BY STAFF REPORTER
A free trade area is a region in which a number of countries have signed a free trade agreement and maintain little or no barriers to trade in the form of tariffs or quotas among one another. They facilitate international trade and the associated gains from trade along with the international division of labor and specialization, but they have been criticized for costs that are associated with increasing economic integration and for artificially restraining free trade.
For example the North American Free Trade Agreement was an agreement signed by Canada, Mexico, and the United States that created a trilateral trade bloc in North America. The agreement came into force on January 1, 1994, and superseded the 1988 Canada–United States Free Trade Agreement between the United States and Canada. Some of the positive effects of NAFTA were increased trade, economic output, foreign investment, and better consumer prices. Free trade areas are also implemented in other parts of the world especially in Asia. The well-known Free Trade Area of Asia-Pacific is one of the well-known regional economic blocs in the world.
Africa has yet to struggle to establish an effective continental economic integration. The African Continental Free Trade Area (AfCFTA), the flagship project of the African Union Agenda 2063 is now on the pipeline as countries are pushing for the faster implementation. The continent has 40 percent of the world’s gold and up to 90 percent of its chromium and platinum. The largest reserves of cobalt, diamonds, platinum and uranium in the world are in Africa. It holds 65 per cent of the world’s arable land and ten percent of the planet’s internal renewable fresh water source.
In addition to its untapped wealth in mining, Africa is also endowed with innumerable amount of water resources that can assist its growth prospect in agriculture, fishery, hydropower and tourism, among others. The AfCFTA promises broader and deeper economic integration and would attract investment, boost trade, provide better jobs, reduce poverty, and increase shared prosperity in Africa. For this end acting Executive Secretary of the Economic Commission for Africa (ECA), Antonio Pedro has urged African nations to accelerate implementation of the African Continental Free Trade Area (AfCFTA) in order to become more resilient and globally competitive, according to UNECA.
“Only through an accelerated and effective implementation of the AfCFTA can Africa build sufficient shock absorbers to build resilience,” said Mr Pedro in his remarks at the 42nd Ordinary Session of the African Union Executive Council meeting in Addis Ababa on February 15, 2023. Launched in 2019 to establish a unified market of 1.3 billion people and a GDP of around US$ 3.4 trillion, the AfCFTA is poised to become the world’s largest free trade area with 55 member states.
Mr Pedro deplored the fact that the COVID-19 pandemic and the Russia-Ukraine war have caused a state of crisis, pushing 55 million people below the poverty line and exacerbating inequalities. High global inflation has also led to tighter financial conditions. Mr Pedro said despite Africa’s economic growth of 3.9% in 2023 and 2024, more still needs to be done to compensate for the losses experienced in the past three years. Pedro added that by fast-tracking the implementation of the AfCFTA, Africa can provide solutions to the global challenges of supply chain disruptions, food insecurity, climate change, and migration.
Highlighting that the AfCFTA provides the economy of scale to invest in manufacturing and increased intra-Africa trade, Mr. Pedro said the free trade area would bring supply chains closer to home and inject self-sufficiency in essential products such as medicines, food and fertilizers. “By providing more opportunities for women and the youth, the AfCFTA helps reduce inequality and poverty, and improves inclusion,” he said.
However, Mr Pedro highlighted two challenges that require immediate attention – ratification and implementation – and appealed to the ten African countries that have not yet ratified the agreement to do so soon. Commenting on resource-based industrialization, Mr Pedro said this should focus on value addition, smart operationalization of local content policies, and tapping into global value chains. He cited the Battery and Electric Vehicle (BEV) sector as one that could enable the continent to tap into a global value expected to reach US$8.8 trillion in the next three years and US$46 trillion by 2050. The ECA is supporting BEV value chain with “strong political will from the Democratic Republic of Congo and Zambia,” said `Mr Pedro.
ECA is also partnering with stakeholders to support the transboundary agro-industry park and special economic zone involving Zambia and Zimbabwe, which could address food security concerns and tap into Africa’s food import market valued at about US$90 billion per year. Mr Pedro pledged ECA’s continued support and collaboration with the African Union and other stakeholders to transform Africa into a globally competitive investment destination.
Editor’s Note: The views entertained in this article do not necessarily reflect the stance of The Ethiopian Herald
THE ETHIOPIAN HERALD TUESDAY 21 FEBRUARY 2023
