This archive report was first published on 29 June 2019.
As the African Continental Free Trade Area (AfCFTA) is set to come into effect on July 7, the continent is poised to become a single market, marking a historic day for African trade and integration. This development was reported on June 29, 2019, as the African Union prepares to launch the AfCFTA, aiming to accelerate continental integration and trade, boost manufacturing, and address possible overlaps within trade blocs.
Challenges Ahead ¶
However, a recent United Nations Conference on Trade and Development (Unctad) report warns that the trade gains may not be evenly distributed among AU member states if proper rules are not put in place. The report emphasizes the need for rules that consider trade patterns, tariff profiles, liberalization schedules, and dependence on tariff revenue. According to Chris Onyango, an expert on international issues, the way the rules of origin are created, enforced, and verified will determine the distribution of economic gains from the AfCFTA and shape future regional value chains.
The AfCFTA implementation team anticipates bottlenecks based on existing problems facing intra-African trade in regional blocs such as the East African Community (EAC), the Common Market for Eastern and Southern Africa, the Economic Community of West African States, and the Southern African Development Community. Intra-Africa trade was only 15.2 percent between 2015 and 2017, constrained by differences in trade regimes, restrictive Customs procedures, administrative and technical barriers, and inadequacies in trade finance, information, and infrastructure.
Key Challenges ¶
A key challenge facing the AU is the need for coherence within regional trade blocs, with many countries having overlapping membership in several blocs. Other challenges include weak productive capacities, tariff-related trade costs, and non-tariff barriers. Sub-Saharan Africa has the highest cost of exporting compared to all other regions. The AU committee is negotiating new continental free trade rules in line with the World Trade Organisation ahead of the July 7 launch.
Experts emphasize that the rules need to be simple, transparent, predictable, and business-friendly to benefit small countries. As the AfCFTA seeks to remove restrictions in tariffs, the bloc rules will still be necessary to guide situations where goods are shipped in from other countries outside Africa. Poorer countries will need to be supported and protected to compete favorably, according to the Unctad report.
