Africa's FTA gets enough signatures to go into operation

Legislation | | MIC Customs Solutions |

The Gambia has become the 22nd nation to sign up to the African Continental Free Trade Area.

A proposed free trade agreement in Africa has won enough signatures to be able to go into operation, something supporters believe could change the economic fortunes of the continent.

The Gambia's parliament became the 22nd to officially ratify the pact, marking the official minimum threshold needed to approve the deal among the 55 member states of the African Union.

It is a significant leap forward for the African Continental Free Trade Area (AfCFTA), which was created last year and would cover a market of 1.2 billion people when it becomes operational.

This would also make it the biggest free trade area since the World Trade Organization was created some 70 years ago.

Presidents of the African nations that have signed up hope the AfCFTA will eliminate high tariffs and build on the work being done by regional economic communities, while the United Nations Economic Commission for Africa believes the pact could boost intra-African trade by as much as 52.3 per cent a year.

Previously, African countries had tried to increase trade through international commodity agreements, but these had grown ineffective as political interests continued to affect negotiations.

However, sceptics of the new agreement are concerned about exactly how the FTA will be executed and whether individual governments can prove coordinated enough to move the deal forward.

For instance, AfCFTA is still subject to negotiation regarding tariffs and rules of origin, while countries will need to decide which imports they are going to let in tariff-free given the aim to liberalise 90 per cent of the trade between member states.

Under the agreement, members will be able to carry on protecting ten per cent of their trade to cover their most important industries from competition, so deciding these could be a lengthy process.  

According to the World Bank, the cost of intra-African trade is around 50 per cent higher than in eastern Asia, with the number of days taken to clear exports and imports also roughly double that of high-income nations in the OECD.