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The African Free Trade Area: A Step Further Towards Unity?

Disclaimer: The views expressed are that of the individual author. All rights are reserved to the original authors of the materials consulted, which are identified in the footnotes below.


By Thomas Clapp


The African Continental Free Trade Agreement (AfCFTA), signed in March 2018, is an extraordinary accord, which is often overlooked in the context of the World Trade Organisation or the European Union. To date, over thirty states have ratified AfCFTA, which is a testament to political, economic, and legal cooperation across the second largest continent, but how far has this historic treaty gone towards ensuring African unity?



Origins and Aims of AfCFTA

Before answering this question, we need to understand the circumstances behind the call for unity and how those conditions were translated into a legal framework. The aims behind the treaty are relatively simple. The UN has noted that the treaty is a manifestation of top-down economics, with key aims such as free trade and free movement of people translating into more jobs and reduced poverty under a regulated body.[1] African leaders were also concerned that Africa was participating in more trade with nations outside of the continent, which excluded a huge internal market.[2] For instance, Kenya exports $1 billion to Europe, but less than $100 million to its neighbour Ethiopia. AfCFTA aimed to address some of these issues, so how was this done?


Article 3 makes it clear that AfCFTA is making a “single market for goods [and] services”, as well as enhancing, “the competitiveness of the economies of State Parties”.[3] The tools at the disposable of future African leaders to enforce the agreement and adjudicate on disagreements are also dealt with at the start, with plans in Article 4 to, “establish a mechanism for the settlement of disputes”. This may not be as robust as its European Union counterpart with an already established court and legislature, but the current AfCFTA agreement is undeniably a big step towards African economic unity.


However, AfCFTA is much more than just a pursuit of economic solidarity within Africa, with the IMF predicting it has the potential to improve employment and GDP and make big strides towards overcoming the original pressures that led to the agreement.[4] The IMF report draws upon models suggesting that “AfCFTA would increase overall income and welfare for the majority of African countries”. The treaty, therefore, is not necessarily a political tool to placate calls for African unity at the expense of action but is instead an internationally recognised way to integrate African nations economically.


AfCFTA’s Problems and Effects

The legal implications of the treaty do pose issues to some nations, especially the implementation of a free trade area for 90% of goods. Dr Dennis Ndonga, lecturer in law with a particular interest in international trade, voices concern that smaller, landlocked countries such as Malawi will be put at a significant disadvantage in comparison to the larger economies in Africa on the seaboard.[5] Ndonga fears removing tariffs on tradeable goods to and from Malawi will have a detrimental impact on the country’s finances because their bureaucracy is not sophisticated enough to fully tax internally. This is not an issue that can be ignored, and AfCFTA without proper support and investment for smaller nations could be inherently unfair. Malawi is not alone, and there is a suggestion that there could be discontent over unequal benefits for different countries.


Problems with AfCFTA are not just confined to the poorest nations in Africa: Nigeria, which accounts for 17% of the GDP of the entire continent, also took issue with different parts of the accord. Nigeria’s President Muhammadu Buhari at the eleventh hour refused to sign AfCFTA on the basis that: “[Nigeria] will not agree to anything that will undermine local manufacturers and entrepreneurs.”[6] Part III Article 7 concerning removing import duties was probably at the forefront of Buhari’s mind, and he was particularly concerned that removing tariffs would lead to cheap products from other nations being “dumped” into Nigeria to intentionally undermine the local industry. Perhaps it was a provision such as the “Anti-dumping Agreement” in Part I, Article I that convinced the Nigerian government that there were still protections in place which led to Nigeria ratifying AfCFTA in early November 2020.


The Future of AfCFTA

Of course, provisions such as those above may help unify the continent through compromise, but there is always a criticism that the treaty is too flexible and accommodating to be truly effective, and there are improvements to consider. The first, which has already been mentioned in passing, is to establish a body to adjudicate on disputes between nations. This may not currently be possible because Africa already has eight separate free trade agreements with differing statutes splitting the continent which run alongside AfCFTA. Certainly, it should be an either-or, but AfCFTA has not made that leap so far.


The second problem is less to do with the accord itself, and more an issue with existing infrastructure in Africa. As mentioned with Malawi, some African nations just do not have the resources to engage effectively with a treaty such as AfCFTA. This suggests that it is also underdeveloped infrastructure, not just inadequate agreements that have impeded intercontinental trade.[7] Therefore, there is a fear that the accord is overbearingly hindered by this problem, and it is not legal treaties but money and investment that is needed. There should be provisions within the treaty to pool resources in order to make this centralised investment a reality.


AfCFTA is clearly a step forward in promoting African economic unity, and is undoubtedly a vision of what could be, although this has not been fully realised yet. If AfCFTA makes the step of introducing a regulatory body, and promoting African-wide investment through pooling resources, then the original aims can be more fully realised. Perhaps AfCFTA then is more of a message of intent for unity on the continent, but so far, it has not gone all the way to addressing pre-existing issues identified with its conception.



 

[1] M. Farahat, "African Continental Free Trade Area: Policy and Negotiation Options for Trade in Goods," UNCTAD, New York & Geneva, 2016. [2] United Nations Economic Commission for Africa, "Youtube," ECA_Official Video Channel, 06 May 2019. [Online]. Available: https://www.youtube.com/watch?v=sG7gdhCa-NY. [Accessed 22 November 2020]. [3] AGREEMENT ESTABLISHING THE AFRICAN CONTINENTAL FREE TRADE AREA, 2018. [4] L. Abrego, M. d. Zamaroczy, T. Gursoy, G. Nicholls, H. Perez-Saiz and J.-N. Rosas, "The African Continental Free Trade Area: Potential Economic Impact and Challenges," IMF, 2020. [5] D. Ndonga, "Assessing the Potential Impact of the African Continental Free Trade Area on Least Developed Countries: A Case Study of Malawi," Journal of Southern African Studies, vol. 46, no. 4, pp. 773-792, 2020. [6] D. Mumbere, "Nigeria's Buhari explains failure to sign continental free trade agreement," Africa News, 23 March 2018. [Online]. Available: https://www.africanews.com/2018/03/23/nigeria-s-buhari-explains-failure-to-sign-continental-free-trade-agreement//. [Accessed 22 November 2020]. [7] E. A. Dovi, "Infrastructure key to intra-African trade," African Renewal (United Nations), November 2018. [Online]. Available: https://www.un.org/africarenewal/magazine/august-november-2018/infrastructure-key-intra-african-trade. [Accessed 26 November 2020].

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