Africa is now world’s largest free trade zone


Map of Trans-African Highways © Wikipedia

Africa is now the world’s largest free trade zone, which bears big implications with expectation to boost regional and international trade.

Media reports said:

The African Continental Free Trade Area (AfCFTA) came into being on May 30, 2019. It is the largest free trade agreement by population that the world has seen since the creation of the World Trade Organization (WTO) in 195.

The AfCFTA opens way for a continent-wide market of 1.2 billion people worth $2.5 trillion.

The agreement’s operational phase will be launched on July 7 at an AU summit in Niger.

There are still some issues to be resolved.

“This is a historic milestone!” tweeted Albert Muchanga, AU commissioner for trade and industry.

Muchanga wrote: “We celebrate the triumph of bold, pragmatic and continent-wide commitment to economic integration.”

Fifty-two of the African Union’s (AU) 55 member states have signed the agreement to establish the free trade area since March 2018. But Nigeria, the largest economy on the continent, is the notable exception.

However, some of Africa’s other economic heavyweights including Ethiopia, Kenya, Egypt and South Africa are among the 24 nations that have formally ratified it. In the last month, Zimbabwe and Burkina Faso joined the deal.

The AU envisions the free trade zone, once fully implemented, driving economic integration and spurring investment within the continent.

The AfCFTA proposal was approved in 2012 and the members started working on a draft in 2015. In March 2018, the leaders of 44 African countries endorsed the agreement in Rwanda. AfCFTA participants are reportedly weighing the possibility of using a common currency.

China’s reaction

Liu Yuxi, Chinese ambassador to the AU, welcomed the agreement, saying it will help forge closer economic and trade ties with China.

“It is a milestone in Africa which has in recent years been upholding the banner of unity and promoting economic integration,” Liu said, adding that the sides are expected to “build closer economic and trade ties by developing the free trade area and promoting the Belt and Road cooperation.”

German opinion

Christoph Kannengiesser, the head of the German-African Business Association, said nearly all the AU member states have signed the accord and thus voiced their interest in free trade.

He added that Africans should not rush things and should make sure their trade relations grow sustainably.

Kannengiesser noted the European single market didn’t come about overnight either, adding that other trade agreements such as NAFTA or TTIP are still controversial as there tend to be winners and losers in the process.

“That can trigger distributional conflicts and may prompt attempts to push and preserve your own national interests too much,” he said.

Kannengiesser believes there’s no big harm in Africa’s most populous, oil-rich state, Nigeria, not wanting to join the AfCFTA.

He thinks that while pursuing its own national interests and feeling stronger on its own, Nigeria won’t be able to ignore Africa’s economic dynamics in the long term.

UNECA’s reaction

Lifting trade barriers across Africa should “increase the value of intra-African trade by between 15 percent (or $50 billion) and 25 percent (or $70 billion),” by 2040, wrote Vera Songwe, executive secretary of the United Nations Economic Commission for Africa (UNECA) in a January 2019 essay.

Agenda 2063

AfCFTA has been a flagship project of the African Union’s “Agenda 2063” development vision for five years.

Reduced duties

Currently, only 16 percent of trade by African nations is with continental neighbors. The new deal is expected to cut duties on 90 percent of goods.

Some critics, however, say that poor infrastructure and a lack of diversity between the continent’s economies could throw up barriers to the hoped-for integration.

Internal trade in its infancy

Already there are other free trade zones in Africa, where tariffs have at least been partly removed. There’s the Union Douaniere de l’Afrique de l’Ouest, founded in 1959 and a precursor to the Economic Community of West African States (ECOWAS) comprising 15 states.

The Southern African Customs Union (SACU) can serve as yet another example.


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