The Nkafu Policy Institute at the Denis and Lenora Foretia Foundation in Yaounde has organized a debate on the African Continental Free Trade Area (AfCTA) six months after the launch of the initiative. The debate holding at the institute’s headquarters in Yaounde had as main objective to provide a platform for high-level experts to address the requirements for the successful implementation of the AfCFTA. The discussion centered around the challenges with implementation and the benefits and opportunities of AfCFTA for African countries. Specifically, and provided an opportunity to examine the benefits of the African Continental Free Trade Area, critically assess the agreement and its benefits to member countries and outline the development implications of the AfCFTA on health, education, employment and consumption. The objectives also focused on broadening assessment on the appropriateness of current procedures in the implementation monitoring of the agreement and to identify and propose policy recommendations to facilitate the process of implementing the African Continental Free Trade Area.
On 1st January 2021, the African Continental Free Trade Area (AfCFTA), created with a view to eventually integrate all states of the African Union into a free trade area, was effectively put in place. This continental market, which brings together several African countries, will cover a market of over 1.2 billion people and a gross domestic product (GDP) of $2.5 trillion. In terms of the number of participating countries, the AfCFTA, at full strength, will be the world’s largest free trade area since the formation of the World Trade Organization (WTO) with 53 member countries. To date, 54 of the 55 member states of the African Union have signed the Agreement, but only 36 countries have deposited their instruments of ratification, thus becoming States Parties to the Agreement, according to the Nkafu Policy Institute.
It says the AfCFTA will liberalize and facilitate a single market for goods and services, including the free movement of people and capital. It would contribute to sustainable and inclusive socioeconomic development, gender equity and, more broadly, lead to increased competitiveness and industrial development. It should be noted that the percentage of trade between African countries is only 16 – 18% and that most of the continent’s trade is with the rest of the world. Most African exports are in raw materials, including extractive commodities like oil, gas and minerals, which are vulnerable to market volatility. Therefore, the key focus here is on the development of value chains and manufacturing on a continental scale. The countries that ratify the agreement agree to liberalize 90% of their tariff lines. In other words, they will reduce and eventually eliminate tariffs on 90% of goods traded under the AfCFTA. The continent’s least developed countries (LDCs) are expected to reach this target in 10 years, while the others will do so over a period of five years. Sensitive products, which account for up to 7% of tariff lines, will be fully liberalized over a period of 13 years for LDCs and 10 years for non-LDCs. Finally, 3% of tariff lines will be excluded from tariff
liberalization. Several other measures were also adopted, including the monitoring and elimination of non-tariff barriers, establishing a digital payments system, and creating the African Trade Observatory. The bigger market will spur producers to upscale and so support increased industrialization and value addition on the continent. More employment opportunities will thus be generated for Africa’s burgeoning youth population.
Indeed, Preferential Trade Agreements (PTAs) or regional Trade Agreements (RTAs) are governed by the scope of rules laid out in the GATT 1994 Article XXIV. The Article gives member states exemption from the principle of Most-Favoured Nation (MFN) by treating mutual imports preferentially through the formation of a PTA or RTA. The WTO permits the creation of three types of PTA, i.e., formation of a Customs Union (CU) under Article XXIV, Agreements under the Generalized System of Preferences (GSP)and Agreements crafted under the Enabling Clause (data source; Nkafu Policy Institute).
With this in mind and given the socioeconomic context marked by the Covid-19 pandemic, theNkafu Policy Institute of the Denis & Lenora Foretia Foundation organized the first edition of the Nkafu Open Trade Initiative Discussion on the theme: “The African Continental Free Trade Area: Benefits, Opportunities and Challenges”
The debates are taking place under the project Nkafu Open Trade InItiative (NOTI). Opening the session, the Interim CEO at the Nkafu Policy Institute Dr Fri Asanga said the project seeks to examine the trade relationship between Cameroon and Nigeria and make recommendations to policy makers to reduce tarrif barriers within the context of the AfCFTA.
The debates brought together business experts among them Dr Jean Cedric Kouam, Deputy Director of the Economic Affairs division and Henry Kouam, Economic Policy Analyst Moderated by Dr Vera Kum, Fellow in Economic Affairs at the Nkafu Policy Institute
This panel discussion provided a forum of 50 participants (including the panel discussion) from different fields of expertise, that enabled them to build new relationships and strengthen existing ones. The audience consisted of government representatives, academics, researchers and students, speakers, entrepreneurs, non-governmental organizations, civil society and public representatives. It served a unique opportunity to better inform on the reforms needed for Cameroon to achieve its emerging status by 2035 whilst ensuring the effective implementation of the AfCFTA. The event also created a platform for professional development and effective policy discourse
Guiding questions for discussion focused on the overall theme “The African Continental Free Trade Area: Benefits, Opportunities and Challenges” and the event objectives, targeting the benefits of the African Continental Free Trade Area and examining if it will be a game-changer for stimulating intra-African trade. AfCTA is projected to increase the value of intra-African trade by between 15 per cent (or $50 billion) and 25 per cent (or $70 billion), depending on liberalization efforts, by 2040, compared to a situation with no AfCFTA in place. With the sole removal of tariffs on goods, the share of intra-African trade would increase by nearly 40 per cent to over 50 per cent, depending on the ambition of the liberalization, between the start of the implementation of the reform
(2020 was considered to be the tentative date for the modelling exercise) and 2040 (UNECA, 2020)
Questions on the debate panel also examined the Tariff and Non-Tariff Barriers. In its National Development Strategy2030, the government of Cameroon plans to conquer markets with high development potential. Nigeria is identified as the first target to regain market share in Africa.Currently, both countries apply Most Favorite Nations tariffs at an average of 11.9 percent in Nigeria and 19.1 per cent in Cameroon to imports from the partner. Trade procedures remain extremely nontransparent—demanding multiple formal and informal payments—and actual trade relationships and barriers differ according to a large number of characteristics, making it nearly impossible to describe the “typical” trade relationship.
How do Cameroon and Nigeria stand to benefit from the African Continental Free Trade Area? The Continental Free Trade Area will reduce tariff and non-tariff barriers, boosting the trade relationship between Cameroon and Nigeria. It will have mutually beneficial employment, welfare and labor market effects via increased trade between both countries.
The panel also made recommendations to policymakers in other to support the effective implementation of the African Continental Free Trade Area. Formalization of the existing import procedures in Cameroon to ensure that actual trade costs do not actually increase as part of the reforms as a full application of statutory rates would increase trade costs at land borders significantly. They panel noted Africa needs to benefit from its demographic dividend especially with the increase in population which can also lead to increase in resources. It noted The AfCFTA can be the solution to the debt problem weighing down on African countries as its successful implementation will multiply resources and consequently end the constant need for foreign aid gotten through debts, hence concrete actions must be undertaken to respect the AfCFTA agreement so it doesn’t just end in wishful aspirations
While economically, women will be very much better off with the implementation of the AfCFTA as they will be more included in the labour force and in economic debates, it will also serve as an opportunity for African countries to integrate, connect and lift millions of people out of poverty, the panel noted
Regarding the format, this quarterly panel discussion represents a platform par excellence for non-politicized discussions based on evidence, facts, and statistics. The objective is to allow high-level experts to objectively address a set of issues related to our country’s economic development.
Source: Bantu Voices