African countries are forging ahead with the continental free trade area agreement, with the continents largest economy, South Africa, having recently ratified AfCFTA in its National Parliament.
The idea of a continental free trade area was adopted by the African Union in 2012, and developed on the premise that it would create a single market which would include the free movement of goods, services and people. Currently, the integrated African market covers 1,2 Billion people, with a combined GDP of over USD$ 3,5 trillion.
It is expected that the agreement would help boost Africa’s industrial development, promote economic transformation and generate new jobs. The is based on the assumption that large markets are job-creating, as it supports more trade in goods, services and assets.
However, the benefits of the free trade agreement won’t be automatic, and as such would require continuous efforts by national, regional and continental bodies.
Viewed against the backdrop of uniting fifty-five countries to foster continental integration, the continent, and specifically the African Union, has made commendable progress in crafting its own path towards industrialization and intra-Africa trade. This is essential considering that trade between African countries stands at only 15% compared to Latin America at 19%, Asia at 51% and Europe at 72%.
However, fear persists amongst some countries on the African continent. This fear is precipitated by notions that countries with existing Infrastructure would benefit more than smaller countries. As such, a number of countries use non-tariff barriers to curb imports of goods such as maize, milk, sugar, food oil products, and steel and iron.
While this has historically been necessary to protect fledgling industries in smaller countries from having their industries completely dominated by imports, the continental free trade agreement needs to open the markets to empower smaller countries to develop their domestic industries to access the larger regional and global markets needed for their growth.
Concerns still exist over the expansion of foreign (non-African) imports, and the continental free trade area becoming a conduit for such imports. Those opposed to AfCFTA, believe it could undermine Africa’s goal to increase its industrial and trade capacity, rather than bolster it. At present, nearly 85% of goods traded in Africa come from outside the continent. Only 15% of the goods traded in Africa are locally produced.
However, the focus of the free trade area should not be the fear of imports. Rather the focus should remain the up-scaling of export production in existing niche markets, through the development of new industries and capacitating existing industries. In addition, African countries resistant to the continental free trade area agreement should be weary of adopting protectionist policies to insulate themselves.
Africa regional integration is not easy. Its not simply about emulating trading rules used in other regions such as the European Union. It should be about remaking the continents trade networks for a more open future with expanding possibilities to use regional trade integration to spread prosperity, create jobs and develop niche industries.