Africa’s Ambitious New Free Trade Agreement

To most outsiders, Africa is a perpetually chaotic and conflict-ridden place, despite the fact that wars on the continent (both civil and inter-state) are at a historic low (albeit from a high base and with some nasty conflicts still brewing).

To take advantage of these improving political circumstances, and its nascent economic potential, most of Africa is coming together to forge the sort of pact typically seen as the pursuit of wealthier states: a united commercial market known as the African Continental Free Trade Area

From The Washington Post (bolding mine):

On Mar. 21, 44 African heads of state and government officials met in Kigali, Rwanda, to sign the framework to establish this initiative of the African Union.

The AfCFTA will come into effect 30 days after ratification by the parliaments of at least 22 countries. Each country has 120 days after signing the framework to ratify.

This will be one of the world’s largest free-trade areas in terms of the number of countries, covering more than 1.2 billion people and over $4 trillion in combined consumer and business spending if all 55 countries join. 

[…]

It creates a single continental market for goods and services as well as a customs union with free movement of capital and business travelers. The African Union agreed in January 2012 to develop the AfCFTA. It took eight rounds of negotiations, beginning in 2015 and lasting until December 2017, to reach agreement.

The A.U. and its member countries hope the AfCFTA will accelerate continental integration and address the overlapping membership of the continent’s regional economic communities (RECs). Many African countries belong to multiple RECs, which tends to limit the efficiency and effectiveness of these organizations.

One of its central goals is to boost African economies by harmonizing trade liberalization across subregions and at the continental level. As a part of the AfCFTA, countries have committed to remove tariffs on 90 percent of goods. According to the U.N. Economic Commission on Africa, intra-African trade is likely to increase by 52.3 percent under the AfCFTA and will double upon the further removal of non-tariff barriers.

In addition to facilitating existing economic activity, it is hoped that ACFTA will help promote Africa’s underdeveloped but fast growing manufacturing sector, diversifying its economies beyond agriculture and resource extraction.

While it remains to be seen how this ambitious effort will play out, it is definitely a step in the right direction, especially for a region that is the youngest and most potentially dynamic in the world.

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