In January 2012 the African Union adopted the decision to create the Continental Free Trade Area (CFTA). This Trade Agreement aimed at creating a single market for goods, services and free movement of people and investments to promote intra-African trade among 55 African countries. This agreement is also an interesting strategy to protect African countries from developed economies. The CFTA negotiations were launched in June 2015 and, parallel to this agreement, a Tripartite Free Trade Agreement linking three African regions is being negotiated.
The rigid tariffs and administrative barriers known as Trade Barriers, as well as the non-trade barriers such as sanitary and phytosanitary measures, trade facilitation, intellectual property rights and poor infrastructure, make the development of continental trade difficult. The integration of the African commercial market will only be achieved if there is an increase of industrial activity, a greater role for the value chain in African countries and greater legal security in trade relations. To this end, it is hoped to eliminate trade barriers, implement a common sanitary and phytosanitary policy and allow free mobility of people for work reasons. As in other Free Trade Agreements, a second phase of liberalization that would affect services is expected.
The CFTA follows the implementation mechanisms established by other free trade agreements in order to homogenize trade, establishing on the one hand a set of equal standards among all countries without discrimination, known as Most Favoured Nation status (MFN), and on the other hand establishing within each country equality of conditions between national and foreign companies known as the National Treatment principle.
Despite the potential of this agreement and the new wave of liberalization, it will not help to improve the African economies because of the of their small size and the lack of competitiveness of their enterprises. Theoretically, the liberalization of African economies would mean the mobility of companies and would prompt a competitiveness that would trigger an increase in the quality of goods and a reduction in costs; only competitive enterprises would survive this market liberalization. However, the consequences of this commercial agreement would be the same as those caused by other free trade agreements such as Economic Partnership Agreements between the EU and different African Regions. The companies of the richest African countries would lord it over those of the less developed countries.
The defenders of economic liberalization see in this type of agreement the source of economic development. The detractors highlight the negative consequences of economic globalization such as the loss of jobs, the reduction of revenues and a lack of protection of the rights of workers / consumers and a worsening of environmental conditions.
It is a fact that this type of agreement favours the mobility of companies and they will find facilities for investment in foreign markets. But what can be seen as an increase in investment and wealth for a country can become a problem for the less developed African countries as they will see companies from neighbouring countries becoming their competitors – and therefore threats to their national companies and workers.
The CFTA must seek to reduce trade barriers and facilitate trade between African countries. However, liberalization like the one that will take place with the EPAs can only result in economic disruption for African markets. Unfair competition, the flooding of foreign companies, the loss of government revenues and the loss of jobs in less favoured countries will perpetuate the dependence of African countries on the most developed economies.
Another argument in favour of the CFTA has been the improvement of infrastructure, but how they will be built or how much capital will be invested in such infrastructure has not been specified. Few countries in Africa have infrastructure that facilitate national trade, let alone interregional trade. However, the CFTA is invoked as if it were the guarantee of the construction of a network of railways, highways and intraregional flights. The development of infrastructure can only come from investments from outside Africa, and it would cause a greater indebtedness of the African economies.
Greater coordination between African countries and the facilitation of trade within Africa is always necessary and a good initiative. The coordinated and moderate reduction of trade barriers within the regions and countries in Africa is necessary for the diversification of industry and the specialization of economies. There must also be a common front against those economies that try to take advantage of their own economic power at the expense of the countries in Africa. However, the biggest mistake would be to combat the negative consequences of market liberalization rooted in the EPAs with further liberalization measures among the economies in Africa.
Africa has the greatest natural wealth on the planet and has the potential to develop economically without depending on developed countries. That is why we do not defend a CFTA, in the image and likeness of the EPAs. However, we defend international African treaties that guarantee a moderate protectionism of the African economies that strengthens national industries; we defend a collaboration within the regions that facilitates the specialization and diversification of industry in Africa that leads to a supply chain installation there; we defend regional coordination to deal with the invasion of non-African companies in Africa; and we defend support for intra-regional integration Trade in Africa.
José Luis Gutiérrez Aranda
AEFJN Trade Policy Officer