Progress is being made towards the signing of a Continental Free-Trade Area (CFTA) involving all 55 countries on the African continent, which aims to encourage trade between neighbouring countries
Progress is being made towards the signing of a Continental Free-Trade Area (CFTA) involving all 55 countries on the African continent, which aims to encourage trade between neighbouring countries.
Currently, African countries trade twice as much with European trade partners as with each other, according to NEPAD, something the CFTA plan wants to change.
Negotiations began in 2015 and a text was finalised at a meeting in December 2017 by African trade ministers, which heads of state are expected to sign in March 2018.
Whilst an agreement on services has been reached, an accompanying protocol on goods has yet to be made, and current trade barriers will require significant efforts to be overcome.
The CFTA will only come into force once 15 countries have signed the agreement, and the deal will initially only form a framework that as of now still lacks details on tariff reduction.
Negotiations on competition, investment and intellectual-property rights are also yet to take place.
Around 82% of exports from African countries, mostly commodities, go to other continents; in contrast, more than 50% of intra-African trade is in manufactured products.
The CFTA deal could create bigger and more competitive markets which will boost Africa’s industrialisation.
In addition, a strong CFTA would give more weight to Africa in talks with America and Europe, according to the African Centre for Economic Transformation.
A study by the UN Economic Commission for Africa has estimated that intra-African trade would be 52% higher in 2022 than it was in 2010, once the CFTA is implemented.
This is, however, under the assumption of the removal of all tariffs, whereas the CFTA’s current aim is to eliminate tariffs on 90% of products within the next 10 years, which is less ambitious and would have a much more modest effect than claimed in the study.
Furthermore, much intra-African trade is already conducted within smaller free-trade areas, with the rest concentrated in a small range of goods.
By retaining just 5% of product tariffs, Africa could exclude most of its current imports from liberalisation, or the freeing of the economy from direct controls imposed by the government.
Research has suggested that removing non-tariff barriers and cutting transport times, rather than reducing tariffs, would have a far bigger impact on the African economy.
For example, according to the World Bank, it takes a container of car parts 3.5 weeks to pass Congolese customs.
In contrast, a recently-introduced one-stop border post has cut the cargo transportation time between Tanzania and Uganda by 90%.
Even where tariffs have been reduced, new non-tariff barriers, like divergent standards for goods, have been reported for harassment of women and extortion at east African borders.
Meanwhile, a separate scheme to link three regional blocs called the Tripartite Free-Trade Area has been set back by failing to meet multiple deadlines.
In many countries, like South Africa and Nigeria, free trade clashes with political currents, with governments afraid of losing control over industrial policy and missing out on the revenue provided by tariffs.
Technical advisors to the CFTA are advising patience in the planning and implementation of the free trade area, in order to give African countries more time to adjust.
Read More: Dr Nkosazana Dlamini Zuma, former Chairperson of the African Union Commission, describes the positive steps now being taken to integrate the African market, and welcomes the first phase of negotiations on the trade in goods and services