What Is the African Free Trade Agreement

April 16, 2022

44 countries initially signed the agreement on 21 March 2018. Nigeria was one of 11 African Union countries that avoided a first signature. The AfCFTA underscores the African Union`s important and growing commitment to reducing poverty through trade – a link that is increasingly recognized. Ngozi Okonjo-Iweala, a candidate for WTO Director-General, recently said: “Trade is a force for good, and proper use can help lift millions of people out of poverty and bring shared prosperity.” Negotiations lasting more than five years culminated in the signing of the trade agreement on March 21, 2018; it entered into force on 30 May 2019; Free trade began on January 1, 2021 after a six-month delay following the COVID-19 outbreak. It continues to promote the agreement with eloquent sovereignty — with urgency and fervour. Yulia Vnukova advises in the Trade and Regional Integration Unit (ETIRI) of the World Bank. Based on more than a decade of experience, Yulia`s current work focuses on trade policy and regional integration, with a focus on macroeconomic and microeconomic analysis of trade, trade and competitiveness of the sector, global value chains and private sector development in emerging markets in Europe, Asia and Africa. Informal cross-border trade can account for up to 90 per cent of official trade flows in some countries and up to 40 per cent of total trade within regional economic communities such as the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA). Policymakers say the free movement of labour will make an important contribution to the proper functioning of the free trade area, but not all African countries are committed to this concept. The World Bank`s report, The African Continental Free Trade Area: Economic and Distributional Effects, is designed to help policymakers implement measures that can maximize the potential gains of the agreement while minimizing risks. Creating a continent-wide market requires determined efforts to reduce all trading costs. Governments also need to develop measures to increase the willingness of their workforce to seize new opportunities.

The second is justice. It will be crucial to understand who benefits from the pact and who loses. For example, smallholder farmers may lose if the focus is on large-scale cash cultivation, which could lead to greater food insecurity and poor nutrition. Poverty and social impacts must therefore be monitored in all sectors and those negatively affected protected until commodity models are replaced by robust value chains, value creation, increased interregional integration, increased investment, more job creation and higher incomes. And third, there is infrastructure. According to the African Development Bank, Africa`s infrastructure needs are substantial, ranging from $130 billion to $170 billion per year, with a financing gap of between $68 billion and $108 billion, pushing most countries` trade outwards rather than inwards. Even before the pandemic, Africa felt the urgency of greater integration as it sought and attempted to maintain impressive economic growth in some countries. So, despite the delays caused by COVID-19, African leaders continued this ambitious project, and on January 1, 2021, trade was officially launched under the AfCFTA. However, the beginning of trade was only one of many steps towards greater economic integration: even now, not all parties have ratified the agreement; Caution remains about potential problems for many countries; Negotiations on the most complex and emerging aspects of trade are still ongoing; and unrelated obstacles to the agreement impede its full realization and the promise of the new trade zone. The scope of the AfCFTA is broad.

The agreement will reduce tariffs between member states and cover policy areas such as trade facilitation and services, as well as regulatory measures such as hygiene standards and technical barriers to trade. Full implementation of the AfCFTA would reshape the region`s markets and economies and increase the production of services, manufacturing and natural resources. The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world in terms of the number of participating countries. The pact connects 1.3 billion people in 55 countries with a combined gross domestic product (GDP) worth $3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, but its full potential will depend on the implementation of important policy reforms and trade facilitation measures. The agreement was negotiated by the African Union (AU) and signed by 44 of its 55 member states in Kigali, Rwanda, on March 21, 2018. The only country that has not yet signed the agreement is Eritrea, whose economy is largely closed. Several committees have been established on trade in goods, trade in services, rules of origin, support measures, non-tariff barriers, technical barriers to trade and sanitary and phytosanitary measures. [39] Dispute resolution rules and procedures are still under negotiation, but will likely include the designation of a dispute resolution body. [35] The Committee of Senior Trade Officials implements the Council`s decisions. The Committee is responsible for drawing up programmes and action plans for the implementation of the AfCFTA Agreement. [39] Countries that ratify the agreement can trade with each other on the basis of their tariff concessions and proposed rules of origin.

Currently, around 90% of the rules of origin are in force, while the rest is expected before the end of July 2021. The AfCFTA was launched on 1 January and is an exciting turning point. Currently, Africa accounts for only 2% of world trade. And only 17% of African exports are intracontinental, compared to 59% for Asia and 68% for Europe. The potential for transformation throughout Africa is therefore considerable. The pact will create the largest free trade area in the world, measured by the number of participating countries. .