African Continental Free Trade Agreement

Forty-four members of the African Union signed an agreement on March 21 to create the African Continental Free Trade Area (AfCFTA). The agreement was signed at a time of extensive activity in major international trade negotiations. The United Kingdom voted in 2016 to leave the European Union; and the United States removed itself from negotiations with transatlantic and transpacific trading partners. Currently, Mexico, Canada, Peru, Chile and seven Asian-Pacific countries have agreed in principle to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor to the transpacific agreement from which the U.S. withdrew.

Eleven of the African Union’s 55 members have not signed the agreement, including two of Africa’s largest economies, Nigeria and South Africa. Nigeria’s labor organizations oppose the agreement, and the country’s president said more time was needed for input from Nigerian stakeholders. South Africa stated commitment to the agreement once legal issues were resolved.

Although Africa has a wealth of natural resources, its colonial past, and mismanagement and corruption since independence, have prevented its people from sharing its wealth. It remains the poorest continent, suffering from illiteracy, malnutrition and poor health. Its leaders look forward to increasing intra-Africa trade by removing import duties and not-tariff barriers. Currently, intra-African trade is estimated to account for 18% of total trade by African countries.

AfCFTA is designed to form a single market for goods and services in Africa. Implementation of AfCFTA will create an African market of over 1.2 billion people with a Gross Domestic Product of 2.5 trillion US dollars, and the largest free trade area in terms of number of participating countries since formation of the World Trade Organization.  Strengthening intra-continent trade will also improve Africa’s position in international trade.

A UN agency estimates that removing import duties has the potential to boost intra-Africa trade by over 50% by 2022 due to eliminating import duties. With the elimination of non-tariff barriers, trade could double, but eliminating such barriers will be a challenge. Costs of moving goods within Africa will hinder free trade until roads and rail networks are improved. Furthermore, full benefits of the trade agreement won’t be realized without adoption of policies that support industrial development. Such policies include establishing a curriculum for the large under-30 population that focuses on business training and upgrading skills; facilitating access to financing and assuring property rights; and attracting direct foreign investment.

Although much remains to be done, AfCFTA represents a great step toward a more prosperous future for Africans. African Union leaders are confident that the remaining countries will sign on.