
Overall, Africa will benefit from free trade agreements, which will bring about income and welfare gains to its people. The Free Trade Area aspires to create a “single market” for trade in goods and services among the African countries. The single market will be reinforced in cooperation with investors and other stakeholders. It may also be strengthened with intellectual property rights and competition policy that support innovation. This may encourage competitiveness and product development and diversification. Such a single market in goods may be created over a transition period among African countries, including Ethiopia.
As incentive to investors in single market, tariff rates may be subject to progressive cuts. An increase in tariffs is very discouraging for domestic investors that rely on imports of inputs. It also affects consumers through raising selling prices. African officials may issue lists of carefully identified products that may be exempted from tariffs. However, concerned authorities have to be negotiate and agree upon the types and quantities of products actually traded among African countries.
These agreements should maximize benefits of growth in trade between and among Africans. Experts indicate that the agreement will be supported by cooperation on measures relating to trade in goods. These measures are rules of origin, customs cooperation, transit, trade facilitation, and non-tariff barriers. The agreements may also include technical barriers to trade such as sanitary and health factors that affect the lives of people. These agreements may increase the efficiency of trade, adding to the gains realized from the Free Trade Area.
Experts are of the opinion that exemptions of tariff would result in gains to all trade between African countries. The gains will arise from increased employment, better use of domestic resources to increase production in manufacturing and agriculture sectors. These gains in trade will also lead to access to a variety of cheaper products for African consumers. Tariff revenue losses of governments from trade are relatively contained for most African countries, as they trade less among themselves. Intra-African exports, for example, represent a low share of the total exports to the rest of the world.
It is reported that the Free Trade Area will further boost the value of intra-African trade by an increased volume. The free trade agreement will not only create new trade opportunities among African countries, but it also partially diverts trade away from developed markets towards Africa. This will help most African countries to reduce their trade deficit.
Africa’s gains from the Free Trade Area may go beyond the estimated amounts in the long-run. Economic gains may arise from improved trade facilitation and customs operations, services trade reform and collaboration on investment, intellectual property and competition. These economic measures contribute to intra-Africa exports, employment, gross domestic product, and minimization of global trade deficit. These economic growth and development are derived from enhanced improvements with the larger markets. These markets can attract investment to stimulate the development of African regional and continental value-chains, diversification and industrialization across Africa.
Experts think that trade within Africa has better quality and benefit than its trade with the rest of the world. The former has higher and medium technological content as well as more product diversity than the global trade. The Free Trade Area can, therefore, help African countries expand their domestic productive capacity. This raises the value-chain thereby diversifying local production and export goods by facilitating more sophisticated and processed goods.
The economic gains derived from the Free Trade Area are made at continental level and may “not” be equally distributed among countries. As a result, a few countries may experience unintended “tariff revenues” and others face costs of adjustment, including job losses. This is a concern for several countries that may be addressed by liberalization schemes and compensations. These losses may be smaller, as the current level of intra-African trade is lower.
However, the expected expansion in intra-African trade may minimize fiscal “revenue losses” resulting from reductions in tariffs. To reduce the negative impacts of revenue losses, the AU may be advancing regional trade agreements for the benefit of all African countries.
BY GETACHEW MINAS
THE ETHIOPIAN HERALD THURSDAY 5 JUNE 2025