TRALAC - Trade Law Centre

Trade under Africa bloc will create ‘respect’

Sunday, 05 August 2018 Published: | IVAN R. MUGISHA

Source: The East African (Kenya)

The East African Community should channel its resources to the implementation of the African Continental Free Trade Area (CFTA) as an alternative to pacts with Europe, Asia and the US. 

“Africa has a lot of potential in intra-regional trade that is untapped; that is why we are exploited by the West and Asia, who offer trade deals that benefit them more than they do African states,” said Seth Kwizera, the co-ordinator of think tank Economic Policy and Research Network.

“When over 40 states signed the CFTA, it was a strong statement. Once it is in force and the major barriers to regional trade are eliminated, liberal trade will start across the continent.

This will give a stronger voice to countries and regions when dealing with global economic powers.”

It is thought that intra-Africa trade could double under the CFTA, and benefit blocs like the EAC that are at advanced stages of free trade protocols such as free movement of people and establishment of a Common Market.

The United Nations Economic Commission for Africa (Uneca) said that the “Anything But Arms” deal with the European Union, established in 2001, has not brought about the expected industrial growth in EAC economies despite exports from the region enjoying duty-free and quota-free access to the EU.

The region’s trade deficit with EU has stagnated at an average of $1 billion every year for the past three years, according to data from the European Commission.

In addition, Economic Partnership Agreements (EPAs) with Europe have met with scepticism, with some countries like Tanzania claiming that industries in the region will be overwhelmed by European products if they sign it.

There has been a similar reaction to the Africa Growth and Opportunity Act (Agoa), which was enacted by the US in 2000.

The Agoa website indicates that total exports to the US from the EAC last year reached $784 million, but the region’s total trade deficit was $77 million.

Kenya accounts for the largest chunk of the region’s exports to the US, while smaller economies like Rwanda make as little as $1.5 million in revenues under Agoa.

With Burundi’s eligibility to Agoa revoked in 2016 and Rwandan textile exports suspended due to its tough stance against second-hand clothes, the CFTA may result in respectful relations among trade partners that “understand each other,” rather than with an economic power that imposes strict conditions.

“Benefits from some pacts, such as the proposed EPAs, remain uncertain, but what is certain is that the CFTA will benefit all member states,” Andrew Mold, the Uneca acting Director for Eastern Africa, said in an interview.

“EAC and SADC are the best performers in regional trade; but this is still lower than 25 per cent of the total trade they engage in. The CFTA will accelerate this, but on its own it is not enough. There is a need to build productive capacities and effective policies.”

Trade among EAC countries increased by $712 million last year, rising 39 per cent from the previous year, Uneca statistics show.

Experts argue that lack of infrastructure to support key sectors in agriculture and manufacturing could limit benefits from the CFTA, which requires fast tracking of projects such as the standard gauge railway.

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