ADDIS ABABA - Realizing a continental free trade bloc has been challenging for the African Union.
Africa’s leaders decided in 2012 that the continent should be a free trade area by 2017. The first steps of creating the necessary institutions and policies are set to start in early 2015, but progress so far has been slow.
The African Union Commissioner for Trade, Fatima Haram Acyl, told African ministers of trade that more needs to be done to reach goals set in the Continental Free Trade Agreement (CFTA).
“Our continent’s current growth has lacked depth, being driven largely by commodity production and trade," she said. "As a result it has been non-inclusive, non-poverty reductive and non-employment generating, and this is not sustainable in the long run. Africa’s recent economy growth, not withstanding, our continent remains the epicenter of global poverty.”
Africa has the lowest amount of intra-regional trade among the world's continents. It currently stands on 10 to 12 percent and the AU believes that this can double in a decade if the CFTA is implemented. But even 20 percent is low when compared to the 60 percent of intra-regional trade in Europe, or the 40 per cent in North America.
The CFTA could contribute to improve Africa’s competitiveness according to the AU.
But there are challenges on every level, according to Calle Schlettwein, Namibia’s Minister of Trade and Chairperson of the African ministers' meeting.
“I think we have large deficits in infrastructure that would well connect us," said Schlettwein. "We have large fragmentation issues with regards to trade facilitation. We have got the same fragmentation with regard to movement of people. But we have similar fragmentations in terms of policy approaches, how do we approach customs policy, how do we approach trade policy, how we do we approach industrial policy.”
Another major issue for many African countries will be to change the large informal sector, where no one pays taxes, into formal sectors. Especially as a large part of custom incomes could disappear once there is free movement of goods.
Establishing the architecture for the realization of the CFTA is very important to Olusegun Olutoyin Aganga, Minister of Trade of Africa’s biggest economy, Nigeria. He says it will create a common understanding between African countries.
“It’s going to be a lot easier to trade within African countries," said Aganga. "But as of now, you have the non-tariff barriers for example, which is all about logistics, cost of doing business and moving goods from region to the other. You need clearer and more transparent tariff policy and trade policy.”
Assisting the AU with establishing the infrastructure for the CFTA, is the World Trade Organization. It will help with both the facilitation and the costs to create a free trade continent. While the CFTA should be established by 2017, it is unsure when the average African businessman will notice the results of the agreement.
WTO Director General Roberto Azevedo says everyone should realize that implementing the CFTA will be a lengthy process.
“If you actually do get a continental free trade area, it will be one of the biggest political enterprises in the world," said Azevedo. "But I think that drawing predictions, and trying to draw hard lines will be very risky and not productive really.”
There are several regional trade blocs on the continent, such as SADC in Southern Africa and ECOWAS in Western Africa. These will continue to exist under a Continental Free Trade Agreement.