Issues at stake on Africa’s single market
Mixed reactions have continued to trail the withdrawal of 11 countries, Nigeria inclusive, from ratifying the African Continental Free Trade Area (AfCFTA) last month in Kigali, Rwanda. While arguments have been made on the uneven benefits of the trade deal, given conditions in certain markets, the need for an approach to building multilateral ties remains a consideration for deepening continental trade. FEMI ADEKOYA writes.
In 2015, a year after the Continental Free Trade Area (CFTA) in Africa was announced, The Guardian reported the lag in the Economic Community of West African States (ECOWAS) region at expediting the process of operationalising the deal, due to several trade issues. This was when other Regional Economic Communities (RECs) had even commenced negotiations towards addressing grey areas. Though the AU set a deadline of December 2017 for the adoption of the CFTA, it was later shifted to March 2018 during the 10th extraordinary AU summit, with a view to enhancing negotiations.
The main objectives of the CFTA are to create a single continental market for goods and services, with free movement of businesspersons and investments, thus paving the way for accelerating the establishment of the Customs Union. It will also expand intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation and instruments across Africa in general.
The CFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for production, continental market access, and better re-allocation of resources. The establishment of the CFTA and the implementation of the Action Plan on Boosting Intra-African Trade (BIAT) provide a comprehensive framework to pursue a developmental regional strategy. The former is conceived as a time bound project, whereas BIAT is continuous, with concrete targets to double intra-African trade flows from January 2012 and January 2022.
The primary concern for Nigeria is that it is facing a protectionist backlash within, as its oil revenues have dipped and it needs its manufacturing and services sectors to be protected. There is also fear that some of the more efficient economies in North Africa, which have French and other EU investment, could sap the domestic manufacturing sectors in larger African countries.
Many of the details of the accord are still to be agreed upon. Countries are supposed to eliminate tariffs on a list comprising 90 per cent of products (although they have not yet agreed what would go on this list). In practice, however, that could allow them to leave unchanged duties on most of their current imports, which are concentrated in a narrow range of goods.
While trade experts believe tariffs are not the most important barrier to trade, a bigger obstacle is that standards and licences are different across Africa, a concern raised by the former Director-General of the Standards Organisation of Nigeria (SON), Dr Joseph Odumodu.
Morocco, which has now rejoined the AU, seems a likely big gainer, considering its relationship with, and proximity to the EU. India could also be a gainer. It has already provided duty-free tariff preferences to African Least Developing Countries (LDCs). This led to a spurt in Indian investment as well.
The Manufacturers Association of Nigeria (MAN) applauded the Federal Government’s refusal to sign the agreement. It frowned on the contents, noting that it would lead to gross unemployment in the country, as most manufacturing companies would die quicker.
The Association’s President, Frank Jacobs, vowed that the body would not support the Federal Government’s adoption and ratification of the agreement, until issues of market access and enforcement of rules of origin were addressed.
According to MAN, the agitation by the private sector stemmed from the lack of consultation and inclusion of the input of key stakeholders before Nigeria’s position was presented at the meetings of the African Union-TWG on CFTA in the build-up to the AfCFTA negotiation.
Jacobs explained that the issues of market access that allow only 10 per cent of products to be protected, as well as government’s enforcement mechanism in the area of enforcement of rules of origin, needed to be clearly defined before local producers can support the agreement.
He added that MAN is not unaware of the benefits inherent in installing a continental trade agreement like AfCFTA that could improve intra-African trade and enhance economic growth and sustainable development. Jacobs declared that Nigeria’s national interest should be the primary consideration.
He urged the government to set in motion a process that would enable all stakeholders on the international trade value chain in Nigeria to quickly review the text of the draft AfCFTA agreement and come up with comments on areas that are not in the best interest of the country’s economy and sectors.
Former President Olusegun Obasanjo decried the failure of Buhari to sign the agreement, expressing hope that he would change his mind before it was too late.
Obasanjo during a presidential panel, titled: ‘When Leaders Make History’, at the Africa CEO Forum in Abidjan, Cote d’Ivoire, recently, said: “That President Buhari didn’t sign the free trade agreement in Kigali is disappointing; I hope he signs it before it is too late. Egypt started the discussion on the formation of the Organisation of African Unity but didn’t conclude it and Nigeria took over. Nigeria was also central to the discussion of the free trade agreement, but I am surprised that the country withdrew from signing.”
Worried by lack of consensus by many countries, the United Nations Conference on Trade and Development (UNCTAD) advocated the use of macroeconomic and sectorial policies to mitigate risks that may arise from exposure to multilateral ties.
According to UNCTAD, trade alone is not enough to reach economic and social objectives; it must be accompanied by a set of macroeconomic and sectorial policies that are inclusive and sustainable – and by social programmes designed to bring fairness to those who risk being left behind.
Secretary-General of UNCTAD, Mukhisa Kituyi, explained that the solution to the concerns raised by some countries is not less trade – characterised by unilateralism and isolationism – but better trade, fashioned by the principles of inclusivity and equity.
He added that the value of world trade has nearly quintupled over the past 20 years from $5 trillion to about $24 trillion. Over the same period, trade has proved to be an excellent medium to leverage and promote economic growth, helping lift a billion people around the globe out of extreme poverty.
For Dr. Benedict Oramah, President of the African Export-Import Bank (Afreximbank), the deal would lead to Africa’s economic development and bring about a better future for the continent.
Oramah said Afreximbank was working on the establishment of export trading companies that would aggregate products from small traders for export across the continent and beyond. The operation of such companies would remove the need for individual small traders, not equipped for such trade, to export products by themselves.
He added that the Bank signed a $1 billion Memorandum of Understanding with the Export Credit Insurance Corporation of South Africa for a South Africa-Africa Trade Promotion Programme, aimed at expanding trade between South Africa and other African countries. He disclosed that a similar programme, which the Bank signed with Egypt at $500 million, exhausted quickly and was replenished.
The head of the CFTA Unit at the African Union, Prudence Sebahizi, said the bottleneck in the AfCFTA negotiation process was the lack of adequate expertise, and that ratification is a progressive process.
“There is no pressure. But the next step is that, of course, most countries have to go back for more consultations and later ratification. Implementation differs from country to country. Signing the agreement was the first important step,” he said.
The signatories have tentatively 180 days to ratify the agreement. And according to the Executive Secretary of the United Nations Economic Commission for Africa, Vera Songwe, the world is watching. There are expectations that the remaining 11 countries would catch-up and create the largest trade deal in the world.
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