A Sceptics Guide to the African Continental Free Trade Area – and Why the Sceptics are Wrong…

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By Andrew Mold, Acting Director, Office for Eastern Africa, Economic Commission for Africa, Kigali, Rwanda


This blog is part of a series marking the upcoming 
19th International Economic Forum on Africa 


Photo by Frans Van Heerden from Pexels
Photo by Frans Van Heerden from Pexels

Scepticism is never in short supply, generally speaking, and particularly in the era we are currently living through. This is often true when it comes to bold policy initiatives on the African continent. Yet I would argue that a lack of faith is certainly not warranted in the case of the African Continental Free Trade Agreement (AfCFTA).

Objections to the AfCFTA follow familiar lines. There are a series of misconceptions which underpin these objections:

“African countries all trade the same things”

Despite evidence of some diversification of exports occurring over recent decades, this is largely true; Africa is still heavily dependent on traditional export crops and commodities, reducing the scope for mutually beneficial trade. Yet this paints an excessively simplified view of trends in regional trade. Patterns of trade are changing rapidly. The traditional export market outside the continent of Africa (Europe, the United States and, increasingly, India and China) are of primary commodities, but the intra-regional component of trade is much more diversified, with high shares of non-traditional exports and manufactured goods, as illustrated by the case of the East African Community (EAC).

Intra-EAC Trade is More Diversified than Extra-African Trade

chart-1

Source: United Nations Economic Commission for Africa, computed from UNCTADStat data

The conclusion is self-evident: if African policy makers wish to accelerate the diversification of their economies, higher levels of regional trade and the AfCFTA are the ways to achieve this.

“AfCFTA is a ‘neo-liberal’ project serving the interests of big corporations”

This is a common criticism in some circles.[1] Given the history of outside interference in African countries’ affairs, it is an understandable concern. However, in fact the AfCFTA is precisely the opposite: it is much more than a free trade area, it is about building a framework for much deeper African regional integration and co-operation, with a view to making the continent economically stronger and more resilient. It is about boosting the levels of industrialisation, intra-regional trade and investment. Precisely to prevent exploitation, it includes safeguards including protocols on competition policy, intellectual property and the free movement of people. In short, it is about creating a unified continental market that works to the benefit of its citizens.

“How can the AfCFTA succeed while regional trade is actually declining?”

Although intra-African trade has been progressively rising over the last decade, there is no doubt that intra-regional exports have remained at low levels for most countries on the continent, accounting for an average of around just 16 percent of total exports, compared with an average in the European Union of 64 percent and 70 percent for Asian Pacific Economic Co-operation (APEC) countries. Indeed, within some African regional blocks, intra-regional trade has been stagnant or actually declining.[2]

Intra-Regional Merchandise Trade, Africa, 1995-2018 (% of Total Trade)

chart-2

Source: UNCTADStat

There are several reasons for this: persistent barriers to trade in the form of high tariff and Non-Tariff Barriers; physical hurdles that cannot be overcome due to a lack of infrastructure; and regional disputes. AfCFTA implementation would alleviate these barriers to trade, boost infrastructure development, and, with its legally-binding element, ensure that the prospects for intra-regional trade do not rely on political goodwill. As an Africa-wide effort at harmonisation and reduction in barriers to trade and investment, the AfCFTA can thus breathe new life into Africa’s regional economic communities and help integrate those blocks better into the wider continental market.

“It won’t be implemented”

It needs conceding that the implementation of regional treaties and protocols within Africa has often not been satisfactory. There is, however, a new sentiment that lessons have been learned on this score. At an Extraordinary Meeting of the African Union (AU), the AfCFTA agreement was signed in March 2018 in Kigali, Rwanda, by no less than 44 member states. Since then, the number of signatories has risen to 54 of the 55 member states of the AU – a remarkable degree of consensus that is rarely achieved in regional bodies in other parts of the world. Moreover, of those 54 countries, more than half (28) have now ratified the agreement through their national parliamentary processes. That, in itself, signals the seriousness with which member states are taking the AfCFTA. With every member state committed to the AfCFTA, there will be significant ‘peer pressure’ on signatories to implement the Agreement fully.

To conclude, the rationale for greater economic co-operation and integration among African countries has always been strong. In a global economy increasingly dominated by large economies and regional blocks like the European Union, the United States, China and India, and against a backdrop of increasingly pronounced trading tensions between them, those arguments become even more compelling. The AfCFTA presents a way to achieve that goal and create a more prosperous, economically resilient, continent.


[1] See Kombo, B. (2019) ‘The African Continental Free Trade Area is expanding, but who will benefit?’, Available at https://oxfamblogs.org/fp2p/the-african-continentalfree-trade-area-and-alternatives-to-neoliberalism; Agbakwuru, J.  (2019) ‘AfCFTA Agreement: Buhari bows to pressure, cancels Nigeria’s participation’, Vanguard, 17 March [Online]. Available at: www.vanguardngr.com/2018/03/afcfta-agreement-buhari-bows-pressure.

[2] For instance, within the EAC, there was a significant decline in intra-regional trade since 2013, although recently released figures show a recovery in 2018, with a rise in intra-regional trade within the EAC by 10 percent. See “East Africa Customs Harmonisation Pushes up Trade Over 10%”, Global Trade Development Week, 14 November, available at www.kwglobaltrade.com/post/east-africa-customs-harmonisation-pushes-up-trade-over-10.

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