Regional customs unions essential to continental free trade area implementation

African ministers responsible for trade met in Niamey, Niger, recently to pave the way for a free continental trade area (CFTA). The agreement deadline is set for December 2017. The Southern Times journalist Timo Shihepo (TS) spoke to African Union Commission’s Commissioner for Trade and Industry, Albert Muchanga (AM).

TS: Please update us on the progress of Africa’s continental free trade area?

AM: We have guided the negotiators to start working on the legal text. We have signalled to them that we would like to keep the deadline for negotiations and conclusion for December 2017. The one African market will be legally created by December this year when the final drafted text of the legal instrument is adopted but this operation may take some time because after adoption, the heads of state and government will agree on a date to sign the legal instrument. There will be a process of ratification by member states. When we receive the minimum number of ratifications that’s when it enters into force. We are yet to agree on the minimum number of countries that are required. It’s still part of negotiations but a strong foundation has been made.

TS: What will the continental free trade area mean to the person on the street?

AM: The CFTA to the women and men on the street is going to mean a lot. First and foremost all the goods and services that are not excluded are going to move across Africa, duty free. It will be like trading at the domestic level. They will be exposed to products from fellow African countries, which is very good. It’s a strong spirit of pan Africanism. Since the goods will not be coming from far markets we expect a downward trend in prices. We are also tying this to other key aspects, which are removing what we call all non-tariff barriers. These are barriers that tend to fluctuate trade. We also improve on transportation and infrastructure connectivity. This will enable countries to move goods easier across the continent. We are improving on customs office administrations so that it’s faster to clear goods and the common men and women will benefit from that, especially our young women and men who are mostly involved in cross border trading.

TS: What have been the main challenges?

AM: We have got different levels of development and 34 of our member states are least developed countries. Others are middle income countries. When you have this disparity of rich countries and less well-off countries the commitment tends to be different as well. Part of the issue is that if we allow the process to go on we shall lay a foundation for all the countries to upscale on investments, economic diversification and to generate more jobs. This will help lay the foundation of CFTA as well as the foundation of new opportunities for the development of the African economies.

TS: Some countries want to start the level of ambition at 85% while the agreed level of ambition is at 90%, has that been sorted yet?

AM: The level of ambition is 90%. That’s where we will start with the industrialisation process but there are eight countries who feel that we should have started at 85% and they have made their reservations. What we work with in these negotiations is the principle of geometry. This means that countries which are not in a position to join the process can be given time to make the necessary adjustments. They can join us at a later stage. Other than Ethiopia, which is not part of any free trade area, most of the other countries are part of the free trade areas, which have the process of liberalisation higher than 90%. One of the key areas agreed in the just ended ministerial meetings is that although we are starting at 90% it does not mean that we are going to roll back the levels of liberalisation that have already been achieved in the regional economic communities. That won’t happen.

TS: Is there a timeframe for those countries to join?

AM: Well, that’s a sovereign decision. They will consider the possibilities and when they are ready they can be part of the process and this is in the negotiations. The modalities laid the foundations for the negotiations for the legal text. We are now going to start the hard part of the legal text negotiations. We hope to submit the draft to the ministers on the 1st of December. They have a meeting from the 30th November to the 1st of December 2017 so we are confident that we can do that by that time.  Between now and December there will be several meetings of the negotiators and senior officials assisting the ministers. Some of the meetings will go for a stretch of two weeks. We are determined not to let down the heads of state and government who have told us that everything must be finalised by 31st December, this year.

TS: This deadline was set by the heads of state and government. There is a sense that heads are pressuring you as the AUC’s trade and industry department as well as the ministers of trade to meet this deadline even though there is still much to be done.

AM: No, they are not forcing us. What the heads of state and government did in 2012 was to come up with a programme to boost intra-African trade. In the 2012 document the heads committed themselves that by 2017 we are going to create a continental free trade area. So the implementation of this decision goes as far back as 2012. Countries have had a lot of time.

TS: I know that the AUC has embarked on a visa-free continent but that will only be implemented later, which is unlikely by the way. Do you think the CFTA can be implemented and be a success without a visa-free continent?

AM: Everything is going together. We have a programme called African Union Agenda 2063 and number of activities are line up there. One of that is to facilitate the free movement of Africans across the continent. The other one is creation of a free trade area, the other is to silence guns (to improve safety and security) on the continent, and others like I said is rapid infrastructure development so that we connect the various markets of Africa. All that is integrated.

TS: Some countries are not part of the customs unions and most elements of the CFTA are built on customs unions. Will the CFTA continue if all countries are not part of certain customs unions?

AM: It will definitely go on. When we start with the negotiations of tariffs liberalisation it’s not going to happen in countries that have already liberalised. For example SADC has a free trade area. The negotiations will not be between Zambia and South Africa. They have already done that. It will be between countries that are not in the same regional economic community or between those in the same regional economic community but they are not trading yet. This will also enable regional economic communities say for example SADC and ECOWAS to engage in negotiations to reduce trade tariffs between the blocs.

TS: So this means that the way of doing trade is going to change in Africa?

AM: Yes and one of the factors that we have to look at it is the liberal economic order that was established especially after the end of the second world war, which brought a new wave of globalisation and now is in retreat. You hear strong sentiments of nationalism and protectionism from developed countries’ markets. For Africa to industrialise we should not rely too much on exports.

We should rely on our internal markets. Domestic consumption will also help us to create a large single African market.

TS: Since you are talking about continental free trade area and free movement. Will there be a single African currency as well?

AM: There are stages for that. First of all we are going to have free trade area. After that we are going to create an African customs union, which is going to have a common external tariff. Under this, countries trading with third parties are going to have their own tariffs. After that that’s when we are going to think of other stages like the monetary aspect of the union. That is going to come at a later stage. To create the foundations of strong economies that is when now we move to a high level of integration. That one is for later. Payments arrangements would be as they exist now depending on each country’s capacity to pay.

TS: What happens then to the traditional trade partners?

AM: In economic literature, that is called trade diversion. That becomes a problem if the new products that we are consuming are more expensive than the products that are coming from outside but if the new products that the countries would start consuming as a result of CFTA are cheap then we create trade.

Those markets (traditional) may exist or they may be closed off. When you look at the level of international trade and the level of intra-African trade, African countries trade amongst themselves more on industrial goods than commodities. But Africa trades with the rest of the world with commodities.

The pattern of commodities’ export is that traditionally prices are going down and down. So there is no much value to be generated from there. The issue is that Africans must industrialise by trading amongst themselves. When we trade amongst ourselves it would help us create a strong position on trade. This in turn would help us get a good deal on trade and better terms on investments.

This is creating a better bargaining position by creating an integrated African market.

July 2017
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