AfCFTA: An exciting game changer for member States
FREE trade areas are fundamental trajectories in paving a solid way for the ambiance of trade. Most States in the global south highly depend on international trade because they have little to look up to with regards internal trade. Being fashioned by the European Union model, the Africa Union (AU) has a script of objectives modelled by ideas from Brussels.
The great Greek crisis sent shocking waves to trade experts in Africa that the then proposed single currency was not appropriate.
The multilateral arrangement has showed that, indeed, the continent is now able to negotiate its own trade agreements for a common good. The agreement came at a time when much of the world was moving away from mutual co-operation and free trade.
The major scope for improvement in Africa lied in the removal of non-tariff barriers, which include uncoordinated bureaucratic procedures and border delays. Such barriers increased the costs of doing business on the African soil.
Africa’s infrastructure made it even more difficult for trade to prevail. As a result, Africa has been connecting faster with other blocs than within itself. The Africa Continental Free Trade Area (AfCFTA) brings to cynosure a huge bloc that cuts across Africa’s 55 economies with a collective 1,3 billion consumers and a combined US$3,4 trillion in gross domestic product (GDP).
The institution seeks to further create a free trade area which corrects the short-comings of the World Trade Organisation affecting African trade. The trade agreement presents opportunities for member regions to benefit from the fruits of multilateral arrangements.
The agreement aims to lower trading costs within the bloc. The agreement reduces 90% of intraAfrican customs tariffs. This makes it amiable for member States to become involved in global supply chains. The pact poses positive impacts on competition, movement of people, investment and intellectual property across the block. Trade within the AfCFTA is under uniform legal basis built on the principles of lawfulness and transparency. This is and will continue to halt a market for illicitly procured and produced goods.
Improved quality of governance on member States is being witnessed due to monitored compliance with agreed standards. Making up around 70% of informal cross-border traders in Africa, women can be vulnerable to confiscation of goods and even imprisonment. The deal is bringing better protection, which enables traders to operate through recognised channels. The free trade area is giving member States a link to close the gender income gap.
Many reports on the trade agreement shows that it will lift more than 30 million people out of extreme poverty by 2035. The AfCFTA presents the significant commitment of the AU to reduce poverty through trade.
World Trade Organisation director-general Ngozi Okonjo-Iweala stated that: “Trade is a force for good, and properly harnessed can lift millions out of poverty and bring shared prosperity. Increasing African exports in the manufacturing sector will create much-needed jobs for Africa’s young populations. If the deal works as intended, could generate consumer and business spending of $6,4 trillion dollars by 2030.”
Whenever there is a bilateral or a multilateral agreement, disputes are likely to happen. Multilateral systems can bring about disputes when a State-party implements a trade policy that another State-party considers a breach of the agreement.
The trade agreement has a dispute settlement mechanism, which offers mediation consultations between disputing parties.
Indeed, in multilateral agreements, States give up their rights in order to enjoy more rights.
Intentions may be convincing, but the devil is on the implementation. The terrorist attacks have cast a dark shadow across the continent’s long-awaited economic rise.
Countries at risk are among the most promising frontier markets, for example Nigeria, which has become Africa’s largest economy. Fighting terrorism is sucking up scarce financial resources in the continent. The coming in of the highly-contagious coronavirus has led to border closures, which resulted in economic recessions in member States and led to a shrinkage in the African production, especially agriculture and mining. COVID-19 has impeded free movement of persons, investments, goods and services, hence halting the agreement’s objectives.