Africa may miss opportunities by waiting for continental trade zone

Should individual African nations delay trade deals with Europe and the United States and instead wait to negotiate as a continental bloc?

Supporters of the pending Continental Free Trade Area agreement, CFTA, said a deal made by the bloc would be more favorable and translate into meaningful job opportunities. The continent’s steady growth has not boosted employment, according to the African Development Bank. “Africa needs to create about 12 million jobs every year to prevent 100 million people from joining the ranks of the unemployed by 2030,” it said in its recent report.

This comes at a time when the European Union, the United Kingdom and the US are making overtures toward individual countries, thus competing aggressively with the African Union’s attempt to speak with a harmonized voice under CFTA by the second half of this year.

In January, the UK inked the trade continuity agreement with five countries from East and Southern Africa: Mauritius, Seychelles, Comoros, Zimbabwe and Madagascar. The UK wants to avoid losing out on trade terms it automatically enjoyed as a member of the EU, if it leaves without a deal.

The new UK deal, which replicates the existing EU Economic Partnership Agreement, or EPA, with the region, will allow continued tarifffree imports to the UK from the five countries, and remove the majority of tariffs on British exports to these countries over the coming years.

The new EU partnership deals, however, have faced headwinds in Africa with Nigeria and Tanzania refusing to append their signatures to the pacts. The agreements are among seven the EU intends to sign with regional communities. The Southern Africa Development Community — consisting of Botswana, Lesotho, Mozambique, Namibia, South Africa, and Swaziland — has already agreed with the delaying tactics of the West and East.

In addition, the US has said it intends to strike a free trade deal with selected African countries, under the US African Growth and Opportunities Act, and make them models for others in the region.

Experts supporting the deals said they offer ready markets and engender foreign investments in the value chains. Opponents, like Prudence Sebahizi, said the trade deals brokered by small African blocs have not alleviated poverty in rural areas nor promoted regional cooperation.

Sebahizi, who heads the CFTA Unit at the African Union office in Addis Ababa, said the EPAs undermine the regional and continental integration process. “We are in the process of building an African Economic Community that would create economies of scale for investors and foster intra-continental trade in manufactured products”, he said.

As a member of the EU partnership with East Africa Community, Kenya is evoking a principle under the East African Community, EAC, Treaty referred to as “variable geometry” that allows “for progression in cooperation among groups within the Community for wider integration schemes in various fields and at different speeds.” The EU is Kenya’s main market for horticulture, translating to more than $1 million in foreign exchange.

“The move would create institutional fissures that may frustrate the general attempt of the country to protect its horticulture sector. The bloc should undertake economic analysis to determine the pros and cons of liberalizing its trade by 82 percent,” said Sebahizi.

But it is a rule-based global economy and countries will be allowed to engage with third parties eve under the CFTA agreement. “Signing deals with third parties, however, was put on hold during the AU summit in Nouakchott, Mauritania, in July to give room for the realization of the CFTA. The Continental agreement also has a provision for engagement in Article 18 of the CFTA Agreement where countries are expected to automatically extend to partner states the same preferences given to third parties.”

The 15-member Economic Community of West African States signed a trade partnership with the EU in 2014, but Nigeria has backed out from signing a similar agreement. Nigeria believes it would undermine nascent domestic industries.

“Boasting of low industrial capacity and infrastructure deficit, it is unlikely that Nigeria industries can compete with the EU. It will be interest for African countries to wait,” said Chukwuka Onyekwena, the executive director of Center for the Study of the Economies of Africa, based in Abuja, Nigeria.

“In addition, there are important global developments that countries need to wait for before committing to a new trade agreement. Brexit, ongoing trade talks between the US and China, and implications for global growth and trade dynamics are important consideration to look at. … Negotiating as a region could deliver more economic benefits than individually engaging with these big partners,” he said.