Jean R. AbiNader
March 27, 2018
Saad Eddine El Othmani, the Head of Government, led Morocco’s delegation to the 10th Extraordinary Summit of the African Union (AU) held in Kigali, at which 44 African countries signed an agreement to initiate a continental free trade area (AfCFTA). He said it was a historic event that marks a major step in the process of African integration. El Othmani noted that discussions will continue through the end of the year to bring the accord into force. Noticeably absent from the initial group of signatories were Nigeria and South Africa, the largest economies in Africa, while the non-state SADR did sign the agreement, despite lacking a credible economic and legal infrastructure.
The goal of AfCFTA is to build over time a shared market for goods and services, the largest to come into being since the World Trade Organization. In many ways, these goals reflect the priorities of King Mohammed VI, who continually calls for greater coordination in regional economic development, and has promoted several multilateral projects that will support AfCFTA, including a regional offshore gas transit pipeline and gas-fueled fertilizer facilities designed specifically to boost agriculture on the continent.
According to experts, this historic pact represents a major advance for African integration and unity. The pact will enhance Africa’s position in global trade, which means new opportunities for African companies to compete and cooperate across borders and build continental reach. However, the success of the AfCFTA will depend on closer collaboration between policy makers and the private sector. In fact, at the deal’s signing, Benedict Oramah, president of the African Export-Import Bank, pledged his organization would disburse around $25 billion to support intra-African trade by 2021 under a strategy launched in anticipation of the creation of AfCFTA, according to the Wall Street Journal.
The need for AfCFTA is made clear from statistics comparing intra-African trade with other regions. For example, intra-African trade is about 16%, whereas it is 19% in Latin America, 51% in Asia, 54% in North America, and 70% in Europe. It is not surprising that Morocco, which sees only 6% of its trade with other Arab countries, is anxious to build stronger commercial ties on the continent.
Morocco and other African countries have common goals in this endeavor: to grow their economies to create valued jobs that will help the continent achieve greater security through prosperity. Early estimates from the UN Economic Commission for Africa are that AfCFTA “has the potential to boost intra-Africa trade by 53% by eliminating import duties and lowering tariff barriers. It could create an African market of over 1.2 billion people with a Gross Domestic Product (GDP) of $2.5 trillion.”
Major challenges include dealing with competition among protected sectors, to the need for legal and technical and standards regimes to deal with logistics, sanitary standards, transparency, and transactions, to basic concerns such as financial transfers, insurance, incentives, subsidies, dispute settlement, and official languages. Since these issues have been confronted in other trade agreements, there is a rich body of knowledge available to AfCFTA to move ahead with developing protocols and regulations. It will be interesting to see how South Africa and Nigeria, which declined to sign without further domestic discussions to garner support for the AfCFTA, will develop their approaches to membership.
The AfCFTA is a flagship project of Agenda 2063, the African Union’s long-term vision for an integrated, prosperous and peaceful Africa. It provides the basis for new partnerships to attract direct foreign investment, spreads best practices among participating countries, and will generate continuous development of opportunities for African young people, who will make up 50% of a population of some 2.5 billion people by 2050.