AFRICAN CONTINENTAL FREE TRADE AREA

 

By África M. Ariño

Setting up a Continental Free Trade Area (CFTA) by 2017 is on Agenda 2063. This will imply the creation of a single continental market for goods and services, and free movement of business persons and investments, which would accelerate the establishment of the Continental Customs Union. Leaders at the African Union Summit agreed to this plan during a meeting in Addis Ababa, Ethiopia on January, 2012. How is the CFTA beneficial for African economies? How far has the plan gone?

Creation of the CFTA aims at facing the low levels of intra-African trade. This represents only 13% of total trade in Africa. The expectation is to boost it up to the levels of other trade areas such as ASEAN (30%), NAFTA (40%) or the EU (60%). So far, the big boost in real GDP experienced in SSA since 2009 (average growth rate of 4.5% per year) has been accompanied by large current account deficits (average -3.3% per year). Boosting intra-African trade would correct these imbalances without the need to slow down their economic growth. Besides, a high volume of trade among SSA countries will incentivize the so much needed infrastructures improvement, and it will positively impact productivity in the medium and long run through higher competition exposure of the local firms.

Despite initial skepticism about the late 2017 deadline, experts say significant progress has been made. The CFTA was launched in Johannesburg on June 2015. The African Union Commission has hosted 5 meetings of the CFTA. The last one took place February, 27 to March, 4 2017. At the time, Commissioner for Trade and Industry at the African Union Commision, Mrs. Fatima Haram Acyl remarked: “I am very confident that the end of 2017 will usher Africa into a new era where our traditional borders will become less important as a result of establishment of the Continental Free Trade Area“.

In the previous meeting, held in Kigali on February 6 to 17, Technical Working Groups met in order to track the evolution of this process. They focused on Trade in Services, Non-Tariff Barriers and Technical Barriers to Trade, Sanitary and Phytosanitary, Rules of Origin , Legal and Institutional Affairs, Trade Remedies, and Customs Procedures and Trade Facilitation.

Despite the noticeable progress, there are unavoidable challenges associated with the unequal distribution of gains among members that could eventually aggravate their economic imbalances. It’s also important to note that in Africa there are already a number of regional economic communities at different stages of integration. A successful harmonization of the existing trade arrangements will be needed for the CFTA’s ultimate success.

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