UNITED NATIONS, Jan. 13 (IPS) – African countries opened their markets on Jan. 1 under the Continental Free Trade Agreement and duty-free trade in goods and services across borders is now underway despite the COVID-19 pandemic and other start-up issues.
The new market, created under the African Continental Free Trade Area (AfCFTA) agreement, is estimated at 1.3 billion people across Africa, with a combined gross domestic product (GDP) of 3.4 trillion dollars. This has the potential to lift up to 30 million Africans out of extreme poverty, according to the World Bank.
“It’s not just a trade deal, it’s our hope for Africa to lift itself out of poverty,” said Wamkele Mene, Secretary General of the AfCFTA Secretariat, at the virtual launch event.
It is also expected to boost intra-African trade, promote industrialization, create jobs and improve the competitiveness of African industries on the world stage.
The pact will also empower women by improving their access to business opportunities. Women represent the largest share of informal traders, ranging from 70 to 80% in some countries.
“Today is a historic day for Africa. In 1963, the founders of the Organization of African Unity had the vision of creating an African common market. The start of trade within the framework of the African Continental Free Trade Area is today an operational start towards the African common market. It has been a long journey of focus, determination and resilience, ”said Moussa Faki Mahamat, Chairperson of the African Union Commission, at the launch.
He added that the common market brings real hope for inclusive and sustainable industrialization across Africa.
However, for a smooth roll-out, countries need to agree on some of the remaining issues such as rules of origin, which are a key part of international trade as they are the cornerstone of preferential trade agreements such as the AfCFTA.
The World Trade Organization (WTO) defines rules of origin as “the criteria used to define the place of manufacture of a product” and are important for the implementation of other trade policy measures, including trade preferences (preferential rules of origin), quotas and anti-dumping measures. and countervailing duties (non-preferential rules of origin). The duties and restrictions depend in many cases on the source of the imports.
Countries that have ratified the AfCFTA agreement appear to have agreed on rules of origin for more than 81 percent of tariff lines.
As of today, Africa is able to start trading over 81 percent of products on preferential terms. These goods are part of the initial trade, while negotiations on the remaining 20% are ongoing and are expected to be concluded by July 2021, according to Faki.
But even though trade officially begins, the road to full implementation is still long. “It’s going to take us a long time,” Mene said.
“If you don’t have the roads, if you don’t have the right equipment for the customs authorities at the border to facilitate the fast and efficient transit of goods…? If you don’t have the infrastructure, both hard and soft, it reduces the meaning of this deal, ”Mene told the Financial Times, ahead of the launch.
Yet the promises of a free trade area are “transformative”.
The official start of trade was given the official green light at an extraordinary meeting in December 2020 where AU member states called on “women, youth, businesses, unions, civil society, cross-border traders , universities, the African diaspora and other stakeholders to join them as governments in this historic effort to create the “Africa we want” in accordance with Agenda 2063.
The summit gave the official green light for formal trade to begin on the first day of the new year.
Over the years, the regional economic community such as EAC, ECOWAS and SADC have attempted to achieve these economic goals. The AfCFTA is poised to bring these efforts together.
It was in 2012 that AU member states previously agreed to inaugurate a continental free trade area and gave themselves 5 years to achieve this goal. But it wasn’t until February 2016, less than a year after the initial deadline, that negotiations began in earnest.
Two years later, in March 2018 in Kigali, Rwanda, the treaty was signed by 44 countries. To date, 36 countries have ratified the treaty as of December 4, 2020 (see table). It entered into force on May 30, 2019 and exchanges began on January 1, 2021. Had it not been for the COVID-19 pandemic, exchanges would have started six months earlier in July 2020.
It took a little less than 5 years between negotiations and implementation. Roughly the same number of years that was originally envisioned in 2012.
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