The AfCFTA Objectives, Concerns and Opportunities

The AfCFTA Objectives, Concerns and Opportunities

By Chikamso C Apeh

According to the international economics, free trade agreement helps to improve the welfare of trade partners/member countries. It helps to regulate tariffs and other trade restrictions between two or more countries, thereby liberalizing both the import and the export markets. It has proved to be one of the effective ways to open foreign markets to exporters. It helps to reduce exporters’ trade barriers, and protects their interests and enhance rule of law in the partner countries.

At the 18th session of the African Union (AU) in 2012, head of member states initiated the idea for the establishment of an African Continental Free Trade Area (AfCFTA). The idea was to establish a free trade area within the African continent with a combined GDP of more than $3.4 trillion collectively to make it the largest-free-trade area in the world. The main aim of this idea is to boost intra-trade in Africa from 12% in 2012 to 25% in 2022. This will help create jobs and boost Africa’s economic status at the world stage.

The AfCFTA Objectives[1]

• To create a single market; this will help facilitate the free movement of persons, goods and services, and investments which will help fast-track the creation of African customs union.
• To reinforce intra-African trade. This will better harmonize the coordination of trade liberalization and facilitation regimes and instruments across the Regional Economic Comunities (RECs) and across Africa in general.
• To accelerate regional and continental integration procedures, and resolve multiple and overlapping memberships challenges.
• To augment industrial competitiveness through production, market access and resources reallocation.

The scope of the agreement covered treaties on trade in goods, services, investment, and rules and procedures on dispute settlement, including a range of provisions to facilitate trade, reduce transaction costs, provide exceptions, flexibilities and safeguards for vulnerable groups and countries in challenging circumstances.

On 21st March 2018, a momentous achievement was made when 44 of the 55 African countries signed the draft AfCFTA agreement during the 18th Extraordinary Session of the Assembly of AU Heads of State and Governments in Kigali, Rwanda. The signatories[2] include Algeria, Angola, Benin, Burkina Faso, Central Africa Republic, Cameroon, Cape Verde, Chad, Comoros, Congo, Cote d’Ivoire, Democratic Republic of Congo, Djibouti, Egypt, Equatorial Guinea, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Kenya, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Niger, Rwanda. The Saharawi Republic, São Tomé and Principe, Senegal, Seychelles, Somalia, South Sudan, Sudan, Swaziland, Togo, Tunisia, Uganda, and Zimbabwe. The likes of Botswana, Burundi, Eritrea, Lesotho, Namibia, Nigeria, South Africa, Tanzania, and Zambia declined to sign the agreement. The expectation was that within six months, the agreed terms will come into force. This will bring about a deeper economic integration and boost commerce, growth and employment in the continent.

The AfCFTA Growing Concerns

While some countries have resorted to widening domestic consultations on the agreement, to ensure all concerns were addressed, some economists and entrepreneurs alike are pondering over the distribution of the benefits of the agreement, for it may not be equitably distributed among economies. They argued that the agreement would only benefit countries with a structured economy that are producing locally than some countries that do not have industries to produce/add value. Others argue that the agreement would impact on government revenue and social welfare, as the elimination of all tariffs among African countries would erode the trading states’ treasury by up to $4.1billion annually and deepen poverty, with millions of Africans potentially exposed to starvation and death particularly among the poorer economies[3]. In effect, the Nigeria Labor Congress (NLC) has kicked against the agreement, warning that it is “extremely dangerous” as it would open their country’s seaports, airports and other businesses to unbridled foreign interference and domination.

The AfCFTA Opportunities

Even thou Africa is still plagued by many tariff and non-tariff barriers, poor infrastructure, poor transportation networks, and heavy bureaucracy and corruption, it does not mean Africa has not been performing well. The bottlenecks preventing the efficient functioning of Africa were covered by the AfCFTA and successful implementation of this agreement will help:

• In the realization of a truly UNITED Africa that the former Ghanaian President Kwame Nkrumah dreamt of;
• To boost Africa’s economic output to around $29 trillion by 2050 and increase intra-African trade by 52.3%. The current, intra-African trade stands at around 18% of total trade compared to 59% in Asia and 69% in Europe[4];
• Bring about Africa’s transformation from an exporter of agricultural commodities and raw materials to a supplier of finished manufactured goods. The diversification in trade would lead to sustained economic growth and employment generation;
• Reduce the vulnerability of African economies to global shocks which are because of over-reliance on imported commodities;
• Trigger the renegotiation of all the multilateral trade agreements, such as the EU-Africa Economic Partnership Agreements with some African nations to reflect the collective nature of the agreement between AU member states.

Finally, the success of AfCFTA depends on African nations rational and understanding that the short-term losses will lead to huge gains in the long run.

Chikamso C Apeh is an Associate of ACINTaD, Food Security Nutrition and Surveillance Expert under the ECOWAS Volunteer Program, working with the Ministry of Agriculture, Liberia.

[1] https://au.int/en/ti/cfta/about

[2] http://africanarguments.org/wp-content/uploads/2018/04/AfCFTA-africa-trade-768×959.jpg

[3] http://sunnewsonline.com/acfta-big-blunder-or-cautious-step/

[4] https://www.washingtonpost.com/news/monkey-cage/wp/2018/03/29/the-countdown-to-the-african-continental-free-trade-area-starts-now/?noredirect=on&utm_term=.9c25872aff60