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Africa eyes its prized continental free trade area

All Africa | 5 May 2017

Africa eyes its prized continental free trade area

By Liesl Louw-Vaudran (ISS Consultant)

Former Ethiopian prime minister Meles Zenawi didn’t like it when the African Union (AU) set tight deadlines that might never be achieved. At a debate about intra-African trade at the AU summit in January 2012, the late Zenawi berated the AU Commission for stating that a Continental Free Trade Area (CFTA) would be established by 2017. It was far too short a deadline for such a complicated and immensely difficult achievement, he said.

Clearly, 2017 has arrived and the CFTA, formally adopted in 2012, is not yet a reality. But it’s not that far off either. Experts say significant progress has been made following the launch of the CFTA negotiations at the AU summit in Johannesburg in 2015.

This week in Nairobi, Kenya, for example, technical working groups of the CFTA have been meeting to put their heads together on tricky issues such as the non-tariff barriers, rules of origin and customs procedures. Several parallel initiatives on sub-regional and continental levels are on the go. These initiatives promote regional integration, even if they are not directly related to the CFTA.

Ahead of the World Economic Forum (WEF) for Africa in Durban this week, there was also optimism about what the CFTA could mean for business on the continent.

Intra-African trade now stands at 15%, far lower than that between other regional blocs

’The key objectives of the CFTA are to boost intra-African trade and investment by easing the movement of goods and people on the continent and to improve Africa’s competitiveness and economic growth by reducing the cost of doing business,’ said Elsie Kanza, the WEF’s head of regional strategies for Africa. ’Achieving this milestone will start to make regional integration a reality. The next step will be to make it easier for Africans to travel within Africa without a visa.’

Free movement of people and goods was given a boost with the adoption of an African passport at the Kigali summit last year. A protocol for the free movement of people in Africa is being drawn up. Like the launch of an African passport, cross-border infrastructure initiatives have also brought the idea of continental integration closer to becoming a reality.

The AU doesn’t have the capacity to run these projects, but facilitating talks on regional integration is one of the few areas where it can make a real difference.

Zenawi’s main point during that debate in 2012 was that the bureaucrats were wrong to think it’s merely a question of scrapping a few border controls or harmonising trade legislation and overnight Africa would be one massive market where everyone got rich by trading with everyone else. What if, he asked, Ethiopia produces coffee and tea and its neighbour Kenya also produces coffee and tea? What will they trade?

Facilitating talks on regional integration is where the AU can make a real difference

Intra-African trade, leaders noted then, was only 11% of Africa’s total trade. This hasn’t improved much. According to the WEF’s Kanza, intra-African trade now stands at 15%, far lower than that of the trade between other regional blocs. In the European Union (EU), trade between member countries stands at 60%, within East Asia it is 53% and in North America regional trade is 41% of total trade.

The figures for intra-African trade are influenced by fluctuations in Africa’s total trade with the rest of the world, which took a knock in the past few years due to the drop in commodity prices. As total external trade drops, the figure of intra-African trade shows a marginal increase.

Part of the problem, as Zenawi noted, was the colonial structure of African economies destined to export goods outside the continent, rather than goods being for local consumption. Many also argue that building regional markets and regional value chains would be the first step in Africa’s participation in global value chains.

The list of other impediments to the CFTA is long, not least of them being the huge overlap of regional economic communities and mechanisms. Negotiations around the Tripartite Free Trade Area that includes the East African Community, the Common Market for East and Southern Africa and the Southern African Development Community are just one of the efforts to try to ensure these overlapping regional communities work better together.

The isolationist measures of US President Donald Trump and the decision by the United Kingdom to leave the EU has led to a vigorous debate over the real benefits of free trade agreements.

The Continental Free Trade Area isn’t yet a reality, but it’s not that far off

Critics of imposing the free trade mantra on Africa argue that rich countries that advocate for free trade got there by selected protectionism and the use of tariffs to build an infant industry. Once they have built their ability to compete behind protective walls, they steadily advocate for freer trade where they now have the ability to compete.

While some governments could hamper regional integration through protectionist measures, some African leaders have carved out a role for themselves as continental leaders in this regard.

Rwanda’s President Paul Kagame has been leading regional projects like the Smart Africa initiative, which champions, among other things, the One Africa Network - an attempt to ensure free call roaming across borders. Rwanda is of course a landlocked country that has everything to gain from free trade as it depends on its neighbours for trade with non-African countries.

Just less than halfway through the year, even if all the details of the CFTA are not thrashed out by December, indications are that heads of state could sign a framework agreement for the CFTA by the end of the year. This should lead to full implementation in the foreseeable future.

 source: All Africa