Trade within Africa will become less burdensome under a new African trade pact that modernizes intra-African trade and reduces the barriers that have traditionally slowed the flow of goods and services across the continent.
- African economic trade is far behind other global economic zones
- Economic trade between African countries should become easier, faster, more standardized
- The pact faces hurdles that may be difficult to overcome
Overview Of The African Free Trade Pact
The pact, called the Tripartite Free Trade Area (TFTA), should help open up and tie together the disparate economies across the continent. Highlights of the pact include:
- Integration across 26 countries, from Angola to Zimbabwe. The zone accounts for almost $1 trillion of economic activity.
- Easier access to goods and services from TFTA members, affecting some 650 million people in the zone
- Simpler, faster transit of goods across borders
Why The Africa Trade Pact Is Needed
The TFTA pact is designed to solve longstanding problems that have stunted economic growth in Africa. As outlined in a 2014 UN report on the topic, the problems include:
- Africa has only a 12% rate of intra-African trade among its nations. Asia has 55%, Europe 70%
- Africa’s share of global trade is only 3%
- The low rate of intra-African trade makes the region vulnerable to global shocks
The African free trade pact aims to increase intra-zone trade, which today accounts for only 12% of economic activity in the zone.
Benefits Of The Free Trade Pact
Studies (pdf) by the European Parliament predict that the pact could yield many benefits, including:
- Increased economic activity, fueled by the elimination of costly tariffs for goods and services that are traded between member countries
- A reduction of border delays, enabling carriers to rapidly move goods throughout the zone
- Consistent trading rules across the zone that should encourage cross-border investments
- Improved and harmonized product and service standards that are important for trading goods in major export markets
Big Hurdles Remain
The trade zone, while a positive move, will not solve all of Africa’s problems. As Norimitsu Onishi of The New York Times points out, the country has “bad roads, air routes that still favor old colonial ties to Europe, corruption and poor governance”.
Though the pact seems promising, it must still be ratified by multiple African member state parliaments, some of which may have protectionist tendencies that could threaten adoption of the pact.
Writing about the pact in The Guardian, British Prime Minister David Cameron provides perspective about why it is so important. “Fifty years ago” he writes, “ per capita GDP in South Korea was twice that of some African countries. Last year, it was nearly forty times higher.”
In many ways the African free trade pact is just a first step in economic modernization across the African continent. Currency unions may be next, increased trade with China is already happening, and there is even talk of a pan-African university system being established.