Africa’s continental free trade area is one of the largest trading arrangements in the world by number of participating countries. It promises to lower tariffs, simplify rules and connect markets that have historically traded more with distant partners than with their neighbours. The agreement is in force, and its practical effect is still small.
The gap between signature and implementation is the story of most trade agreements, and this one is no exception.
What the agreement covers
The framework commits members to reduce tariffs on most goods, liberalise trade in services and cooperate on investment, competition and intellectual property. It also addresses customs procedures and rules of origin, which determine whether a product counts as local and therefore qualifies for preferential treatment.
Why intra-African trade is low
Only a modest share of African trade is between African countries, far below the level in Europe or Asia. The reasons are practical: poor transport links, slow borders, different currencies and regulatory systems, and a colonial-era pattern of exporting raw materials and importing manufactured goods from outside the continent.
The implementation challenge
An agreement requires domestic legislation, customs capacity and political will. Countries at different stages of development have different interests, and some industries fear competition from neighbours. Progress therefore depends on national decisions that are slower than the continental timetable.
Infrastructure and logistics
Trade needs roads, ports, railways and reliable power. Where these are missing, the cost of moving goods between neighbours can exceed the cost of shipping them overseas. Investment in corridors and border posts is as important as tariff reductions, and it takes years to deliver.
The services dimension
Services are a growing part of African economies, and the agreement covers them. Liberalising services means recognising qualifications, allowing firms to operate across borders and coordinating regulation. These are harder to negotiate than tariffs because they touch domestic rules and professional interests.
What businesses need
Smaller firms need information, finance and predictable procedures to trade across borders. Larger firms already have the capacity. A trade agreement that works only for the largest companies will deliver less than its potential, which is why support for small exporters is part of the agenda.
Indicators to follow
The indicators worth following are intra-regional trade volumes, the number of tariff lines liberalised and the time taken to clear goods at borders. Those figures show whether the agreement is changing behaviour or remaining a statement of intent.
The political economy
Trade liberalisation creates winners and losers within each country, and the losers are often concentrated while the benefits are spread across consumers. That asymmetry explains why implementation is slow even when the agreement is popular in principle. Compensating affected sectors, or phasing reductions over time, is how governments manage the transition.
The role of regional communities
Africa’s continental framework sits alongside several regional economic communities, each with its own rules and membership. Overlapping commitments create complexity for businesses trying to work out which rules apply. Making the layers compatible, or at least transparent, is a precondition for the continental agreement to function in practice.
What to watch
The indicators worth following are intra-regional trade volumes, the number of tariff lines liberalised and the time taken to clear goods at borders. Those figures show whether the agreement is changing behaviour or remaining a statement of intent.
This report draws on UNCTAD and the African Union’s trade framework.
Image: Khobbyyyy · CC0 · via Wikimedia Commons.