African Continental Free Trade Agreement among 54 of the 55 African Union nations is being implemented. This free-trade area will be the largest in the world in terms of the number of participating countries since the formation of the World Trade Organization. However, the classification of world countries based on gross domestic product per capita shows that most african countries are in 50 top porest countries. Do you this the agreement will change the trend in Africa?
Thank you for the question Niyungeko Antoine
This is a brilliant question. Unfortunately, I am not an expert in this area. I would love to hear and learn from others, but gut feel tells me NO, on its own, it will not change the structure and the course of African economies.
I think that for the economic structure and course to shift materially, cross country value chains needs to be developed - end to end R&D, Production/Processing; supply chain/logistics etc., of specific commodities. Secondly, go on aggressive import substitution drive. Everything being equal and with minimised leakages.
There are different views...or and against...
Luke, D., & MacLeod, J. (Eds.). (2019). Inclusive Trade in Africa: The African Continental Free Trade Area in Comparative Perspective. Routledge.
Even there are different country perspectives...
… What was too glaring and surprising was the action of Nigeria - the Africa's biggest economy …
Jibrilla, A. (2018). African Continental Free Trade Area (CFTA) and Its Implications for Nigeria: A Policy Perspective. International Journal of Research and Innovation in Social Science, 2(12), 164-174.
... … The removal of tariffs will create a continental market that allows companies to benefit from the economies of scale. ...
Bello, S. A. (2018). The Prospects and Challenges of African Continental Free Trade Area Agreement. Sri Lanka J. Int'l L., 26, 121.
If corruption and bribery are overcome within each country on the African continent, the effectiveness of such a union will probably increase significantly. Currently, the governments of these countries are governed by local oligarchs and law enforcement agencies.
a new beginning for trade in Africa???
Parshotam, A. (2018). Can the African Continental Free Trade Area offer a new beginning for trade in Africa?.
Welfare Gains???
Abrego, M. L., Amado, M. A., Gursoy, T., Nicholls, G. P., & Perez-Saiz, H. (2019). The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model. International Monetary Fund.
... It seeks to create a single continental market for goods and services ...
Mishra, A. (2018). The African Continental Free trade Area and its Implications for India-Africa Trade. Observer Research Foundation.
... recent developments in international trading systems have weakened state capacity to pursue industrial policy by dislocating some trade measures from the state … Instead, African continental free trade is expected to encourage intra-Africa trade...
Odijie, M. E. (2019). The need for industrial policy coordination in the African Continental Free Trade Area. African Affairs, 118(470), 182-193.
obstacles to the African economic integration process...
Pasara, M. T. (2020). An overview of the obstacles to the African economic integration process in view of the African continental free trade area. Africa Review, 12(1), 1-17.
Case of winners and losers...
Akeyewale, R. (2018). Winners and losers in Africa's Continental Free Trade area. In International Trade Forum (No. 4, pp. 14-15). International Trade Centre.
The African Continental Free Trade Area (AfCFTA) was launched on May 30, 2019. If every African country joins, it is expected to be one of the largest individual markets in the world, representing $ 4 trillion in spending and investment in 54 countries.
The Central African Free Trade Agreement will give businessmen across the continent access to a much larger market. So it is important for young African entrepreneurs to understand how a free trade agreement for Central America and their companies can be beneficial. With full awareness-raising, business people should start drawing new business road maps for their business, informed by the agreement.
Dear Antoine,
we will hopefully (Corona?!) have a seminar on the AfCFTA in the summer term 2020 at the University of Potsdam, Germany (https://www.uni-potsdam.de/en/intwipo/index). We will also touch issues concerning your question. I can send you the syllabus, as soon as it is finished, if you want. Maybe you can also participate in the seminar, since we plan to do it online, which is not yet fixed. To come back to your question: Such as in the case of the EU and other economically integrated areas in the world, a general answer to your question who will benefit or not surely is: it depends! There will be winners and loosers. So, it will depend on the point of view, whether the african continent benefits or not, because one simply cannot compare gains and losses between different people, regions, etc., and over time.
Thank you so much dear Peter for your contribution. I m interested in your seminar.
My experience in negotiating and later on monitoring implementation of FTAs shows that, especially regional FTAs, are of great benefit for the business and the countries involved. Regional FTA not only creates more transparent and predictable environment for domestic businesses but also increases trade with third countries and attracts more FDI. Of course some countries' gains are bigger than the others but there are positive effects for all of them.
Galateya, thank you for your contribution. I think the benefit from FTA will be in proportion of a country development. Some countries will constitute market for others. For instance, Burundi exports around 10% in East African community while it imports around 30% from east african community.
The base of trade is production of goods and services, the more a country produces much is the benefit of FTA.
Ideally it was supposed to work as soon as it is in implimentation phase. Having all other matter working. The sad reality is amidst the ongoing Corona Virus many Economies on the continent are constrained in doing business. To have goods and service move across the continent is at this moment a risk.
Possibly after this pandemic goes is when it may work. The only part is that the focus of many governments will be to recover their economies from the economic damage the pandemic may have caused.
Dear Niyungeko Antoine,
Thank you for this challenging question. From the post-Covid-19 perspective, the AfCFTA is a good initiative. It is necessary but not sufficient. In many African countries there are barriers that prevent the AfCFTA implementation, such as:
- continuing internal and inter-state conflicts;
- poor infrastructure and insufficient capacities;
- low human development;
- low quality of government.
As long as such weaknesses persist, AfCFTA cannot generate the expected results.
AfCFTA is a good step but in the absence of other relevant initiatives and measures, it will remain only partially implemented and will have limited results.
Best wishes from Bucharest,
Monica
