Source 2
JOHANNESBURG - African countries began officially trading under a new continent-wide free trade area on Friday, after months of delays caused by the global coronavirus pandemic.
But experts view the New Year's Day launch as largely symbolic with full implementation of the deal expected to take years.
The African Continental Free Trade Area (AfCFTA) aims to bring together 1.3 billion people in a $3.4 trillion economic bloc that will be the largest free trade area since the establishment of the World Trade Organization.
Backers say it will boost trade among African neighbours while allowing the continent to develop its own value chains. The World Bank estimates it could lift tens of millions out of poverty by 2035.
But obstacles - ranging from ubiquitous red tape and poor infrastructure to the entrenched protectionism of some of its members - must be overcome if the bloc is to reach its full potential.
Trade under the AfCFTA was meant to be launched on July 1 but was pushed back after COVID-19 made in-person negotiations impossible.
However, the pandemic also gave the process added impetus, said Silver Ojakol, chief of staff at the AfCFTA's secretariat.
"We saw the impact on our economies of the disruption of imports due to the pandemic," he said. "So there's actually been an increase in political will to boost intra-African integration."
Every African country except Eritrea has signed on to the AfCFTA framework agreement, and 34 have ratified it. But observers such as W. Gyude Moore - a former Liberian minister who is now a senior fellow at the Center for Global Development - say the real work begins now.
"I would be surprised if they can have everything set up within 24 months," he told Reuters. "For long-term success, I think we'll need to look at how long it took Europe. This is a multi-decade process."
'WE MUST START SOMEWHERE'
Historic challenges including Africa's poor road and rail links, political unrest, excessive border bureaucracy and petty corruption will not disappear overnight.
And an annex to the deal outlining the rules of origin - an essential step for determining which products can be subject to tariffs and duties - has not been completed yet.
Meanwhile, 41 of the zone's 54 member states have submitted tariff reduction schedules.
Members must phase out 90% of tariff lines - over five years for more advanced economies or 10 years for less developed nations. Another 7% considered sensitive will get more time, while 3% will be allowed to be placed on an exclusion list.
Finalising those schedules and communicating them to businesses must be done quickly, said Ziad Hamoui of Borderless Alliance, a group that campaigns for easier cross-border trade.
But efforts to implement the deal will also likely face resistance from countries' domestic interest groups. Fears of losing out to more competitive neighbours initially made some countries, including West African giant Nigeria, sceptical of the pan-African project.
Still, proponents of the zone are confident that initial steps towards its implementation will already allow member states to double intra-African trade by 2025.
"Economic integration is not an event. It's a process aid the AfCFTA secretariat's Ojakol. "We must start somewhere."
But experts view the New Year's Day launch as largely symbolic with full implementation of the deal expected to take years.
The African Continental Free Trade Area (AfCFTA) aims to bring together 1.3 billion people in a $3.4 trillion economic bloc that will be the largest free trade area since the establishment of the World Trade Organization.
Backers say it will boost trade among African neighbours while allowing the continent to develop its own value chains. The World Bank estimates it could lift tens of millions out of poverty by 2035.
But obstacles - ranging from ubiquitous red tape and poor infrastructure to the entrenched protectionism of some of its members - must be overcome if the bloc is to reach its full potential.
Trade under the AfCFTA was meant to be launched on July 1 but was pushed back after COVID-19 made in-person negotiations impossible.
However, the pandemic also gave the process added impetus, said Silver Ojakol, chief of staff at the AfCFTA's secretariat.
"We saw the impact on our economies of the disruption of imports due to the pandemic," he said. "So there's actually been an increase in political will to boost intra-African integration."
Every African country except Eritrea has signed on to the AfCFTA framework agreement, and 34 have ratified it. But observers such as W. Gyude Moore - a former Liberian minister who is now a senior fellow at the Center for Global Development - say the real work begins now.
"I would be surprised if they can have everything set up within 24 months," he told Reuters. "For long-term success, I think we'll need to look at how long it took Europe. This is a multi-decade process."
'WE MUST START SOMEWHERE'
Historic challenges including Africa's poor road and rail links, political unrest, excessive border bureaucracy and petty corruption will not disappear overnight.
And an annex to the deal outlining the rules of origin - an essential step for determining which products can be subject to tariffs and duties - has not been completed yet.
Meanwhile, 41 of the zone's 54 member states have submitted tariff reduction schedules.
Members must phase out 90% of tariff lines - over five years for more advanced economies or 10 years for less developed nations. Another 7% considered sensitive will get more time, while 3% will be allowed to be placed on an exclusion list.
Finalising those schedules and communicating them to businesses must be done quickly, said Ziad Hamoui of Borderless Alliance, a group that campaigns for easier cross-border trade.
But efforts to implement the deal will also likely face resistance from countries' domestic interest groups. Fears of losing out to more competitive neighbours initially made some countries, including West African giant Nigeria, sceptical of the pan-African project.
Still, proponents of the zone are confident that initial steps towards its implementation will already allow member states to double intra-African trade by 2025.
"Economic integration is not an event. It's a process aid the AfCFTA secretariat's Ojakol. "We must start somewhere."
The first goods will begin to flow under an Africa-wide free-trade pact on Friday, the culmination of more than five years of negotiations on cutting cross-border tariffs. The accord comes to fruition at a time when trade tensions are rising across much of the rest of the world. The 55-nation Africa Union marked the occasion in a ceremony that came just hours after the U.K. left the European Union’s single market and a new post-Brexit trade agreement entered into force.
It’s “a day in which we take Africa a step closer to a vision of an integrated Africa, a vision of an integrated market on the African continent,” Wamkele Mene, the secretary general of the African Continental Free Trade Area, said during the event. The treaty seeks to lower or eliminate cross-border tariffs on most goods, facilitate the movement of capital and people, promote investment and pave the way for a continent-wide customs union. The bloc has a potential market of 1.2 billion people with a combined gross domestic product of $2.5 trillion, and could be the world’s biggest free-trade zone by area when the treaty becomes fully operational by 2030.
The accord will assist the continent to recover from the “devastating impact” of the coronavirus pandemic, said South African President Cyril Ramaphosa, who holds the AU’s rotating chairmanship.
Intra-African trade fell to 14.5% of the total in 2019, from 15% the year before. The free-trade pact could bolster the proportion to 22%, and commerce within the continent could rise to more than $231 billion even if all other conditions remained unchanged, the African Export-Import Bank said in report published on Dec. 15. Internal shipments accounted for 52% of total trade in Asia and 72% in Europe, according to Afreximbank data.
All but one of the 55 nations recognized by the African Union have signed to join the area and more than half have ratified the accord. Eritrea, which has a largely closed economy, is the sole holdout.
The pact will help Africa to industrialize on a big scale, said President Nana Akufo-Addo of Ghana, the host country of the bloc’s secretariat.
All outstanding issues relating to the bloc’s various operation instruments, such as an online platform for tariff negotiations and a digital payment and settlement system, would be finalized and made operational by the end of March, Akufo-Addo said.
It’s “a day in which we take Africa a step closer to a vision of an integrated Africa, a vision of an integrated market on the African continent,” Wamkele Mene, the secretary general of the African Continental Free Trade Area, said during the event. The treaty seeks to lower or eliminate cross-border tariffs on most goods, facilitate the movement of capital and people, promote investment and pave the way for a continent-wide customs union. The bloc has a potential market of 1.2 billion people with a combined gross domestic product of $2.5 trillion, and could be the world’s biggest free-trade zone by area when the treaty becomes fully operational by 2030.
The accord will assist the continent to recover from the “devastating impact” of the coronavirus pandemic, said South African President Cyril Ramaphosa, who holds the AU’s rotating chairmanship.
Intra-African trade fell to 14.5% of the total in 2019, from 15% the year before. The free-trade pact could bolster the proportion to 22%, and commerce within the continent could rise to more than $231 billion even if all other conditions remained unchanged, the African Export-Import Bank said in report published on Dec. 15. Internal shipments accounted for 52% of total trade in Asia and 72% in Europe, according to Afreximbank data.
All but one of the 55 nations recognized by the African Union have signed to join the area and more than half have ratified the accord. Eritrea, which has a largely closed economy, is the sole holdout.
The pact will help Africa to industrialize on a big scale, said President Nana Akufo-Addo of Ghana, the host country of the bloc’s secretariat.
All outstanding issues relating to the bloc’s various operation instruments, such as an online platform for tariff negotiations and a digital payment and settlement system, would be finalized and made operational by the end of March, Akufo-Addo said.
It's interesting, to me, to see how while the rest of the world is running screaming away from free trade, Africa is embracing it.
But, NSG, will this just be another failed experiment in globalization? Or will it bring much needed-prosperity to some of the most impoverished parts of the world?
