A driving force to promote trade

Wednesday, 2021-01-20 17:32:23
 Font Size:     |        Print

Cranes and containers seen at APM Terminals at the gateway port in Apapa, Lagos, Nigeria. (Photo: Reuters)
 Font Size:     |  

NDO – The Secretary General of the African Continental Free Trade Area (AfCFTA) recently visited Egypt to discuss solutions to facilitate the operation of the world’s largest regional trade agreement. Considered a promising start to the goal of continental integration as well as promoting trade among African countries, the deal has now officially come into effect. However, there are still many barriers for the document to be implemented in order to creating a driving force to promote trade in Africa.

The AfCFTA Secretary-General’s visit to Egypt came in the context of African countries beginning to formally implement the AfCFTA since January 1, 2021, after months of delays due to the COVID-19 pandemic. When fully operational, the AfCFTA will be the largest free trade region in the world, with 1.3 billion people and a total GDP of up to US$3.4 trillion. Currently, 41 out of the 54 AfCFTA member countries have submitted their tax reduction procedures.

The AfCFTA has the ability to help economies in the region thrive in the face of future global crises. The successful implementation of the AfCFTA is expected to support the development of competitive regional value chains and increase resilience, while also enhancing the industrialisation of countries and the region as a whole, especially in the medical field. Therefore, AfCFTA can help the African economy grow stronger. The pandemic has also shown the importance of digital technology, a driver of intra-regional trade and overall economic growth. The e-commerce protocol created under the framework of AfCFTA will help accelerate the digital transformation of African economies.

The African free trade area is expected to stimulate intra-regional trade and at the same time facilitate the continent's development and industrialisation. African countries are currently importing 94% of medical products from the outside, and the establishment of AfCFTA is expected to boost intra-regional trade to more than 52% by 2022. The AfCFTA will help strengthen intra-regional trade by cutting or eliminating cross-border tariffs on the majority of goods, facilitating the movement of the capital and people, boosting investment and paving the way for a customs alliance across the continent.

Although officially in force, in fact, no goods can be exported or imported below zero duty or reduced import tax under the AfCFTA. Meanwhile, obstacles in activating the AfCFTA are not only regarding the issue of tariff harmonisation, but the current biggest challenge is the infrastructural interconnection to facilitate transactions.

The World Bank has estimated that the AfCFTA can help tens of millions of people in the continent escape poverty by 2035. The agreement is also an important factor to help Africa overcome the COVID-19 “storm”. However, in order to fully activate the AfCFTA and open up trade flows in Africa, countries need to accelerate the completion of procedures as well as solve internal bottlenecks, contributing to promoting the continent's position on the global market.