It was exactly twenty years ago that member states of the African Union made the decision to attain one economic community encompassing 53 countries. And it is clear that the Abuja treaty (1991) set the precedent for most of the efforts directed towards achieving economic and later political unification of the continent.
Historical accounts show that one of the challenging issues in the formation of the Organizations of African Unity (OAU) was the modality of unifying the then liberalized African nations. The dispute had earlier resulted in splitting Africans into two uneven groups - the Monrovia and Casablanca camps.
A handful of countries led by Ghanaian President Kwame Nkrumah insisted the Casablanca group pushed for the immediate unification of the continent under the auspices of the federation of African nations, while Léopold Sédar Senghor, the then Senegalese leader, backed by most of the former French colonies, advocated gradual implementation of the unification starting with economic integration. Although the difference between the two groups was narrowed down, credit was due to Emperor Haile-selassie of Ethiopia, and the OAU was formed in Addis Ababa. The age-long quest for unity and cooperation appears to be there until the present time.
Adding to the point, the late Libyan leader, Muammar al-Qaddafi as well flirted with idea of political unification in recent times and, to some extent, he also managed to rally some support for his move. However, in spite of strong diplomacy and campaigning, the AU still remained more of economic than political in nature, pundits believe.
The AU, modeled after the European Union, is mostly about enhancing economic partnership, the pundit argues. Upon its establishment in 2002, the long-term goal of the organization was to realize continental economic unity; and the theme of the 18th session of the heads of state and government - that is boosting intra -African trade - showed just that.
In addition to some eight regional trading blocs in Africa, the union also launched initiatives towards monetary unification of African economies. Among such initiatives, the establishment of an African Central Bank and African Monetary Fund, both in the making for many years, reveals the conviction of the AU states about attaining overall economic integration.
The ultimate goal
The African Union, like the EU, was destined from start to encompass a central bank, a court of justice and an all-Africa parliament in its structure. And it was to be achieved through strong economic cooperation. At least it seems to be the intention when the AU members signed the treaty of Abuja, which laid out the plan for the formation of the African Economic Community (AEC).
However, the journey to the continental economic community is not easy, to say the least, according to experts. It involves various stages and faces many hurdles. Economic integration has the prerequisites of integrating the trade and monetary policies of the 54-member countries of various backgrounds and economic caliber. According to international trade theorists, the process of fully integrating a region, composed of various economic units and independent custom territories, has some five rigorous, core stages.
In this regard, Preferential Trade Area (PTA) or Free Trade Area (FTA) agreements, though sometimes the distinction between the two is blurred, is the primary level of economic integration. According to various documentations, FTA signatories agree to open their borders by eliminating tariff and non-tariff (quotas, licensing or restrictions) trade barriers to products originating from the FTA region. The countries in FTA still keep independent tariffs with respect to their trade exchange outside the region. Here, the issues of verification of the origin of the product allowed access by FTA is a critical matter as a non-signatory might take advantage through countries in the region. A region successfully implemented FTA can promote their integration to second stage: unifying their customs. At this stage countries in treaty would adopt common external trade policies - tariffs and non-tariff barriers. In level three, the unified custom territories would open borders for free movement of factors and resources signifying a higher level of economic integration. However, what follows in step four and five are economic and monetary unifications and full political union.
Africans look to your neighbors!
According to the 18th ordinary session of the AU, the time has come for Africa to start focusing inwards. The draft decision document elaborated how African trade is external oriented. It says that intra-Africa trade is a mere 11 percent as opposed to 60 and 40 percent in Europe and North America, respectively. In spite of some eight, at times overlapping, regional trading blocs in the continent, still the bulk of the Africa import-export business is linked to the outside world, explains AU’s study. According to data, the total share of Africa’s exports in the global market was 2.5 percent while a whopping 90 percent of the continent’s imports came from outside. And furthermore, the study shows that as a rule the value of export increased for countries in some regional economic communities in the continent. In order of performance, CEN-SAD, COMESA, ECOWAS, SADC and AMU occupy the top places in Africa. They have achieved increased exports within their own regional communities both in terms of value of imports and exports.
In the back-drop of the performance of the regional blocs, the tripartite treaty set to be signed among Common Market for Eastern and Sothern Africa (COMESA), Eastern African community (EAC) and Southern Africa Development Community (SADC) is an initiative in a right direction, says AU.
Hence, the union has reviewed a draft document to fast-track a process of realizing FTA across the continent by 2017. The draft detailed the road map make and the framework to achieve the FTA within the next five years. The free trade area arrangement, which is the first of the five core levels until full political union, was said to be a way out for the insignificant intra-Africa trade level in the continent.
Why now?
The renewed commitment and the optimisms towards re-enforcing intra-Africa trade is not just an epiphany according to the union. The intra-continental market that obviously is definite plus for growth, which Africa has record an average of 5 percent last year, is cited as one of the rationales for realizing the FTA. As the traditional export products from Africa with the exception of South African, which is achieving industrialization at present, is dominantly primary commodities, the FTA would help countries to diversify, AU says. Not to mention the considerable decrease in transportation cost and hence the price of the commodities once the free trade area starts to function.
However, one of the basic reasons appears to be the recent economic turmoil in the traditional trading partners of the continent. The financial crisis and the follow-up economic downturn in U.S. and the recent sovereign debt crisis in Europe were mentioned as cases in point. It is an exit strategy for Africa to strengthen the intra-continental trade exchanges, says the AU study, and external shocks would be basic factors for Africa. Nevertheless, the challenges to get the FTA rolling are not undermined by the continental union. Investment on infrastructure to facilitate cross-border trade and improve the inner capacity of the countries to diversify production capacity will be some of issues to tackle.
Unrealistic timeframe
On the other hand, some cast serious doubt on the realistic nature of the plan to have the continent-wide FTA up and running in the next five years. As the free trade agreements imply dissolving most of trade barriers and be open to the cross-border trade exchanges, the time frame set aside for the completion is not well thought-out, said Goodluck Jonathan, Nigerian president. In his address to the convention of African Heads of state and government this week, he noted that the continent is composed of various economic units each with its own challenges. And each country has an independent speed to effect changes necessary for joining the FTA.
Jonathan further cautions the union about advancing FTA without the presence of adequate infrastructure, legal framework and socio-political conditions to ensure free trade. He insisted that the AU members should take FTA roadmap and implementation time frame as a general guideline instead of being rigid on the matter. “I say this from experience,” said Jonathan, drawing on the problems encountered in ECOWAS. On the other hand, he also warned that new assignments like FTA should not slacken the continent’s firm negotiating power and representation in multilateral trade rounds.
On the other hand, with some of the African nations like Ethiopia in the process of acceding to the World Trade Organization (WTO), the resources to conduct a detailed negotiation of FTA could be quite difficult. In this regard, solving product origin matters and laying down dispute settlement and arbitration mechanisms in a diverse economic community like Africa will require considerable resources, commentators note. And they wonder if political will is enough. Tanzanian president Jakaya Kikwete, however, says the complete opposite. “We can achieve all of it, if the political will is there,” he remarks.
