CFTA dream faces commitment challenge
Windhoek – African governments’ commitment to promoting intra-African trade has become questionable, as protection tariffs and a myriad non-tariff barriers still stifle continental transacting in goods and services.
There have been efforts over the years to create a continental free trade area (CFTA) that is to be built on free trade initiatives being pursued by regional economic communities.
One such initiative meant to give impetus to CFTA is the Grand FTA that will merge SADC, COMESA and the East African Community into a single trading bloc stretching from the southernmost tip of Africa – the Cape in South Africa – to Cairo, Egypt.
With intra-African trade ranging from 10 to 12 percent of Africa’s trade with the rest of the world, the AU wants the CFTA to be operational by 2017.
The CFTA will build on the SADC-COMESA-EAC Grand FTA, which is expected to be operational by 2014.
However, the AU laments that African countries are not “providing each other market access which is consistent with their stated goal of enhancing intra-African trade”.
In a document detailing some of the issues curtailing intra-African trade, the AU says trade protection within the continent is relatively high, with an average applied tariff of 8.7 percent.
Trade protection tariffs are highest on agricultural products, AU statistics show.
Angola and DRC slap 15.3 percent and 10.4 percent import tariffs on imports of agricultural and non-agricultural products, respectively, from African economies.<br /> Malawi charges a 10.1 percent import tariff on agricultural products and 8.2 percent on non-agricultural products, while Mozambique levies an 18.7 percent tariff on imports of agricultural products from fellow African economies and 12.4 percent on non-agricultural products.
Zimbabwe’s regime puts a 21.5 percent levy on agricultural imports and 11.1 percent on imports of non-agricultural products.
The AU statistics show that the country with the highest import tariff is Nigeria, which charges a 46.9 percent tariff on imports of agricultural products. This is followed by Tunisia (27 percent).
On average, importing and exporting agricultural products in African markets attracts a 12.4 percent tariff, one of the reasons the AU cites for the continent’s food insecurity, as produce is not easily moved from areas of abundance to those in deficit.
“Intra-Africa trade in agriculture faces (a) higher rate of protection than non-agriculture sector. Almost all African countries and sub-regions impose higher tariffs on agriculture imports from other African countries.
“This suggests that the roadmap for establishing an African FTA must pay close attention to intra-African agricultural trade. The FTA could be instrumental to Africa feeding itself,” the AU says.
“But the real big but negative story is that two-thirds of African countries are either more protectionist than Africa in general or face more limiting market access conditions within Africa, than the average situation,” the AU says.
It goes on to note, “This means that an FTA, even one that progressively eliminates these barriers, could offer substantial economic and social gains for Africa.”
The AU points out that removal of these tariff barriers alone is not enough, as governments still need to come up with ways to cut overall trade costs.
Non-agricultural products also face applied protection of 7.8 percent; a development the AU says affects diversification and manufacturing potential.
The AU argues that establishing FTAs among all regional economic groups in Africa could result in average protectionist tariffs falling to 2.7 percent from the current 8.7 percent.
The AU says intra-regional exports and imports are dominated by a few economies while the European Union and the US are major export destinations, followed by Asia and in particular China.
Goods exported range from foodstuffs to raw materials, which are manufactured into end-user goods that are exported back to Africa at higher cost.
The AU says that it is well-documented that continued export of primary commodities and raw materials to external markets translates into exports of jobs and by-products and potential for industrial development or the development of allied industries.
The continental body bemoans the fact that intra-African trade has consistently remained low, averaging about 10 percent over the past decade.
“The direction of Africa’s trade both in terms of exports and imports has been heavily influenced by traditional links with the rest of the world, in particular with Europe. Over 80 percent of African countries’ exports are destined for markets outside the continent, and a similar amount of the continent’s imports come from external sources.”
The AU says initiatives on trade liberalization – though substantial and laudable ‑ have “had limited impact in terms of raising the average level of intra-African trade to more than 15 percent”.
Africa’s intra-regional trade levels are in stark contrast to within the EU (63 percent) and in Asia (at least 40 percent).
Some of the factors contributing to Africa’s low levels of internal trade are its economies, which are geared to primary commodities for which demand is externally-oriented.
“There is the stark reality of the continent’s structural deficiency, which manifests itself in the dichotomy between the traditional and modern sectors, in the excessive dependence on external inputs, and in external rather than domestic market as the principal mover in the development process,” the AU says.
The adds that integration has been a hotly pursued subject across the continent and has over the years ‘evoked hopes that African countries would enlarge their economic space for production and trading among themselves.
“Yet progress towards increased intra-African trade as a major objective of this integration agenda has been less than impressive.”