After getting delayed by eight months because of the global Coronavirus pandemic, the African Continental Free Trade Area (AfCFTA) was launched belatedly on New Year’s Day this year. Ethiopian Airlines partnered with DHL and African Electronic Trade Group to transport the first batch of parcels traded under this much anticipated free trade area agreement.
In a statement, the partners hailed the effort as one that will “welcome the start of trading of the African Continental Free Trade Area with its 1.3 billion people and an estimated GDP of [USD] 3.4 trillion.”
The AfCFTA, the largest in the world, garnered the signatures from 30 of the 55 nations on the continent surpassing the threshold of 22 signatories to be ratified.
The objectives of the agreement include creating a single continental market for goods and services – with free movement of goods, people and investments – and thus, paving the way for an accelerated establishment of the Continental Customs Union. The ultimate vision being to further expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation regimes and instruments across Regional Economic Communities (RECs).
Resolving the challenges of multiple and overlapping memberships and expediting the regional and continental integration processes and enhancing competitiveness at the industry and enterprise level is also to be the principle that will guide the historic agreement. This is to be achieved by exploiting opportunities for scale production, continental market access and better reallocation of resources.
The AfCFTA is said to bring about much more benefits to the signatories by removing trade barriers. The 2015 document by the United Nations Conference on Trade and Development (UNCTAD) foresees, “the removal of tariffs on intra-African trade could raise their share in total African trade volume from about 10.2 percent to 15.5 percent from 2010-2022”.
“And with enhanced trade facilitation measures, the gains would double to reach 21.9 percent”.
This continental free trade area is a continuation of the continental integration project set forth during the formation of the Organization of the African Unity (OAU), now called simply as the African Union (AU). Hence, a treaty was made in Abuja in 1991 to establish the African Economic Community, starting a formation of the continental free trade area to serve as a transition to the African Economic Community.
This treaty stipulated the CFTA would be established by 2017.
In this regard, the progress made by regional economic communities on the continent is expected to spearhead the quick integration of economies at continental levels. Africa hosts 10 regional communities that work towards the realization of this African Economic Community.
The African Economic Community aspires to leverage the Continental Free Trade Area to create a European Union like integration on the continent where countries enjoy increased trade among themselves, sufficiently substituting imports and lower poverty levels with enhanced interdependence
While the level of integration expected from regional communities is limited and many customs unions and market integration including reaching to the level of using single currency. Tariff and non-tariff barriers also remain challenges to the economic integration of the continent.
On the other hand, the viability and feasibility of the project itself is being challenged as the European Union faces growing challenges while Africa is heading towards the direction of emulating it.
The economic crises that failed numerous European countries like Spain, Ireland and Greece present opportunities for Africa to learn from the wrongs in the EU. On the other hand, the much debated exit of Great Britain from the EU triggered questions on the viability of such unions.
In an article on the website of the World Bank Group, Dirk Reinermann indicates that, as the EU grew out of smaller communities, there are three lessons Africa can take from its experience.
The first one is bringing the people together. Europeans managed to bring their peoples closer during and following various conflicts, especially the two World Wars. While Africa was not free from such conflicts, they were not used to create commonality among the people and “the cumulative effect does not seem to have created a strong enough political rationale for African citizens to feel the need to integrate.”
Hence, African leaders are now suddenly tasked with creating strong economic rationale to create awareness among the public about the benefits of integration for their own economical survival and competitiveness.
Second, apart from institutions, Africa can take lessons on matching its political will as it is a “deeply political process”. When “it gets interesting (open markets, common trade policy, common currency, joined external policies) it entails giving up national sovereignty” Reinermann points out.
Accordingly, regional integration “happens because countries and elected officials show leadership, often against fierce domestic political resistance… Institutions like the European Commission were created as the result of that strong political will of member states. Yet in Africa, we seem to have an obsession with creating more institutions – underfunded, often lacking legitimacy and with overlapping membership – and then trying to build their capacity without the necessary leadership of the member states.”
The third is being strategically selective and sequential steps are required in bringing about the integration.
“In Africa we have hundreds of simultaneous initiatives from air traffic control to biodiversity to transport to malaria and education, all without a doubt important in their own right, but taken together hardly strategic,” the writer further observed.
The learning for Africa could be easier if the continental body could leverage its increasingly strong relations with the European Union by way of strategic advice and financial support. The two bodies have institutionalized their relations through the Africa-EU Partnership as a formal channel through which they work together.
The Partnership is based on the Joint Africa-EU Strategy adopted by Heads of State and Government at the second EU-Africa Summit in 2007.
