By Sharon Atieno
Though Africa has several regional blocks: COMESA, EAC, ECOWAS and SADC among others, they have not been enough to promote trade across the region. In 2012, African governments agreed to establish a continental free trade area. Serious negotiations which started in 2015 led to the formation of Africa Continental Free Trade Area (AfCFTA).
The main purpose of forming the continental block is to improve intra-African trade. The United Nations Economic Commission for Africa (UNECA) estimates that the AfCFTA has the potential to boost intra-African trade by 52.3 percent by eliminating tariffs. With the reduction of non-tariff barriers, trade between African countries doubles.
Supporters of AfCFTA fault the different tariffs in individual African countries terming them as impediments to intra-region trade. The 55 African countries have 107 unique land borders which frustrate trade. In Africa, businesses face average tariffs of 6.9 percent and non-tariff barriers. The AfCFTA scraps tariffs on goods and liberalizes it up to 90 percent with the 10 percent being left to protect sensitive items provided by the countries.
Africa is a big market that has the potential to expand rapidly. In 2017, five out of ten fastest growing countries in the world were African. It is estimated that Africa’s GDP can reach $4 trillion by 2030 through AfCFTA.
UNECA predicts that the continental integration will benefit industrial and value added exports such as processed agricultural and industrial supplies thus, creating more jobs and opportunities for micro small and medium enterprises. United Nations Conference on Trade and Development (UNCTAD) projects a 1.2 percent gain in employment.
The AfCFTA is a game changer in multilateral negotiation. “AfCFTA is a stepping stone to solidifying Africa’s position in World Trade Organization, as it gives a strong position to negotiate with developed countries at the international level. It is not just one individual country but a continental block hence more powerful,” states Victor Ogalo, Head, Policy Research and Public Private Dialogue, Kenya Private Sector Alliance (KEPSA).He further said that AfCFTA provides a strong position to do more meaningful trade with emerging markets like Brazil, China and others.
Other benefits to be accrued from AfCFTA include opening borders, thus making it easier for landlocked countries to trade among others.
Ogalo was speaking at a Nairobi conference convened by World Trade Organization and Friedrich-Ebert-Stiftung, dubbed: Challenges for the multi-lateral trading system-Perspectives from East Africa, where he pointed out the benefits and challenges of the AfCFTA having been a participant in the negotiations of the continental block. The conference brought together civil society organizations, business and media participants from World Trade Organization (WTO) members and observers from East Africa.
The WTO has made significant contribution to AfCFTA being that WTO rules are the foundation stone for AfCFTA. Processes such as trade remedies and depositing of ratification instruments started at the WTO. ”The WTO is the starting point of international, regional and bilateral trade agreements, from which they expand in terms of issues of consideration such as investment, movement of persons, competition among others , where WTO rules are not well developed,” Keith Rockwell, director, WTO information and external relations division. He also noted that African countries that have been reluctant to take up trade issues at the WTO are pushing them very hard at the African context.
Ogalo cautioned that with the continental integration, changes had to be made in individual countries in order for AfCFTA to be effective. “There will be a lot of adjustment costs that countries will have to incur, such as restrictions on movement of people, capital, investment, tariffs among others,” he stated.
This opened the floor for the participants to raise their concerns about the AfCFTA, with some of the questions and discussions bordering on exploitation, funding and fears of duplication.
Funding of the continental block was a concern, with participants raising issues on how it would be carried out. They all agreed that some African countries do not have the financial capability of funding themselves in their own negotiations so it would be difficult for them to fund the continental block. Donor funding was considered as a solution provided the interest of the donors do not override that of the member States.
Some of the members present had doubts about exploitation. Some African countries are doing better in trade compared to others hence, by all African standards; they are placed under the developed category. Fears were raised that if unchecked, these developed countries can take advantage of the less developed ones. “AfCFTA is a good idea, but we still have to put strategies in place to ensure that the interests of the less developed African countries with less infrastructure and capabilities are not exploited by the more developed ones, thus making the integration beneficial to all players ,” Eugene Jernigan, trade policy and development , Action Green for Trade and Sustainable Development.
Exploitation also included countries outside Africa. “Care should be taken to ensure that the continental block is not making a market for goods outside the continent at the expense of Africans,” cautioned Isaac Shinyekwa, senior research fellow, Trade and regional integration department.
Other participants questioned the difference between AfCFTA and other earlier continental agreements that had failed terming it as a replica of the others. “ A lot of research has been put in to this, considering the previous continental agreements and borrowing ideas from the regional blocks hence making it more feasible and better,” Jamie Macleod, trade policy expert, UNECA.
Since its launch in June 2015, negotiations carried out on AfCFTA have been slow but progressive. Currently, three countries have not shown any commitment: Nigeria, Guinea Bissau and Eritrea. 49 countries have signed, seven have ratified and three are committed to the Kigali declaration. For AfCFTA to be enforced 22 countries have to ratify, this is evident of the work ahead.