The African nations are trying to convert the continent into a free trade area. Once all the 55 nations joined the free trade agreement, it will become the largest free trade area in the world. So far 22 countries have signed the agreement. The African Continental Free Trade Area comes into force on paper on Thursday after the required 22 countries ratified the deal a month ago. Once it’s passed by all 55 nations recognized as part of the African Union, it would cover a market of 1.2 billion people, with a combined gross domestic product (GDP) of $2.5 trillion.
The deal would help the economies dependent on raw material and commodities export at the moment to build and expand the manufacturing capacity and industrialisation. It would help to expand the regional trade and spur the economic development at faster pace. Boosting intra-regional trade would spur the construction of roads and railways, reducing the infrastructure gap in Africa.
Trade between African countries is at 15% which is lowest in the world, compared with 20% in Latin America and 58% in Asia, according to the African Export-Import Bank. This could increase by 52% by 2022 and can more than double within the first decade after implementing the deal, the Egypt-based bank said in a report last year.
After four years of talks, the mechanics of the agreement will be negotiated in phases and it should be fully in operation by 2030. Non-trade barriers, such as delays at ports, and politics, would have to be navigated before the plan to remove tariffs on 90% of goods can be realised. Negotiators will also have to convince economies reliant on these levies for revenue to let them go.
One hurdle to integration is Nigeria. The country that vies with South Africa for the title of Africa’s biggest economy, hasn’t signed up yet. Now re-elected, President Muhammad Buhari is reviewing an impact-assessment report.
Analysts say the deal could still face opposition from oil exporting countries making “super profits” in the West African nation. Nigeria is one of three countries, including Benin and Eritrea, that hasn’t signed the deal. Twenty-two nations, including South Africa, have ratified the text, the next step after signing.
In each of our countries, there are proper issues that one needs to deal with and where people need to see that the government is focused on their day-to-day issues,” said one expert. “Opening up a market for the people from other parts of the continent to freely come and do commerce and trade in your country is going to take a lot.”
There are many hurdles in the full implementation of free trade agreement that needs to be removed. It will take lot of time and efforts to fully realise this deal. But if implemented it would create new economic opportunities and much needed jobs. African nations can reduce poverty and enjoy high growth rate as the result of this agreement. But larger nations will have to take into account the concerns of the weaker and small nations and economies. If their concerns are not addressed than they might opted out of this agreement.
The potential benefits are obvious, if the usual hurdles of nationalism and protectionism don’t yet stand in the way. The trade pact’s implementation could also be scupper if leaders seeking re-election put sovereign interests ahead of the continent.
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27 September, 2019