Time for up­grad­ing Sino-African co­op­er­a­tion

China Daily European Weekly - - Cover Story - Ehizue­len Michael Mitchell Omoruyi The au­thor is ex­ec­u­tive di­rec­tor of the Cen­tre for Nige­rian Stud­ies at the In­sti­tute of African Stud­ies at Zhe­jiang Nor­mal Univer­sity. The views do not nec­es­sar­ily re­flect those of China Daily.

Free trade agree­ments be­tween Chi­nese and African lead­ers can be of huge ad­van­tage to both sides

The African Union agreed in Jan­uary 2012 to de­velop the African Con­ti­nen­tal Free Trade Area. It took eight rounds of ne­go­ti­a­tions to fi­nally reach an agree­ment. This his­toric pact, nearly four decades in the mak­ing, rep­re­sents ma­jor progress for African in­te­gra­tion and unity.

The AfCFTA was signed by 44 African na­tions on March 21, un­der the theme “Cre­at­ing One African Mar­ket”, and if all African na­tions come on board, it will bring to­gether more than 1.2 bil­lion peo­ple and $4.2 tril­lion (3.6 tril­lion eu­ros; £3.2 tril­lion) in com­bined con­sumer and busi­ness spend­ing, ac­cord­ing to the Brook­ings In­sti­tu­tion. In ad­di­tion, Brook­ings es­ti­mated that by 2030, Africa may emerge as a $2.5 tril­lion po­ten­tial mar­ket for house­hold con­sump­tion, up from $1.1 tril­lion in 2015. It would then be the world’s largest free trade bloc since the es­tab­lish­ment of the World Trade Or­ga­ni­za­tion in 1995.

The es­tab­lish­ment of such a con­ti­nen­twide trade area is one of the 12 flag­ship projects of the African Union’s Agenda 2063. The AfCFTA will pro­gres­sively elim­i­nate tar­iffs on 90 per­cent of goods in in­tra-African trade and, ac­cord­ing to the United Na­tions Eco­nomic Com­mis­sion for Africa, this could boost in­tra-Africa trade by 53.2 per­cent. The re­moval of tar­iffs will cre­ate a con­ti­nen­tal mar­ket that will al­low com­pa­nies to ben­e­fit from economies of scale. In­tra-con­ti­nen­tal trade in Africa is around 16 per­cent, com­pared with 21 per­cent in Latin Amer­ica and the Caribbean, 51 per­cent for Asia and 70 per­cent for Europe.

The AfCFTA aims to change that, deal­ing with prob­lems that in­clude lo­cal busi­ness laws, se­cu­rity and poor in­fra­struc­ture. AfCFTA is ex­pected to gen­er­ate growth that could sup­port eco­nomic di­ver­si­fi­ca­tion of African economies away from low-value-added prod­ucts and com­modi­ties as well as the devel­op­ment of re­gional value chains with con­sid­er­able up­grad­ing po­ten­tial.

The trade area is an­tic­i­pated to bring an up­surge in GDP of be­tween 1 and 6 per­cent, broad­en­ing the tax base and boost­ing rev­enue col­lec­tion from other sources. The most im­por­tant and ur­gent ac­tion in­volved would be pro­vid­ing the nec­es­sary in­fra­struc­ture and cre­at­ing the fis­cal space re­quired to foster pub­lic and pri­vate in­vest­ment alike while en­sur­ing eco­nomic di­ver­si­fi­ca­tion with the view to cre­at­ing jobs. The pic­ture is not of a con­ti­nent that less than 130 years ago had no ar­ti­fi­cial bound­aries and where its peo­ple traded and mi­grated freely. The African Union has em­barked on an ini­tia­tive that is am­bi­tious but also nec­es­sary for up­grad­ing China-Africa trade co­op­er­a­tion.

The sign­ing of the AfCFTA comes as Africa is pre­par­ing for the Fo­rum on China-Africa Co­op­er­a­tion Sum­mit in Septem­ber in Bei­jing. Dur­ing the FOCAC meet­ing, new poli­cies and mea­sures pro­mot­ing China-Africa co­op­er­a­tion will be dis­cussed to align the African Union Agenda 2063 and the Belt and Road Ini­tia­tive. This will pro­vide an op­por­tu­nity for both sides to up­grade China-Africa trade in order to pro­mote the ac­tu­al­iza­tion of a com­mu­nity with a shared fu­ture be­tween Africa and China.

Since its for­ma­tion in 2000, FOCAC has be­come a game-changer in Africa’s devel­op­ment nar­ra­tive. Africa’s im­age has dra­mat­i­cally changed from the pes­simism of a “hope­less con­ti­nent” to the op­ti­mism of “Africa ris­ing”. This is partly as a re­sult of China’s heavy in­vest­ment across Africa through dra­mat­i­cally aug­mented trade, for­eign di­rect in­vest­ment and loans from the China Ex­port-Im­port Bank, which have deep­ened co­op­er­a­tion in a wide spec­trum of ar­eas.

The bi­lat­eral trade be­tween Africa and China has seen speedy growth re­cently. China cus­toms sta­tis­tics show that Africa-China trade was “off to a fly­ing be­gin­ning” of $170 bil­lion in 2017. Trade vol­ume in­creased by 19 per­cent com­pared with an 18 per­cent drop in 2015. The in­crease was pro­pelled by the con­struc­tion sec­tor. Since 2013, China has been im­ple­ment­ing the Belt and Road Ini­tia­tive, en­abling China to pump bil­lions of dol­lars into in­fra­struc­ture such as Kenya’s mon­u­men­tal stan­dard gauge rail­way. The newly signed agree­ment to cre­ate the AfCFTA is likely to bol­ster China’s con­fi­dence in Africa as an in­vest­ment des­ti­na­tion and an emerg­ing mar­ket. In ad­di­tion, Africa is likely to ben­e­fit from China’s newly cre­ated in­ter­na­tional devel­op­ment co­op­er­a­tion agency, de­signed to co­or­di­nate China’s for­eign aid pro­gram.

In this con­text, African lead­ers and Chi­nese lead­ers are fac­ing his­toric op­por­tu­ni­ties for bol­ster­ing their trade co­op­er­a­tion, which can help im­proved in­te­grated and glob­al­ized devel­op­ment in Sino-African co­op­er­a­tion. Con­versely, a trend of anti-glob­al­iza­tion has oc­curred in the in­ter­na­tional com­mu­nity, with soar­ing trade pro­tec­tion­ism. There­fore, it is es­sen­tial for China to con­sider launch­ing free trade agree­ment ne­go­ti­a­tions with African lead­ers. It is of great im­por­tance for China’s and Africa’s lead­ers to sign free trade agree­ments via ne­go­ti­a­tions. While ne­go­ti­at­ing free trade agree­ments, both sides could set de­tailed and fea­si­ble stip­u­la­tions on trade in mer­chan­dise, par­tic­u­larly in ar­eas of mu­tual con­cern such as in­tel­lec­tual prop­erty and dis­pute set­tle­ments, tar­iff ex­emp­tion, cus­toms pro­cesses and trade fa­cil­i­ta­tion. This can as­sist in fos­ter­ing China-Africa trade and African in­te­gra­tion, boost devel­op­ment of glob­al­iza­tion and ac­tu­al­ize fu­ture pros­per­ity for both sides.

Based on China’s se­cond Africa pol­icy pa­per is­sued in De­cem­ber 2015, the Chi­nese lead­er­ship has said that China will con­tinue to sup­port the devel­op­ment of the African free trade zone and re­gional in­te­gra­tion and dis­cuss cre­ation of in­sti­tu­tion­al­ized trade agree­ments with mem­ber states of the African Union.

The 30th Or­di­nary Ses­sion of the African Union Sum­mit, held from Jan 22 to 29 in Addis Ababa, Ethiopia, noted that cre­at­ing the AfCFTA, pro­mot­ing the for­ma­tion of a sin­gle African air trans­porta­tion mar­ket and pro­mot­ing the free move­ment of peo­ple and mer­chan­dise are the three key mea­sures for ac­tu­al­iz­ing African in­te­gra­tion. For that rea­son, it will make eco­nomic sense for African lead­ers to ac­cel­er­ate their free trade agree­ment ne­go­ti­a­tions in order to foster sus­tain­able devel­op­ment for the con­ti­nent of Africa.

It makes eco­nomic sense for China and Africa to pur­sue stronger re­gional trade agree­ments which in turn can help form the build­ing blocks for both sides’ free trade deals. Also, it can help fur­ther en­hance the African re­gional mar­ket and pro­mote trans­for­ma­tion as well as up­grade Africa-China trade co­op­er­a­tion. In­creas­ing trade will not only help both sides’ economies de­velop, but also will drive growth around the world as the fi­nan­cial cri­sis re­cedes. At present, African trade with China is based on bi­lat­eral trade agree­ments, and China’s lead­er­ship has yet to reach any con­crete free trade agree­ments with African lead­ers.

Free trade agree­ments be­tween Chi­nese and African lead­ers can be of huge ad­van­tage to both sides, help­ing China’s mer­chan­dise to go to African mar­kets freely. Chi­nese and African lead­ers should re­al­ize that if both sides can reach a free trade agree­ment, both sides could greatly ex­pand their mar­kets and, in turn, help Africa bol­ster its eco­nomic co­op­er­a­tion glob­ally. China and Africa should also know that through in­sti­tu­tional trade agree­ments with re­gional or­ga­ni­za­tions in Africa, Sino-African trade will be more bal­anced and sta­ble.

The in­ter­na­tional com­mu­nity stresses the launch­ing of in­vest­ment and trade with African na­tions and re­gions via eco­nomic and trade ar­range­ments as a free trade agree­ment. For ex­am­ple, the Euro­pean Union launched a se­ries of ne­go­ti­a­tions on eco­nomic part­ner­ship agree­ments with African re­gional or­ga­ni­za­tions. The United States also signed such pacts with some re­gional or­ga­ni­za­tions in Africa.

These pacts stip­u­lated de­tailed ar­range­ments on mar­ket ac­cess, trade and re­lated mat­ters. In the same way, Chi­nese lead­er­ship should con­sider launch­ing a free trade pact with African lead­ers in order to en­hance the part­ner­ship be­tween Africa and the world. China’s lead­er­ship can be­gin by con­sid­er­ing launch­ing ne­go­ti­a­tions with var­i­ous re­gional or­ga­ni­za­tions. The sign­ing of the AfCFTA means the African Union wants to achieve Agenda 2063 by en­cour­ag­ing in­tra-Africa trade and pro­mot­ing a uni­fied mar­ket.

African lead­ers broadly see China as a healthy coun­ter­bal­ance to Western in­flu­ence but, as ties ma­ture, there are ris­ing calls from pol­i­cy­mak­ers and econ­o­mists for bal­anced trade co­op­er­a­tion. In order to fur­ther ex­pand China-Africa trade, China’s lead­er­ship can con­sider launch­ing free trade ne­go­ti­a­tions with the var­i­ous African re­gional or­ga­ni­za­tions and the AfCFTA.


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