Understanding the African Continental Free Trade Area
When analyzed independently, many African countries may not be economically viable and attractive to global market players. However, under the single market framework of the African Continental Free Trade Area (AfCTFA), the continent’s prospect for global production, value chain management and consumption capacity rises.
What does AfCFTA mean?
The proposed Continental Free Trade Area (CTFA) for Africa is a market integration agreement that presents an equal opportunity open market to all participating countries in the region. The plan would substantially remove obstructions to movement of goods and services across the continent at the initial implementation stage with the hope of progressing into a customs union with free movement of capital and business persons.
This initiative is essentially driven by the potential of creating an enlarged marketplace of 1.2 billion people for all the 55 nations of Africa. Benefits anticipated by the promoters of the idea include a boost to intra-African trade and by extension industrial development, economic diversification and economic growth among other key advantages. The CFTA is also expected to amplify Africa’s market and economic possibilities to the rest of the world and particularly to global investors.
Although the overall concept is to create a level playing field for everyone, the gains for each country however will be unequal depending on each country’s level of preparedness in terms of institutional and developmental priorities over the years.
Implications for other global markets
The implementation, enforcement and monitoring of such agreements is very complex and more so in a place with poor regional coordination. When fully implemented, the CFTA will be a binding force and it will significantly impact how individual countries negotiate with the rest of the world in terms of trade agreements. Presently each African country and regional bloc has several trade agreements with other global markets; some of these agreements will have to be renegotiated to recognize the existence of the CFTA.
Under the CFTA, African leaders will have a stronger bargaining power on all continental and global trade issues. An indication of this strength manifested in a recent interview with David Luke, Coordinator of African Trade Policy Center at UNECA, who said “Gone are the days when larger economies pick us off individually; now they will have to deal with us all equally or not at all”.
Considering how advanced economies have engaged with Africa in recent past, it appears China foresaw its current trade faceoff with the United States and has been preparing a soft landing in Africa. The volume of US-China trade of $635 billion is nothing compared to China’s trade of $170 billion with Africa but in a worst-case scenario of prolonged irreconcilable differences between the two countries, China would probably have more leverage to explore alternative trade routes globally.
While China accelerated its global engagements beyond the US market and especially with Africa, US- Africa trade relations has been passive with total trade volume of $55 billion in 2017.
Now that the US government is reviewing its global trade relationships, several stakeholders have called on the administration not to neglect Africa, the future global production power house, or continue to sit on the sidelines while competition from China, the EU and other places take over the market.
This appeal needs to be sustained. The United States Secretary of Commerce Wilbur Ross got the message. He visited four Sub-Saharan African countries last month and announced deals of $1 billion. The CFTA will be a major shift in the global trading landscape; it will be interesting to see how global markets respond to this development.
Kemi Arosanyin is a Global Trade contributor and the Director for Africa Trade Expansion Program at the World Trade Center Miami. She writes, speaks, and advises on trade and investment in sub-Saharan Africa.