Ethiopia is the latest country to approve the African Union’s African Continental Free Trade Area, AfCFTA, after the Council of Ministers passed the deal on Saturday (February 2). It now goes to Parliament for a final vote before the instruments of ratification are deposited with the AU Commission. A statement from the Prime Minister’s Office said this decision and Ethiopia’s track record of advocating Pan African causes would help bring the reality of an integrated Africa. It was consistent with the Prime Minister’s vision of “creating a closer and full regional integration, where minds are open to ideas and markets are open to trade”.
The African Continental Free Trade Agreement (AFCFTA) needs four more ratifications to enter into force; the AU hopes these will come during this week of the AU Summit. Although the agreement is not yet in force, a business guide and handbook to the AfCFTA have been published to assist in advocacy. Preparatory work to make the market operate is being carried out in areas like rules of origin, liberalization of trade in goods and services, and establishment of a digital payments and settlements systems. The AU is developing regional value chains to supply the market and competitively link Africa to global value chains; the AU Supply Chain Platform was unveiled at a workshop in Hawassa, Ethiopia, last month.
Plans for implementation of the AfCFTA already include member states acting to formulate and carry out national AfCFTA strategies. At the regional level, the African Union Commission has already been taking action to break down barriers and improve the flow of goods and capital, envisaging a common African passport and cross-border movement moving toward an internal market free of physical, technical, or fiscal barriers. In January last year, it launched the Single African Air Transport Market and opened for signature the Protocol to the Treaty Establishing the African Economic Community Relating to Free Movement of Persons, and Right of Residence and Right of Establishment. Work is underway to conclude by 2020 the negotiation of Protocols on Investment, Competition and Intellectual Property Rights.
At a meeting of the Specialized Technical Committee of the Ministers of Trade, Industry and Mineral Resources, in Rwanda last month, under the theme, “The Entry into Force of the Agreement Establishing the African Continental Free Trade Area (AfCFTA) and its Implementation”, AU Commissioner for Economic Affairs, Professor Victor Harrison, said the AfCFTA provided an invaluable opportunity for Africa to increase its 1% share of world manufactured goods through industrialisation and the creation of regional value chains. For the AfCFTA to deliver, he said, Africa needed supportive and accompanying measures in place, including support for the productive sectors as well as improving the business-enabling environment. He underlined the importance of viable financial institutions such as the African Investment Bank, the African Central Bank and the African Monetary Fund, which are provided for in the Constitutive Act of the African Union.
Once in force AfCFTA aims to increase intra-African trade by 52% by the year 2022, remove tariffs on 90% of goods, liberalize services and tackle other barriers to intra-African trade, including long delays at border posts. The latest African Economic Outlook (2019) estimates there will be an initial increase in Africa-to-Africa trade of 15% and some $2.8 billion in gains in real income when Africa’s bilateral tariffs are removed. Eliminating other barriers will be worth $37 billion and push trade gains up by more than 100%. This will also be increased significantly with the implementation of the World Trade Organization’s Trade Facilitation Agreement (TFA), which went into force in February 2017. More than 30 African nations have signed the TFA, in anticipation of reducing trading costs by 14 to 18% and a 0.5% boost in world trade expected to benefit the world’s least developed countries (LDCs) most. That has the potential for real economic impact across Africa, which has 33 out of 47 LDCs, but it also faces the challenges of financing the necessary energy and infrastructure.
