…In view of modalities and opportunity costs
By Hilary Mare
LAST week the Continental Free Trade Area (CFTA) -a US$3 trillion continental free-trade zone encompassing 1.2 billion people -was given a green light by African leaders at a special African Union summit in Kigali, Rwanda.
Chaired by the current AU leader, President Paul Kagame of Rwanda and the chair of the AU Commission, Moussa Faki Mahamat, the session saw 44 of the 55 AU member states sign the deal.
However, the continents two biggest economies, Nigeria and South Africa as well as Namibia, Botswana, Lesotho, Zambia, Burundi, Eritrea, Benin, Sierra Leone and Guinea Bissau, did not sign up, diminishing its impact.
With Namibia yet to complete consultations and fully pronounce itself regarding the deal, the AU Commissioner for Trade and Industry, Albert Muchanga last week noted with concern that another summit penned for July will present another chance for Namibia and others to ink the deal.
“Some countries have reservations and have not finalised their national consultations. But we shall have another summit in Mauritania in July where we expect countries with reservations to also sign,” Muchanga said.
In essence, stakeholders who were present at the national level consultation on the CFTA held in Windhoek last September said that Namibia was not ready to engage in this initiative.
The consultation featured various trade unions, faith-based organisations, academia, youth groups, government officials and private sector players who deliberated on the developmental impact of the CFTA on people in Namibia in particular and the Southern African Development Community (SADC) in general.
Sylvester Wullo Bagooro from the Third World Network-Africa, who was a guest speaker at the consultation, cautioned the participants on the negative impact of the deadline on which they had to approve the content of agreement, which was December 2017. Some other issues brought forward by Bagooro are the exclusionary nature of the consultation process which he said omitted, among others, civil society, the private sector and academia.
He also argued that African countries have been liberalising for a while under the WTO, structural adjustment, EPAs and regional economic communities without an improvement in the welfare benefits for the people as this forms part of the liberalisation agenda.
On the other hand Africa already has an alphabet soup of competing and overlapping trade zones — ECOWAS in the west, EAC in the east, SADC in the south and COMESA in the east and south — although only the EAC, driven mainly by Kenya, has made significant progress toward a common market in goods and services.
However currently, African countries only do about 16 percent of their business with each other, the smallest amount of intra-regional trade compared to Latin America, Asia, North America and Europe.
And with average tariffs of 6.1 per cent, businesses currently pay higher tariffs when they export within Africa than when they export outside it, according to the AU.
“If we remove customs and duties by 2022, the level of intra-African trade will increase by 60 percent, which is very, very significant,” Muchanga told AFP in an interview before the summit.
No room for the weak
Proponents of the deal argue that African economies on their own are too small to support economic diversification and industrialisation on their own and will benefit from having a unified platform to negotiate trade deals with wealthier nations.
The “CFTA will make Africa one of the largest economies in the world and enhance its capacity to interact on equal terms with other international economic blocs,” said Faki Mahamat in a speech before the signing ceremony.
“The world is changing, and changing at a great speed. International competition is fierce. It leaves no room for the weak.”
However, critics highlight a dearth of roads and other infrastructure linking different African nations, as well as the fact that many countries do not manufacture goods their neighbours may want to import, as challenges to the deal.
Breaking the trend
Faki Mahamat acknowledged that Africans “have seen so many proclamations remain a dead letter, so many commitments without practical execution that they have come to doubt the strength of our commitment.”
He urged for a break in this trend, calling for a deal that “must confound those who, outside Africa, continue to think – with barely-concealed condescension — that our decisions will never materialise.”
The CFTA is a key part of the AU’s long-term development plan Agenda 2063, which calls for easing trade and travel across the continent.
At its most recent summit in Ethiopia in January, AU member states agreed to a common air transport market that could drive down airfares, as well as plans for visa-free travel for Africans across the continent.
Also last week, 27 countries signed the protocol agreeing to the free movement of persons across the continent.
Enhancing trade within signatories
The CFTA is expected to be implemented in various stages since the overall process of regional integration in Africa including its eight Regional Economic Communities (RECs) is at different stages.
In this regard, the CFTA will build on the existence of other Free Trade Area’s (FTA) in the continent such as the SADC FTA and the pending ‘Grand’ FTA involving the Common Market for Eastern and Southern Africa (COMESA), the East African Community and SADC.
However, the actual implementation of the CFTA will entail that all members of the trade agreement abolish any tariffs, taxes or special requirements for import on goods from other member countries.
Parties to the agreement must also discourage any monopoly of the domestic market to make it easier for international producers to penetrate the market.
The implications of these regulations are expected to promote free and fair trade and competition among member states, thereby encouraging countries to work together rather than as individual states.
As such, some of the benefits that will accrued from the CFTA include the harmonization of trade policies, and removal of non-tariff barriers, enabling countries to increase their earnings, penetrate new markets and contribute towards their national development.
Furthermore, the CFTA will resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes.
Currently, most countries in Africa belong to more than one RECs, a situation that usually led to conflicts of loyalty and confusion of commitment, thus hindering progress of integration in Africa.
Therefore, addressing the issues of overlapping membership has the capacity to accelerate the pace of integration in Africa.
The establishment of the CFTA is also expected to enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources.
The decision to establish a CFTA was adopted by the 18th Ordinary Session of the Assembly of Heads of State and Government of the AU at their annual summit held in Addis Ababa, Ethiopia in January 2012.
Negotiations for the CFTA began in June 2015 with the initially date of the launch set for 2017. However, this was delayed to ensure that the right modalities are put in place for the success of the market.
Confidente. Lifting the Lid. Copyright © 2015