Windhoek
In 2017, when the Tripartite Free Trade Area (TFTA) comes into force the common market created by the customs union will encompass 51 per cent of the continent’s GDP – about US$1 trillion annually – and a slew of big countries with huge growth potential, such as Ethiopia, Kenya and Mozambique.
The TFTA declaration was signed in Egypt this week by the heads of state of the East African Community (EAC), Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA) blocs.
The three blocs will take alternating turns to lead the TFTA, and work to reduce customs duties – the hope is to achieve an 85 per cent reduction in tariffs within three years – and non-tariff trade barriers such as superfluous paperwork at borders.
However, the TFTA agreement does not include most of western Africa, including Nigeria, the continent’s most populous nation with 177 million people and a GDP of nearly US$600 billion. The TFTA is nevertheless expected to prove a crucial stepping stone to a pan-African free trade area.
African leaders are scheduled to reconvene in Johannesburg, South Africa, on June 14-15 for this year’s African Union Summit, where their first order of business will be the launch of a two-year negotiation aimed at agreeing Africa’s Continental Free Trade Agreement (CFTA).
The TFTA agreement is still to be ratified by national parliaments over the next two years, but Egyptian trade minister Mounir Fakhry Abdel Nour said that would be a mere formality – “simpler compared with the effort that has gone into preparing the document.” He described the deal as a “monumental step” for Africa.
TFTA provides a mechanism for identifying, reporting, monitoring and eliminating non-tariff barriers to trade, officials said. And it aims at raising Africa’s share of global trade, which currently stands at just 2 per cent.
“What we have realised is that having one trade regime is better than the costly multiple trade regimes,” said COMESA Secretary General Sindiso Ngwenya, a Zimbabwean economist who led the negotiations toward TFTA among the three trade blocs.
“We believe that this sends a powerful message that Africa is committed to its economic integration agenda and in creating a conducive environment for trade and investment,” said Ngwenya.
Of concern though is that implementation has lagged in previous trade agreements. “Many countries sign up to all of these agreements, but in terms of actual implementation, the record is very different. This is only the beginning of the process – it could be some years before it’s fully in effect,” said Razia Khan, head of Africa Economic Research at Standard Chartered bank in London.
Many African countries had signed up to multiple regional trade bloc agreements, but in practice “they didn’t really mean anything”, said Khan.
The hope is that by eliminating competition between different trade zones and creating a single larger system, the new agreement will provide an impetus to move ahead with implementing free trade in practice, not just in theory. That should help Africa’s global competitiveness as well, Khan said.
A pan-African trade agreement may help Africa negotiate better trade deals with the rest of the world. The rich OECD (Organisation for Economic Cooperation and Development) countries have long been criticised for neglecting Africa’s legitimate interests in access to global markets.
This week’s G7 summit at Schloss Elmau included an Outreach Conference including African leaders. African leaders attended an Outreach Conference at the G7 summit at Schloss Elmau last week. Host country Germany made improved development assistance a key theme for this year’s G7 meeting.
TFTA took five years to negotiate. CFTA negotiations, in contrast, are expected to take just two years – because they’ll build directly on TFTA. That said, CFTA negotiations are not expected to result in completely free trade in the short term – according to Jean-Joseph Boillot, a researcher at CEPII, a French economics think tank, and it could take a decade and a half or more to gradually remove the many non-tariff barriers to trade in Africa. – Additional reporting by Deutsche Welle.