Graphic: CFTA. Editing: TP
The new bloc aims to reduce tariffs and trade barriers and give the black continent more weight in negotiations with the rest of the world
In the Rwandan capital of Kigali on Wednesday, representatives of 44 of Africa’s 54 to 56 countries signed an agreement to establish the Continental Free Trade Area (CFTA), which had been under negotiation for two years. Moussa Faki Mahamat, the Chadian commission president of the African Union (AU), hopes that the relevant bodies and politicians of the signatory states will complete the ratification process within the next six months so that the agreement can enter into force as planned.
The continent’s two most important economies, South Africa and Nigeria, have not yet signed the free trade agreement. Nigerian President Muhammadu Buhari cited concerns raised by representatives of his country’s trade unions and business community. Officially, they base their opposition on fear of dumping, but unofficially, observers suggest that Nigerian officials may also be opposed because they fear losing revenue from corruption if there are new alternatives and competitors.
Sudanese President Cyril Ramaphosa, on the other hand, will not sign until his country’s parliament has given its approval. Albert Muchanga, the Zambian commissioner for trade and industry at the AU, therefore hopes that both Sud Africa and Nigeria and the other countries that have so far failed to join will decide to do so before the next summit in July in Mauritania.
Many inhabitants, low gross domestic product
The free trade zone would then encompass a market of 1.2 billion people, who, however, only generate a total gross domestic product of around 3.3 trillion US dollars (and of whom up to two-thirds want to emigrate) – whereas the Chinese, with a population of 1.4 billion, generate over 14 trillion dollars, the Europeans, with a population of 512 million, generate around 17 trillion dollars, and the Americans, with a population of 326 million, generate almost 20 trillion dollars. Whether the free trade agreement can change these differences is an open question. Theoretically it can, because by trade more division of labor and by more division of labor more progress develops.
In practice, African countries have so far mainly offered raw materials and hardly any other goods, which is why inter-African trade accounts for only 16 percent of the total volume. Muchanga nevertheless believes that eliminating African tariffs, which have averaged 6.1 percent so far, could increase inter-African trade by 60 percent.
Another advantage he believes is that a rough bloc like the CFTA can negotiate better terms in international negotiations on other agreements. However, this is only true if such rough agreements, which U.S. President Donald Trump wants to replace again with bilateral treaties, also exist in the future.
Asia and South America continue to rely on rough agreements
This is supported by the fact that, although not in the U.S., there seems to be continued support for this in Asia (cf. JEFTA – EU free trade agreement with Japan as a hydra). Following the departure of the USA from the Pacific Free Trade Agreement TPP, the alternative concepts of RCEP ("Regional Comprehensive Economic Partnership") and FTAAP ("Free Trade Area of the Asia-Pacific") and the TPP successor project CPTPP ("Comprehensive and Progressive Trans Pacific Partnership") with each other (cf. Pacific Free Trade Competition).
The South American countries also rely on Mercosur, a free trade zone that currently includes Argentina, Brazil, Paraguay and Uruguay (cf. What happened to TTIP, Ceta and the other free trade agreements??). Associated members are currently Bolivia, Chile, Peru, Colombia, Ecuador, Guyana and Suriname. Venezuela, which was one of the founding members, has been excluded until further notice because its President Maduro is opposing his ouster by trickery and violence.
Because Mexico is also holding talks with the Mercosur countries, an extension of the free trade zone to Central America and the Caribbean is conceivable. Especially if Donald Trump makes good on his threat and dissolves the NAFTA free trade zone consisting of the U.S., Canada and Mexico (cf. USA threatens to cancel NAFTA).