Africa’s trade agreements remain unfulfilled

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Jeff Kapembwa

Lusaka – Calls for regional integration and boosting of economic growth in Africa will remain unanswered unless all countries strive to fulfil agreements to the letter unlike piece-meal legislation, a leading economist has noted.  

In recent years, several African economic blocs – the Common Market for Eastern and Southern Africa (Comesa), East African Community (EAC) and Southern African Development Community (SADC) ‑ have signed and adopted various agreements relating to trade but a few, or none, have been ratified and operationalised.

Key among the trade agreements that have been signed and not ratified are the Comesa Free Trade Area (FTA) and the recently signed Continental Free Trade Area (CFTA) in which 44 African countries signed various agreements during the just-ended AU Summit in Rwanda but remain to be ratified.

Sindiso Ngwenya, the Comesa Secretary-General, noted that while there has been a zeal to append signatures on various trade treaties, the majority of agreements still remain on the shelves, unratified to make them fully operational and bolster intra-trade growth in the 54 member states.

In an interview with The Southern Times in Lusaka, Ngwenya, the outgoing chief administrator of 25-year-old Comesa, noted that while there has been increasing zeal for countries in various groupings to sign agreements and necessitate their operationalisation, many have remained on the drawing board, incomplete because they are not ratified to the letter.

Twenty-two countries out of 26 signed the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) Agreement, Botswana being the latest signatory to the agreement, after signing on 30 January 2018 in Gaborone.

The Tripartite FTA brings together a population of 700 million people with an estimated Gross Domestic Product of well over US$1.4 trillion. It is envisaged the TFTA will help improve intra-Africa trade by eliminating and reducing tariffs and non-tariff barriers.

Last year, Mauritius signed the COMESA-EAC-SADC regional trade framework.  With that country’s Minister of Foreign Affairs, Regional Integration and International Trade, Seetanah Lutchmeenaraidoo, signing the agreement in Ebene Cybercity, which was witnessed by Ngwenya.

The tripartite agreement was launched in June 2015. Currently, only Egypt and Uganda have signed and ratified the agreement. A minimum of 14 countries is required to ratify the agreement for it to come into force.

African leaders made history on 21 March 2018, when they came together in Kigali, Rwanda, to sign an agreement that will launch the African Continental Free Trade Area (AfCFTA), which will make the continent the largest free trade area created since the formation of the World Trade Organisation.

During the Summit, more than 40 countries, South Africa included, signed an agreement for the establishment of a free trade area that is intended to create the world’s largest market.

The Africa Continental Free Trade Area agreement seeks to, among other things, bring together all the 55-member countries of the African Union to trade tariff-free.

However, Nigeria and Uganda were not among countries that signed the agreement after withdrawing from the process. Zambia did not sign the agreement but opted that it would consult with relevant authorities over the matter.

Zambia had negotiated the protocol on goods and services and the dispute settlement mechanism, while the remaining protocols, including trade competition, investment and the intellectual property, were yet to be negotiated.

Christopher Yaluma, Zambia’s Commerce and Trade Minister, said the country will not sign the protocol on the free movement of people, as the country was not ready.

The decision to form the AfCFTA was adopted in January 2012 during the 18th Ordinary Session of the Assembly of Heads of State and Government of the AU while negotiations were launched by the AU in 2015.

It seeks to create a single continental market for goods and services with free movement of businesses and investments.

AU has said this will pave the way for the establishment of the Continental Customs Union and the African Customs Union.

The AfCFTA could create an African market of over 1.2 billion people with a GDP of US$2.5 trillion.

The agreement, after being signed, will be submitted for ratification by state parties before it can enter into force.

It comes 55 years after the formation of the Organisation of African Unity (OAU) and 16 years since the formation of the African Union.

“Today’s agenda is to adopt the agreement establishing the AfCFTA,” said Paul Kagame, Chairperson of the AU and President of Rwanda, at the opening session of the 10th Extraordinary Session of the Assembly of the AU on 21 March.

The protocol on the Free Movement of Persons and the Kigali Declaration that expresses African unity in moving forward are sure to be counted among the “most consequential actions” that the AU Assembly has ever taken, Kagame said.

He said the AfCFTA is the culmination of a vision set forth nearly 40 years ago in the Lagos Plan of Action, adopted by African heads of state and government in 1980.

The AfCFTA will progressively eliminate tariffs on intra-African trade, making it easier for African businesses to trade within the continent and cater to and benefit from the growing African market, said the AU.

The UN Economic Commission for Africa estimates that the AfCFTA has the potential both to boost intra-African trade by 53.2 percent by eliminating import duties and to double this trade if non-tariff barriers are also reduced.

 

Trade between neighbours

 

AU Trade and Industry Commissioner, Albert M Muchanga, said Africa’s fledgling industries and growing middle-class would benefit from the CFTA’s removal of tariffs.

Currently, African countries only do about 16 percent of their business with each other.

“If we remove customs and duties by 2022, the level of intra-African trade will increase by 60 percent, which is very, very significant,” Muchanga told AFP.

“Eventually, we are hoping that all the African Union states will be parties to the Continental Free Trade Area,” he added.

Experts say countries with ports serving land-locked nations fear a loss of revenue.

With underdeveloped service and industrial sectors across the continent, African countries have for decades seen their fortunes rise and fall with the prices of exported commodities such as oil, cocoa and gold.

In recent years, nations like Ethiopia and Ghana have tried to wean themselves from this cycle by building factories and new infrastructure for local industries, spurring rapid growth.

Landry Signe, a development expert with Stanford University in the United States, said the agreement could help these industries while giving African countries a unified platform to negotiate trade deals with wealthier nations.

“With the CFTA, the manufacturing sector would be much more diversified, as the market would not be a few million people, but potentially 1.2 billion people,” he said.

South Africa, a vocal backer of the trade deal, has argued that African economies are too small to support economic diversification and industrialisation on their own.

Regional integration “is critical to reducing the vulnerability of African economies to global shocks, a vulnerability which results from their heavy reliance on commodities”, South Africa’s Trade and Industry Minister, Rob Davies, wrote in an editorial last week.

However, in Nigeria, the plans have not gone down well with unions and business leaders.

“We have no doubt this policy initiative will spell the death knell of the Nigerian economy,” said the Nigeria Labour Congress.

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