The AfCFTA on its own will not change the extractive practices of Africa’s development partners. Africa’s trade negotiators need to find ways to make them reshape their trade patterns with the continent.
It has become quite fashionable, whenever the African continent is mentioned by development partners, to talk about the African Continental Free Trade Area. This is rightly so: the AfCFTA is potentially game-changing for the continent, and is the world’s largest free trade area by numbers of countries.
The AfCFTA now covers a market of 1.2 billion people – only 500m of whom live above the poverty line. But, if United Nations projections are to be believed, by 2050 it will cover a market of 2.5bn people and, based on current projections, around 2.1bn people will live above the poverty line.
Furthermore, if African aspirations are to be believed, then this market will not just be the world’s largest consumption market but also a manufacturing hub, similar to the role China currently plays in the world economy. This is elaborated in the African Union’s collective development plan Agenda 2063 – in which the AfCFTA is just one of 15 flagship projects and six policy frameworks to be implemented over the coming years, albeit a massive one.
The AfCFTA has also shown itself to be effective. It came into force in January 2021 and by May 2023 46 countries have ratified the agreement out of 54 signatories; protocols for harmonised competition, investment and special economic zone rules have been adopted; and Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia have already traded “tariff free” in various products.
This progress is comparable to, if not even faster than, that of the Asian-dominated Regional Comprehensive Economic Partnership (RCEP). The problem is that, despite it being fashionable, most of Africa’s development partners are not yet being serious about the AfCFTA.
Why partners need to deal with the AfCFTA
How and why does this matter? I know there are readers who will already be saying out loud as they read this – “the AfCFTA is an internal policy, it only needs Africans to be serious about it.” Before I explain why that might be a limiting perspective, let me first explain why I think the partners are not being serious.
If Africa’s development partners were being serious, we would see mention of the AfCFTA in major policy documents and schemes such as communiqués from the G7 group of “most advanced” economies or the G20 forum of 19 countries and the European Union. That hasn’t happened yet.
This is partly because, as research that my firm will soon release explains, Africa currently accounts for just 3% of G20 imports. So even when the G7 are saying “we recognise that economic resilience requires de-risking and diversifying” they are hardly thinking about the African continent. Switzerland occupies a greater share of G20 imports than does the entire African continent.
If Africa’s development partners were being serious, we’d also be seeing more policy papers being released by think-tanks across the world about options for integrating the AfCFTA with current trade initiatives, such as the US Africa Growth and Opportunity Act (AGOA) or the UK’s recently-revised preferential trade scheme for developing countries.
I say “more” because as far as I know, there are only a handful of such papers – including one by my colleagues, commissioned by the South African Institute of International Affairs (SAIIA). This focused on trade policy relationships between China and African countries. It considered a spectrum of measures; from preserving status-quo duty-free schemes targeted at least-developed countries, combined with specific bilateral free trade agreements to, at the other end of the spectrum, creating a free-trade area with the entire AfCFTA region.
It argued that the option that would best complement the AfCFTA would be a preferential trade agreement for the entire AfCFTA. In other words, duty-free, quota-free access for every African country.
This result is also likely to apply for the US, the UK and most other development partners. But where are the think-tanks and policymakers from African countries – or those from the UK or US themselves – reviewing these options in depth, linking them to direct policy negotiation opportunities, or global meetings such as those of the World Trade Organization?
My colleagues argued that such a preferential trade agreement should be a key outcome at the Forum on China Africa Cooperation (FOCAC), convened every three years by Chinese and African leaders. The next FOCAC will take place in Beijing in 2024.
There is a strong case to be made for fully recognising the AfCFTA in AGOA, for example, as a means for the US to address the failings of this existing trade regime. But this case has not yet been made, even though AGOA is due for renewal in 2025. This means serious options are not yet on the table, either from the African or the American side.
Does it matter? If, as I have noted, the AfCFTA is an African regional policy – is it not therefore only what is done on the continent that matters? Beyond this, some might argue that trade partners are being serious because many are ploughing millions into “aid for trade” schemes, such as Trade Mark Africa (TMA) which primarily provides training and digital equipment from British and European experts to reduce customs procedures and other at-the-border processes.
To consider Africa in isolation is ahistorical
The AfCFTA’s success is of course dependent to a degree on the willingness of individual member states and their leaders to make it work. But to rely only on action on the continent is short-sighted and ahistorical. Africa’s trade patterns are highly dominated by extractive-based investment and consumption – from agricultural products such as cocoa, to critical minerals such as lithium, to simple medicines. This pattern typically shows itself in trade deficits in all other sectors. For instance every single African country – even the most industrialised – is a net importer of pharmaceutical products.
These extractive patterns were established in colonial times and the era of slavery – and are so pervasive that they even set the tone for trade partners that were never involved in these gross atrocities. There is just one G20 country – Mexico – that does not have a trade deficit with the vast majority of African countries.
The fact is that the AfCFTA on its own, even with aid-for-trade and targeted preferential schemes, will not change these extractive patterns with development partners – however many tariffs are reduced or customs procedures simplified or digitalised. To change those patterns needs intentional, proactive policies.
The two questions that every African trade negotiator and leader must therefore have for our development partners must be: what policies are you taking to recognise the AfCFTA in your own trade policy; and how quickly do you think those new policies will reshape your trade patterns with the continent to make them more resilient, sustainable and reliable?
Only when development partners can answer this, will they demonstrate they are being serious, not just fashionable.
Source : African Business