By Telesphor Magobe , The Guardian
ON May 30, 2019, African countries ratified the African Continental Free Trade Area (AfCFTA). Envisaged in the treaty was that the 54 member states create tariff liberalization and complete removal of barriers with a view of opening pan-African doors for trade in goods and services to a population of an estimated 1.2 billion people, with an estimated combined economic output of $2.5 trillion in 2018.
Many observers hailed the AfCFTA agreement’s entry into force as a milestone in African economic integration and wellbeing. Its impact, however, will depend on political will of member state.
This follows many years of EU’s push for entry into what is known as Economic Partner Agreements (EPAs) geared towards liberalization of trade with African nations by removal of protective measures to most products produced in Tanzania.
EPA’s were designed to be ratified by African countries in blocks. In the EAC, only Kenya reneged against other East African states and has dived into EPAs. The other countries have been taking the whole idea with a pinch of salt, mulling over it, assessing its cons and pros. It is yet to be seen what will be come of it with time but so far, Kenya’s journey into unknown.
The EPAs are essentially Free Trade Agreements (FTAs), creating free trade between the EU and EU and African, the Caribbean and Pacific countries, with no duties or quotas on goods and services traded. In order to continue enjoying duty-free access into EU markets, Africa has been told to open its markets to EU goods and services.
History has taught Africa nations that a time has come of not gobbling any economic models fashioned by from EU and world Breton Woods including the Structural Adjustment Programs (SAPs) of the 80s fell short of achieving their goals they were intended. Instead, many African nations hurtled into excruciating abyss of spiraling debts and desperation. The EPAs are no different.
What pundits say is that trade liberalization is bound to have direct impact on Tanzania’s private sector as imported goods are more competitive for domestic market her, raising competition for both intermediate and final products.
The civil society was up in arms citing possible unseen degradation of human rights. The civil societies’ rationale for taking a hardliner stance is that ultimately, the human rights face to EPA’s will be eroded. There is also the danger of African countries being forced to relinquish their sovereignty. Once economically stripped, the African countries will once more be indirectly re-colonized.
In other words, EPAs pose a direct threat to policy space of the African governments and to the very aspirations full regional integrations, thus threatening the development of these nations.
A reciprocal EPA would severely reduce intra-regional trade at the expense of Africa’s trade balance and production. To the benefits of exporters whose goods and services have been heavily subsidized.
Africa depends solely on agriculture. Some African countries are already facing a surge in imports for agricultural products – from poultry to dairy, cereals and other processed agricultural products. If this continues, the cottage industries that have been adding value will close down. Unemployment, poverty and poor health will be the order of the day in Africa.
Why go for AfCFTA instead?
With the mooting of the AfCFTA, it was and still remains the panacea for Africa’s trade woes. Africa has eight economic blocks that could be used for pan-African integration. The large market envisioned under the AfCFTA could spur increased value-added production and trade within Africa, achieve economies of scale, and attract greater foreign investment.
Increased trade flows resulting from the removal of trade barriers and the facilitation of cross-border trade could enable countries to develop and specialize in specific production activities, potentially fostering intra African supply chains.
According to CRS and IMF Trade Statistics, between 1990 and 2018, intra-Africa trade generally included more value-added content than Africa’s trade with the world. In East Africa for example, statistics show that regional market for manufacturing is much more important for local producers than any other market.
Kenya or example, exports more manufactured goods to the COMESA market than any other market. In the 90’s the balance of trade between Tanzania and Kenya was in favour of Kenya. Not anymore! The reverse is true with Kenya using cooking gas and other commodities from Tanzania. The question comes; which one, between the two development models should African countries go for? Your guess is as good as mine. AfCFTA is the way to go
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