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The Road to Continental Free Trade Area (1)

Recently President Buhari of Nigeria gave the countries weight to the establishment of CFTA. Coming from the President of the most populous countries in Africa at this time, five (5) years after that was agreed in AU suggest a lot of intricacies. We should recall that it was in their 50th Anniversary Solemn Declaration, the heads of State and Government of the African Union (AU), while acknowledging past successes and challenges, rededicated themselves to the continent’s accelerated development and technological progress. They laid down vision and eight ideals to serve as pillars for the continent in the foreseeable future, which Agenda 2063 will translate into concrete objectives, milestones, goals, targets and actions/measures Agenda 2063 strives to enable Africa remain focused and committed to the ideals envisaged in the context of a rapidly changing world.

Agenda 2063 is both a Vision and an Action Plan. It is a call for action to all segments of African society to work together to build a prosperous and united Africa based on shared values and a common destiny. All policies and strategies employable must be employed by the line Department (DTI) to realize this vision. Our medium have not established discussion with DTI-AUC on their actions so far.
Cross section of Heads of States at the AU Summit (Photo Credit: AFDB)
In a related development the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa, Ethiopia in January 2012, adopted a decision to establish a Continental Free Trade Area (CFTA) by an indicative date of 2017. The summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven clusters: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration. The CFTA will bring together fifty-four African Countries with a combined population of more than one billion people and a combined gross domestic product of more than US $3.4 trillion.

Negotiations for the CFTA were expected to take place from 2015-2016 and the CFTA should be launched by an indicative date of 2017. The main objectives of the CFTA are to create a single continental market for goods and services, with the free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union. It was also expected to expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation and instruments across the RECs and across Africa in general. The CFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources.

According to the World Trade Oragnisation (WTO) the level of intra- African trade in 2012 was 12.8% which is very low compared to other regions in the world. The share of Africa’s total exports in global trade flows was 3.5% which is extremely low compared to other regions. An African exporter faces an average non-agriculture applied tariff protection rate of 7.8% which is higher than what the same exporter would face when exporting to Europe and the United States. Trade among Africa’s economies which do not belong to the same Regional Economic Community is on the basis of the most favored nation principle. This commercial reality of cross border trade in Africa simply demands that more should be done in order to come up with framework that provides for the reduction of tariffs, elimination of non-tariff barriers and a rule based mechanism for contract enforcement and dispute settlement among other things. The CFTA provides such a framework and is in line with the goal of the Abuja Treaty Establishing the African Economic Community.

In line with the a strategic objectives of the Unions Agenda 2063 initiative, the CFTA provides a lever that can be used to strategically position the continent to exploit its numerous trade and investment opportunities and contribute positively towards the structural transformation of African economies. In the process of transforming Africa, the CFTA should contribute towards the creation of decent and gainful employment opportunities for African citizens. Overall trade among African countries should contribute towards poverty eradication and have a positive impact on the lives of the citizens.

The move to establish the CFTA comes at a time when seven of the world’s ten fastest growing countries are in African and the continent also has a fast-growing middle class. Indeed, a lot of positive developments are happening across the continent and Africa is on the rise. It is therefore imperative that the CFTA was designed in such a way that it provides an opportunity to integrate the fragmented national markets into a functional continental market. Yet, pursuing market integration and leaving out important aspects such as trade facilitation, infrastructure and industrial capacity development will not yield the required results. African member states that implement the right policy mix should be able to take advantage of the trade and investment opportunities brought about by the growth that the continent is currently enjoying.