With Ratification Expected.. Here’s All About AFCFTA.. World’s Biggest Free Trade Agreement

By: Yassmine ElSayed

CAIRO, Feb. 24 (SEE) – Parliament is set to vote soon to

ratify the foundation agreement of African Continental Free Trade Area or

AfCFTA, the biggest free trade agreement in the world since the World Trade

Organization was created in the 1990s.

African countries are set to launch AfCFTA, amid lengthy

efforts for regional integration. When implemented, the AfCFTA is expected to

increase intra-African trade by 52.3 percent by 2022, from 2010 levels.

In turn, higher trade levels can facilitate economic growth,

transform domestic economies, and help the countries achieve the Sustainable

Development Goals (SDGs).

So what is exactly this agreement?

‘Observer Research Foundation’ published an analysis by Dr. Abhishek

Mishra, Research Assistant with ORF’s Strategic Studies Program.

The 18 ordinary session of the African Union (AU), held in Addis

Ababa in January 2012, concluded with issuing a decision to launch a Continental

Free Trade Area (CFTA) by 2017. Eight rounds of negotiations followed this

between 2015 and 2017.

A major breakthrough was achieved on 21 March 2018 when

leaders from 44 African countries met in Kigali, Rwanda, and signed a framework

agreement to establish what is being called one of the world’s largest 3 trade

blocs. The agreement declared that the African Continental Free Trade Area

(AfCFTA) would “come into effect 30 days after ratification by the parliaments

of at least 22 countries.

Dr. Mishra considered the CFTA is an attempt by the African

governments to “unlock Africa’s tremendous potential” to deliver prosperity to

all Africans. It seeks to create a single continental market for goods and

services with free movement of business people and investments. By 2030, the

African market size is expected to reach 1.7 billion people, with a combined

and cumulative consumer and business spending of US$6.7 trillion.

The CFTA aims to expand intra-African trade through better

harmonization and coordination of trade liberalization and facilitation regimes

and instruments across subregions (RECs) and at the continental level. As part

of the agreement, “countries have committed to remove tariffs on 90 percent of

goods with the remaining 10 percent of items to be phased in at a later stage”.

A study by the UN Economic Commission for Africa (UNECA)

estimates that successful completion and implementation of the CFTA agreement –

complemented with efforts to improve trade-related infrastructure, reduced

import duties and transit costs – could lead to a 52.3 percent increase in

intra-African trade by 2022, from the 2010 levels.

The figures are expected to double upon further removal of

non-tariff barriers. An increase in intra-African trade will “drive the structural

transformation of economies from low productivity and labour intensive

activities to higher productivity and skills intensive industrial and service

activities”.

This will subsequently help in generating better paid jobs,

leading to poverty alleviation.

The AfCFTA also seeks to “foster a competitive manufacturing

sector and promote economic persification”.

At present, manufacturing represents only about 10 percent

of the total GDP in Africa, on average, lagging behind other developing nations.

Given the CFTA’s enormous “market size of 1.2 billion people and over $3.4

trillion of cumulative GDP”, if implemented properly, the CFTA could reduce

this gap by increasing growth in the manufacturing sector and its value added

products.