At the 2012 AU Summit, Heads of State and Government adopted a Decision on the Establishment of a Continental Free Trade Area and endorsed the Action Plan on Boosting Intra-Africa Trade which identifies seven areas of cooperation namely: trade policy; trade facilitation; productive capacity; trade related infrastructure; trade finance; trade information; and factor market integration. These are expected to lay the foundation for the establishment of a Continental Customs Union at a later stage.
The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world measured by the number of countries participating. The impact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.
The African Continental Free Trade Agreement represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion. Implementing AfCFTA would:
- Lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day;
- Boost Africa’s income by $450 billion by 2035 (a gain of 7 percent) while adding $76 billion to the income of the rest of the world.
- Increase Africa’s exports by $560 billion, mostly in manufacturing.
- Spur larger wage gains for women (10.5 percent) than for men (9.9 percent).
- Boost wages for both skilled and unskilled workers—10.3 percent for unskilled workers, and 9.8 percent for skilled workers.
The provision of the Treaty will potentially affect current company rules regarding minimum capital, directorship and shareholding in many African countries. It will also have effect on capital control exchange regulation and local content rules. There is the need to harmonise existing rules such as the rules of origin which differ between various RECs on the continent. This ranges from 60 percent of local content of total raw materials used for wholly produced goods originating from the ECOWAS region to 40% material content rule in COMESA to a more complex product specific low import and high valueadded requirements in SADC.
A CALL FOR ACTION
I strongly believe that the real issues for the Nigerian Economic Submit Group are not with the AfCFTA treaty but potentially its implementation. African countries need to; review and harmonise trade policies, identify areas of competitive advantage, build institutional capacity, address non-tariff barriers, develop safeguards, build roboust infrastructure and engage with stakeholders.
In conclusion, in order to make the Treaty work, Africa needs to learn from itself in terms of experiences from its existing RECs and also from the rest of the world. Eliminating tariffs is good but a larger impact on boosting trade requires the removal of nontariff barriers, reforms of services sector and improvement of trade facilitation measures.