Africa is moving towards crystallising an ambitious integration agenda of establishing a continental free trade area by October. This comes against a backdrop of an apparent trend away from mega-regional trade agreements in both Europe and the US.
African leaders appear to be undaunted by this. Their commitment to a continental-wide free trade area was firmed up in Addis Ababa in November 2016. Ministers and negotiators from the 54 members of the African Union (AU) held their fourth round of negotiations for establishing the free trade area.
There is a huge amount to be gained from a free trade area for Africa. Compared with the other regions of the world, intra-African trade is the lowest of any region in the world at 10%. Intra-regional trade in Europe is 60%. Within the association of Southeast Asian Nations it is 30% and in South America 21%.
If well designed and implemented, a free trade area for the continent could change this. It could also set countries on a path of transformation from dependence on the export of commodities to manufactured products. Intra-Africa trade in manufactured products is more diversified than other sectors and higher than exports to other regions of the world. But there’s room for higher volumes which would, in turn, lead to structural transformation and socio-economic development.
The drive for a pan-African free trade area follows progress in developing regional free trade pacts. This movement towards regional economic integration feeds into the continental free trade area ambition.
But Africa needs to learn from the experiences of others who have negotiated free trade pacts. In particular it needs to make sure that the process it runs is inclusive and has all interested parties around the table, not just representatives of a few special interests.
Muddling through with missed targets
For a long time regional integration has been recognised as one of the ways in which Africa can achieve economic transformation and development. This was borne out of the historical ties that bind people together as well as the limited capacity of the state to foster development.
The 1991 Abuja Treaty specified a sequence of steps that would need to be followed for an African Economic Community to become reality. Article 6 of the Treaty says that
the Community shall be established gradually in six stages of variable duration over a transitional period not exceeding 34 years.
The initial deadline for establishing the Economic Community was 2000. Despite the fact that this has been missed by nearly two decades, there is renewed momentum to meet a new deadline. This was set at a meeting in Johannesburg in June 2015 when negotiations on a Continental Free Trade Area where launched.
The threat of mega regional trade agreements
Africa needs the free trade area now more than ever. This is because it would help African countries hedge against possible losses and preference erosions that are likely in the wake of mega regional trade agreements. These include the Trans-Pacific Partnership Agreement, the Regional Comprehensive Economic Partnership of Asian countries, the EU-US Trans-Atlantic Trade and Investment Partnership as well as EU Comprehensive Economic and Trade Agreements.
These agreements threaten to worsen the trade position of African countries.
Africa needs to act quickly. The EU is pursuing economic partnership agreements with developing countries in different African regions, the Caribbean and Pacific islands. If these are completed before a continent-wide agreement is signed they could have a negative effect on the usefulness of a continental free trade area.
As countries, as well as regional economic communities, sign into these agreements, some African countries could find it cheaper to export to Europe than to fellow African countries.
Ordinary people need to be involved
There is clearly a sense of urgency in concluding a free trade deal for the whole continent. But the process requires deep reflection, leadership, political will and commitment, and an effective strategy.
Civil society organisations at the Africa Trade Week in Addis Ababa late last year pointed out that the integration objectives of the trade deal must be balanced with possible unintended consequences. Examples include job losses. These could happen in the wake of tariffs being removed and countries consequently being unable to protect infant industries. Also, if there is no domestic capacity to take advantage of market opportunities created by a free trade area there may be losses in revenue from import duties.
At a minimum accommodation should be made for boosting the productive capacity of countries. Compensation mechanisms should also be put in place for countries that might suffer losses in tariff revenues. This is particularly true for the poorest countries.
These steps are necessary to forestall or, at least, minimise the inevitable economic problems generally associated with liberalisation programmes.
Unlike previous attempts to transform and develop Africa, ordinary Africans should be the focus of the free trade zone. This can only happen if they “own” the process. African leaders must stop holding exclusive closed door negotiations on big issues that affect people.
The continental free trade area provides a unique opportunity for the continent to distinguish itself by conducting negotiations in a way that’s inclusive rather than simply representative of special interests. An example of bad practice is the infamous Green Room process at World Trade Organisation negotiations. Small unrepresentative groups of developed countries informally meet behind closed doors, setting the tone for critical issues that affect all countries.
African negotiators should also take heed of the growing resistance to mega trade deals by ordinary citizens. Both the Trans-Pacific Partnership Agreement and Trans-Atlantic Trade and Investment Partnership have run into trouble because citizens of some countries objected to the secret and exclusive negotiations that drove the agreements.
These examples provide lessons that Africa should avoid.
Ownership of the Continental Free Trade Area by the people of Africa can be achieved through inclusiveness where representatives from the private sector, trade unions, civil society, academia and development practitioners participate in the negotiations. After all, the argument and justification often given for such deals is development and employment creation for ordinary people.
Written by Samuel Oloruntoba, Chris Changwe Nshimbi, for the Conversation January 9 2017. Edited by Amy Smith (NIAS).