Africa one step closer to a free trade bloc
Hopes for an African free trade agreement moved closer to reality when negotiations were launched in Johannesburg this week, with 2017 set for the conclusion of a treaty.
But trade experts have cautioned that there is much to do before realising this ambitious target.
The negotiations for a continental free trade agreement were launched at the African Union summit this week, and come off the back of the ratification of the smaller but significant tripartite free trade agreement in Egypt earlier this month.
The tripartite agreement links three major regional blocs – the East African Community (EAC), the Southern African Development Community and the Common Market for Eastern and Southern Africa.
The tripartite agreement talks began in 2008 and, although the legal agreement has been concluded, further phased negotiations on protocols governing, among other things, competition, cross-border investment and intellectual property rights are still ongoing.
With the signing of the tripartite agreement, however, the dream of a continental agreement is no longer as distant as it once seemed, according to Wolfe Braude, the founder of research consultancy firm Emet Consulting.
“We are now on the road towards continental economic unity,” he said, but warned that the timelines were ambitious.
Once completed, the continental agreement would link 54 countries, with a combined gross domestic product of $3-trillion, and could raise intra-African trade by 52% by 2022, according to the AU Commission.
Braude said the AU wanted to conduct back-to-back negotiations with the tripartite agreement, which could be useful because the experience of one set of talks could be built into the next.
But a continent-wide deal would involve new actors. “Within this greater bloc, you do have other significant economies,” he said.
These included Nigeria, Morocco and Algeria, and this could be a challenge for countries such as Kenya and South Africa.
“South Africa and Nigeria have never had to play in the same economic playground,” Braude said.
Greater regional integration also faces well-documented problems, including infrastructure barriers, border post delays and corruption.
Research has shown that trade facilitation, such as easing the cost and waiting times of goods at border posts, could have major benefits for the continent.
Scenarios for integration
The Trade Law Centre (Tralac) used the Global Trade Analysis Project database and issued a report that posited several scenarios for regional integration and intra-African trade barrier reductions.
Tralac found that if there was a mere 20% decrease in the costs associated with transit delays, it could amount to a $30.5-billion benefit to the continent.
The steps required to do this could be taken by countries unilaterally, or with improved co-ordination, without the need for drawn-out processes associated with free trade agreement negotiations, according to Tralac.
In the case of Zimbabwe, for example, the research estimated that it would gain almost $1-billion from a reduction in transit times, and “much, but not all, of these transit costs are under Zimbabwe’s own control”.
These barriers have ensured that intra-African trade is far below what it could be.
According to data from the World Trade Organisation, in 2012 intra-African trade amounted to about 12% of all trade. Intra-regional trade in more developed areas such as Europe and North America was 60% and 40% respectively.
Kenyan President Uhuru Kenyatta underscored the importance of a continent-wide agreement for Africans.
“[It] means an end to poverty, it means prosperity, jobs for our young people, who are today fleeing our continent to look for greener pastures, and it means peace and security,” he said during a panel discussion at the launch of the agreement talks in Johannesburg.
“Pooling economies and markets together through regional integration will provide a sufficiently wide market space to make economies of scale possible for African industries and allow Africa to play its rightful role in the global market,” he added.
Fatima Haram Acyl, the AU commissioner for trade and investment, acknowledged that it was important to address trade facilitation issues and other nontariff barriers.
“It will have an immediate effect on all our economies,” she said. “The political will is there, but negotiations won’t be easy. Our economies are different – some countries are rich and some are poor.”
Acyl added that the continental free trade area should be dealt with in a holistic way.
It was not just about the creation of a bigger market for Africa, she said, but also about tackling issues of industrialisation, improving the continent’s productive capacity and addressing trade facilitation and infrastructure.
“The 2017 deadline for the continental free trade is ambitious but we are not starting from scratch,” Acyl said.
The work done to finalise the tri-partite free trade agreement provided lessons in what worked and “the best examples that we should replicate in order for us to move forward”.
Similarly, work done by other regional blocs, such as the Economic Community of West African States, which shared a common external tariff, provided a valid and strong basis for negotiations on a continent-wide agreement, Acyl added.
Debates about regional integration cannot ignore the question of the movement of people. Migration has become an increasingly sensitive matter in the wake of events such as the recent xenophobic attacks in South Africa.
Braude said the successful implementation of the free movement of goods could be used to establish a basis for trust.
Once that was done, the more sensitive issue of the movement of people could be dealt with, beginning first with the movement of business people before graduating to the issue “that requires the most careful management and is probably the most distant one”, the free movement of labour.
Acyl said an increasing number of African states had already eased the movement of people across their borders and they could share their best practices.
She cited Rwanda and Kenya, which are part of the EAC regional bloc, as examples. They had already taken steps such as abolishing work permit fees for people from other states in the EAC seeking to work in their countries.
“We’re not saying that 54 countries today will have free movement of people, but I think it’s very important that best practices are shared and then to see how [others] will come forward,” she said.