AfCFTA an opportunity to expand China-Africa ties
May 30, 2019, marked the official commencement of the African Continental Free Trade Agreement (AfCFTA). The agreement has been signed by 52 members of the African Union (AU), with three countries yet to sign. Observers are hoping that the three absentee members will sign the agreement in the near future to help bring together the over-1.2-billion people on the continent.
It is expected that the world would witness an increase in intra-African trade, and the agreement plans to cut tariffs by as high as 90 percent and harmonize trading rules. If everything goes as planned, AfCFTA is expected to increase intra-continental trade by 52.3 percent by 2022.
With the ambition of boosting Africa’s trading position in the global market, AfCFTA hopes to encourage more commercial activities within the region, with a more relaxed trading arrangement suitable for the unique circumstances of countries in Africa. It aims to raise Africa’s voice and negotiating power in the world’s trade engagements.
At the moment, it could be said that the majority of the members of AfCFTA are largely underdeveloped. The GDP of all AU members is $3 trillion, which makes it an important trade bloc in the world – but one that is still lacking in many areas.
China was able to use its clout in Africa to hasten the signing of the trade
agreement, because the country sees huge potential in a united Africa where trade policies are harmonized. Low-cost manufacturing in a few years will shift to Africa, and for China that is a good thing as it constantly needs to buy cheap and quality finished goods.
The merger of African countries under AfCFTA as a single trade bloc will largely expedite unified trade bargains, which are preferred to bespoke negotiation arrangements with countries on an individual basis within the continent. The establishment of this agreement could not have come at a better time for China, with the China-US trade war looking like it will not abate anytime soon.
The scrabble for Africa since the end of the Cold War has made it the hub for investment. Superpowers like the US, the EU, China, Russia, and even India have pushed billions of dollars into Africa. AfCFTA and the Belt and Road Initiative will not only consolidate the already-flourishing relationship between Africa and China, but will also help push for more investments in infrastructure connectivity, trade facilities, and industrial promotion.
Critics of AfCFTA say that Chinese people will see loopholes in the agreement, which will be detrimental to the continent. For example, they argue that cheap and low-quality Chinese goods will fill up the market, thereby destroying existing, local manufacturing businesses. Proponents of the relations have said that this argument is baseless.
With all the glamor and anxiety surrounding the establishment of the agreement, beyond just that of the Chinese, it is equally important to state that AfCFTA will face several challenges before it can successfully be called a plan.
The implementation will be slow, as expected, with countries trying to negotiate tariff schedules, rules of origin and commitments for service sectors. One major issue that will take center stage is how to work out the most-favorednation deals between all the countries, given the almost inevitable reciprocity this deal would need.
How this conundrum is dealt with is crucial to the success or failure of the agreement. As we all know, tariffs are a huge source of revenue for many countries in the region and they may be difficult to let go in favor of the content of the agreement signed under AfCFTA. This problem is equally evident in many Regional Economic Communities agreements across the continent.
In spite of the bottlenecks, this idea should be encouraged by not only policy-makers in Africa but also the stakeholders in China, as it offers the two partners a greater opportunity to expand their already blooming cooperation. With the prevailing malign of free trade among the developed economies, AfCFTA should be seen as a new path for further economic prosperity for Africa and China.
AfCFTA and the Belt and Road Initiative will not only consolidate the already flourishing relationship between Africa and China, but will also help push for more investments in infrastructure connectivity, trade facilities, and industrial promotion.