in maintaining peace and security, abundant natural resources, high growth rates, improved linkages to global supply chains and a youthful population, Africa is emerging as a new global centre of economic growth, increasingly sought after as a partner by the world’s biggest economies. Governments from across Africa have been taking a more assertive role in international markets, including through proactive diversification of trading partners, and the continent remains a strong advocate for the multilateral trading system.

However, this is not yet reflected in outcomes. The African Union does not have observer status at the World Trade Organization, despite diplomatic efforts in the past decade. Africa has less than a three per cent share of global trade, and the growing trend towards protectionism across the global economy may only increase the vulnerability of a disunited Africa. Its fractured internal market means that trade within Africa is lower than for any other region on the globe, with intra-African trade just 18 per cent of overall exports, as compared to 70 per cent in Europe.

The AfCFTA is the continent’s tool to address the disparity between Africa’s growing economic significance and its peripheral place in the global trade system, to build a bridge between present fragmentation and future prosperity. It is an ambitious, comprehensive agreement covering trade in goods, services, investment, intellectual property rights and competition policy. It has been signed by all of Africa’s states with the exception of Eritrea.

It is the AU's Agenda 2063 flagship project, brought about by the decisions taken at the January 2012 African Union Summit to boost intra-African trade and to fast track the establishment of the Continental Free Trade Area. It builds upon ambitions enshrined in successive agreements including the Lagos Plan of Action and the Abuja Treaty. Access to new regional markets and reduced non-tariff barriers are intended to help companies scale up, driving job creation and poverty reduction, as well as attracting inward investment to even Africa’s smaller economies.

The signing in 2018 of the instruments governing the Single Air Transport Market and the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment provided another step towards the gradual elimination of barriers to the movement of goods, services and people within the continent.

Tests to come

However, while progress is being made towards the ratification of the AfCFTA, much remains to be done before African countries can fully trade under its terms. The framework for implementation is still under development, and the creation of enabling infrastructure that is critical for connectivity will take time to develop and requires extensive investment.

So, the first test for the AfCFTA will be the level to which Africa’s leaders make it a domestic priority, and whether a consensus can be maintained across the AU’s member states as the costs of implementation become clear.

There is no guarantee that the gains of free trade will be evenly distributed. They will mainly depend on the extent to which countries embrace industrialization, liberalization of their markets and opening of their borders for free movement of goods and people – policies that some incumbent leaders may be reluctant to implement. Political will to maintain a unified negotiating position with diverse stakeholders, including the private sector, will come under increasing stress.  

A second challenge is how the AfCFTA relates to already existing trade arrangements, notably with the EU.  The AU has long preferred to pursue a continent-to-continent trading arrangement instead of the bilateral Economic Partnership Agreements being sought by the EU under the African, Caribbean and Pacific (ACP) framework to which, with the exception of Algeria, Egypt, Libya, Morocco, Tunisia and South Africa, all African states belong. The signing of the AfCFTA is one important step towards making this possible.

But there are currently negotiations under the ACP to replace the Cotonou Accord (the framework governing trade between ACP members and the EU, including Economic Partnership Agreements [EPAs], that is due to expire in 2020). Negotiations on the African pillar of the accord are due to take place after the AfCFTA has entered into force. So African states and the AU will face the challenge of balancing their commitment to the ACP bloc with pursuing their own interests.

And though the AfCFTA should supersede any other agreements, the EPAs or their successors, will continue to govern day-to-day trading, in parallel to the new pan-African market. It is not yet clear how these contradictions will be reconciled.

A new role for the AU?

The AU will need to play an active role as the main interlocutor with Africa´s international trading partners, with the AfCFTA secretariat being the arbiter of internal tensions and trade disputes. The AU´s engagement at continental level has to date revolved mainly around headline political diplomacy, security and peacekeeping. With the continental free market becoming a reality, an effective pivot to economic diplomacy will be critical for growth and development.

With the AfCFTA, the AU has endeavoured to address Africa’s unsustainable position in global trade, to stimulate growth, economic diversification and jobs for its growing population. Much will depend on the commitment of African leaders to maintaining a unified negotiating position to implement the agreement and the AU’s capacity to effectively move from political to economic diplomacy.