AfCFTA: A window of opportunity for Africa’s sustainable development

By Pyemo Afego

The emerging global trend towards cutting trade barriers as demonstrated by recent landmark multilateral trade deals such as the EU-Japan Economic Partnership Agreement (EPA) 2017, the African Continental Free Trade Area (AfCFTA) 2018 as well as the ongoing EU-Mexico, EU-Australia and EU-New Zealand trade negotiations presents a massive opportunity to recalibrate future global trade and investment rules with a view to supporting long-term economic and social sustainability.

The AfCFTA, a landmark free trade deal that’s being described as the most ambitious Africa focused trade deal, aims to eliminate non-tariff and tariff barriers on goods and services as well as facilitate free movement of labour and capital within the African continent.

On May 8th Namibia announced its decision to join 44 of the 55-member countries of the African Union (AU) in signing up to the AfCFTA. The new bloc, the largest free trade area in terms of member countries since the creation of the World Trade Organization, provides a unique opportunity to pursue a pan African developmental strategy in a market comprising 1.3 billion people and a combined GDP of US$2.5 trillion if all 55 AU members sign up.

There is ample research to sup- port the notion that trade is crucial for development. Sadly Africa’s current internal trade is dismally low, making up only 18% of its total trade compared with 35% and 45% for Latin America and Asia respectively, according to data from the Economic Commission for Africa (ECA).

The low intra-Africa trade may be linked to high applied tariff rates, a recent report by the African Trade Policy Centre (ATPC) suggests.

“With average tariffs of 6.1 per cent, businesses currently face higher tariffs when they export within Africa than when they export outside it,” the ATPC stated in their report.

However by committing member countries to remove tariffs from 90 percent of goods when trading with one another, the AfCFTA agreement will not only open up market access opportunities for African businesses and consumers but will also offer the chance to support sustainable and inclusive development on the continent.

One way that the AfCFTA can facilitate sustainable regional and economic development, according to the ATPC, is by improving manufacturing capabilities and inducing structural transformation away from natural resource dependency.

“Africa’s industrial exports are forecast to benefit most from AfCFTA. This is important for diversifying Africa’s trade and encouraging a move away from extractive commodities, such as oil and minerals, which have traditionally accounted for most of Africa’s exports, towards a more balanced and sustainable export base.

“Using AfCFTA to pivot away from extractive exports will help to secure more sustainable and inclusive trade that is less dependent on the fluctuations of commodity prices,” it noted.
In addition, the report highlighted the potential impact of the AfCFTA on sustainable youth employment in the region.

“Perhaps most importantly, AfCFTA will also produce more jobs for Africa’s bulging youth population. This is because extractive exports, on which Africa’s trade is currently based, are less labour intensive than the manufactures and agricultural goods that will benefit most from AfCFTA.”