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African Union Aims for Continental Free Trade Area by 2017Friday, February 03, 2012 > 09:49:27
(Bridges Trade Weekly)
Plans to establish a pan-African trade pact are well underway, as part of a broader effort to increase intra-regional trade within the continent. However, these plans also hit an early roadblock during a week-long meeting of African leaders in Addis Ababa, Ethiopia, after various participants questioned such an agreement’s feasibility.
Leaders at the African Union Summit, which took place from 23 to 30 January 2012 under the theme ‘boosting intra-African trade’, endorsed a plan to set up a Continental Free Trade Area (CFTA) by 2017. The proposed CFTA would be a key component of the AU’s strategy to boost trade within the region by at least 25-30% in the next decade.
The “Declaration on boosting intra-African trade and the establishment of a continental free trade area” calls on member states, regional economic communities (RECs), and development partners to adopt the necessary measures toward the effective implementation of an Action Plan – a document produced during the AU trade ministers’ meeting in December 2011 detailing priority action clusters to address obstacles to increasing intra-African trade.
Intra-African trade currently stands at 12% of total trade, compared to 60% for Europe, 40% for North America, and 30% for ASEAN, according to statistics cited by the WTO. Enhancing this trade – such as through a large continent-wide trade deal – and deepening market integration “can contribute significantly to sustainable economic growth, employment generation, poverty reduction, inflow of foreign direct investment, industrial development, and better integration of the continent into the global economy,” the AU declaration said.
Despite leaders’ endorsement of the declaration, however, several representatives from various regional groupings insisted that it was premature to think of establishing a CFTA by 2017, given that another plan to consolidate three existing free trade areas into a smaller, 26-nation “Tripartite FTA,” is still facing challenges of its own.
The CFTA would evolve from the proposed 26-country Tripartite FTA and other regional FTA processes, upon their expected completion in 2014. These regional processes would be consolidated into the CFTA between 2015 and 2016, with the pan-African pact launching in 2017, according to an earlier roadmap released in December at the AU trade ministers’ meeting.
The smaller “Tripartite FTA”, if finalised, would span three existing regional economic communities – namely the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern Africa Development Community (SADC) – or 26 countries in total.
At a June 2011 meeting of African leaders, South African trade minister Rob Davies announced a three-year time period for developing the Tripartite FTA, also known as the Grand Free Trade Area – though other African leaders, including South African President Jacob Zuma, predicted at the time that this process would likely meet substantial challenges along the way, including the “uneven and unequal development” between countries and regions, along with infrastructure limitations .
The difficulties of pursuing a pan-African trade deal prompted substantial debate at the weeklong meet, with participants divided over whether such an idea could actually be put into practice by the 2017 deadline and whether other goals might be more appropriate.
At the high-level gathering, the Intergovernmental Authority on Development (IGAD) – an eight-country regional development organisation in East Africa – argued that, instead of the CFTA, African countries should concentrate their efforts and investments on infrastructure development. Countries could also push for the removal of non-tariff barriers and trade facilitation while also addressing the challenges of food security, the organisation added.
There are “many deadlines that have been set and surpassed,” IGAD told fellow participants at the meet, referring to the current state of play of other proposed trade pacts in Africa. Rather than continue to push for a continent-wide trade agreement, the focus should shift to “what can be done to promote trade and the creation of inter-industry linkages rather than inactionable action plans,” they continued. Even if such a pan-African deal did manage to come together, there would be very little scope for deepened trade since there are many other issues that would still need to be addressed, the organisation added.
Along similar lines, Nigerian President Goodluck Jonathan said on Sunday that the 2017 target date for launching the proposed Continental Free Trade Area was unrealistic. “There are no quick-fixes to integration,” he said.
Meanwhile, WTO Director-General Pascal Lamy supported the initiative, stating that “there is absolutely no contradiction between accelerating regional integration and deepening the multilateral trading system” and encouraging leaders to “operationalise” intra-African trade. “Creating a platform premised on a continental area free of restrictive trade barriers can create an environment receptive to the growth of these regional and global supply networks in Africa,” Lamy added.
For its part, COMESA stressed that pursuing the CFTA was indeed appropriate; however, the regional grouping emphasised that negotiations for the proposed COMESA-EAC-SADC Tripartite FTA must be concluded first, as doing so could provide useful guidelines and experience for later establishing the CFTA.
The heads of state of the AU agreed to schedule the next summit for July 2012 in Lilongwe, Malawi, where proposals for a detailed action plan on how to improve infrastructure and institutional arrangements to support the creation of the CFTA are expected to be reviewed.