The threat to African trade integration
The AfCFTA promises to strengthen Africa through economic integration, but as David Luke and Melaku Desta describe, powerful forces are pushing back against it
In international trade negotiations, the European Union (EU) has often led the way. Where the EU goes others follow. Today this is perfectly demonstrated in Africa’s fast-changing external trading environment. Africa’s 1.2bn population and its $2.5 trillion economy, while only just over half that of Germany’s, are increasingly seen as an attractive market. As big powers muscle in to capture a share of this market, the tradition of granting poor countries concessional, non-reciprocal trade benefits sanctioned by the GATT/WTO system is giving way to reciprocal arrangements.
The famous Lomé agreements governing trade relations between the African, Caribbean and Pacific group of countries and Europe were the poster child of preferential market access from the 1960s to the 1990s. In 2000, the EU replaced Lomé with the Cotonou Partnership Agreement, which contained a sunset clause to terminate the Lomé acquis of non-reciprocal market access within eight years and usher in reciprocal Economic Partnership Agreements. At around the same time, the EU operationalised its association agreements with North African countries – Tunisia (1998), Morocco (2000), Egypt (2004) and Algeria (2005).
The US belatedly introduced the African
Trade liberalisation with the EU through EPAs undercuts the nascent regional value chains that intra-African trade is fostering
Growth and Opportunity Act in 2000, which provided non-reciprocal market access to qualifying African countries south of the Sahara. At the same time, seeing that the EU was already moving towards reciprocal, free trade-type agreements with North African countries, the US concluded its first and only free trade agreement (FTA) with an African country, Morocco, in 2006. Likewise, as the EU moved towards reciprocal economic partnership agreements (EPAs), the Obama administration in 2016 declared its intention to take the same approach upon expiry of trade arrangements under the African Growth and Opportunity Act (AGOA) in 2025.
The Trump administration, well-known for its fondness for transactional diplomacy, launched FTA negotiations with Kenya in July 2020, setting a model for future agreements with other African countries.
Once again, under this one-country-at-a-time approach, the US would conclude individual agreements with willing African countries rather than a single agreement with Africa acting as one. AGOA would then give way to a patchwork of bilateral FTAs, further undermining Africa’s integration programme. AGOA still has strong support in Congress, raising fresh hope that the Biden administration might choose to retain it. But, history shows that where the EU goes, others follow.
Nor is the UK an exception. Following its exit from
the EU, the UK has literally cut and pasted the same EPAs that the EU has with African countries. In 2018 China concluded a reciprocal FTA with Mauritius, while India is currently finalising its own FTA also with Mauritius. China and India, too, are likely to use their FTAs with Mauritius as templates for future engagements with other African countries.
It can only be a matter of when, not if, other large economies, such as Japan and Canada, take the same route. In short, the new scramble for Africa is underway, throwing Africa’s own trade agenda in disarray. How so?
First, the new one-country-at-a-time approach undermines the African Continental Free Trade Agreement (AfCFTA) objective to progressively establish a single African market.
Second, the fragmented approach introduces perverse incentives that encourage African countries to act contrary to the AU position “to engage external partners as one bloc speaking with one voice” in the international arena.
Third, empirical evidence shows that intra-Africa trade tends to be concentrated more in value-added products compared to trade with outside the continent, thereby supporting Africa’s industrialisation and creating greater opportunities for SMEs. Anything that undermines the AfCFTA is likely to undermine Africa’s industrialisation agenda. In terms of sequencing, too, trade liberalisation with the EU through EPAs undercuts the nascent regional value chains that intra-African trade is fostering.
Finally, there is a direct relationship between trade and infrastructure. As more intra-Africa trade requires more and better connectivity, more trade also spurs and justifies further investment in infrastructure. Anything that adversely impacts intra-Africa trade retards Africa’s infrastructure integration.
Bad for Africa, bad for the world
In sum, continued market fragmentation in Africa is bad for Africa itself and bad for the world. An Africa that trades increasingly with itself is likely to be a more peaceful, stable, prosperous and responsible player in the world. Instead of the recurrent conflict, instability and migration that have regrettably defined Africa’s image for far too long, a rising Africa will be a beacon of hope and opportunity for its citizens and an attractive market for all.
We call on the EU to change course and to lead in the right direction. When that happens, we are confident others will follow. What is striking is that many of these trading powers, most of all the EU, have dedicated enormous resources to support Africa’s development. Absent evidence to the contrary, we can only assume that the root cause of the problem is lack of coherence between EU trade and development policy rather than a desire to undo what the EU does so well through its development arm.