Africa to gain $16.1bn from continental free trade

The United Nations Conference on Free Trade and Development (UNCTAD) says the African Continental Free Trade Area if well implemented could help the continent gain as much as $16.1 billion in trades within the region.

In a report on the continent’s economic development,  UNCTAD said rules of origin could be a game changer for Africa and enable the African Continental Free Trade Area to catalyse the continent’s regional integration by generating significant gains.

Rules of origin are a “passport” enabling goods to circulate duty-free within a free trade area if those goods qualify as originating within the area. They are therefore one of the cornerstones for boosting trade on the continent.

 “The African Continental Free Trade Area will lead to the creation of a single continental market of more than 1.3 billion people, with a combined annual output of $2.2 trillion. The transition phase to the Continental Free Trade Area alone could generate welfare gains of $16.1 billion and boost intra-African trade by 33 per cent,” UNCTAD said in its “Economic Development In Africa Report 2019 Made in Africa: Rules of Origin for Enhanced Intra-African Trade” report on Thursday.

“UNCTAD estimates that the gross domestic product of most African countries could increase by up to three percent once all tariffs are eliminated, if rules of origin are made simple and business friendly,” it added.

It however, advised that “realising the full potential gains from the African Continental Free Trade Area would require a broad range of complementary policies, to address multiple challenges, designed to enhance an emerging trade–industrialisation nexus

on the continent: from business and trade facilitation to infrastructure, from productive capacities to entrepreneurship policies. But, under the African Continental Free Trade Area, it is the rules of origin – establishing the nationality of products produced in Africa – that will determine whether preferential trade liberalisation can be a game changer for Africa’s industrialisation.”

Mukhisa Kituyi, secretary-general of UNCTAD noted in the report that how these rules are designed, enforced and verified would critically determine the size and distribution of the economic gains from the African Continental Free Trade Area, and would shape the future regional value chains on the continent. “How lenient, flexible, easy to use and understand and accessible rules of origin are will shape the net benefits to the African private sector under the African Continental Free Trade Area. African countries should also consider the differing levels of productive capacities and competitiveness of African countries when enforcing rules of origin. Policies are needed to build institutional capacities of customs authorities to ensure impartial, transparent and predictable implementation of agreed rules of origin. New and emerging technologies must also be leveraged to lower compliance costs for the private sector,” he said.

The African Continental Free Trade Area is Africa’s renewed opportunity to steer its economic relations away from a reliance on external donors, foreign creditors and excessive commodity dependence, ushering in instead a new economic and political era focused on self-reliant cooperation, deeper integration and higher levels of intra- African trade. The African Continental Free Trade Area could boost African economies by harmonizing trade liberalization at the continental level, promote economic diversification and intra-African trade, and foster a more competitive manufacturing sector.

The United Nations Conference on Trade and Development (UNCTAD), as the leading United Nations body on trade and development, has embarked on this historic initiative with African member states to support them in exploiting the potential gains of the African Continental Free Trade Area. I am certain that this report will prove to be a valuable guide to policymakers as we journey along the road towards the African Continental Free Trade Area and beyond.