Continental free trade area deal overdue

African heads of states and governments during the African Union Summit for the agreement to establish the Continental Free Trade Area in Kigali, Rwanda, on March 21, 2018. AFP PHOTO

What you need to know:

  • Process of economically integrating the region has remained slow.

Experience with regional economic groupings in Africa has long turned many supporters of trading blocs into cynics.

Yet the fact that African heads of state recently came together in Kigali, Rwanda, to sign a protocol establishing a continental free trade area marked a major milestone on the road to what was perceived as far back as the Lagos Plan of Action.

What I find most significant in the new initiative is that it marks the beginning of the dismantling of the multiple trading blocs on the continent. We have too many regional economic groupings in Africa. Multiple memberships by countries have been a major source of tensions within the existing trading blocs on the continent.

Take the case of East Africa for example. The five members of the customs union for East Africa frequently find themselves conflicted.

Kenya and Uganda are members of Comesa in which Egypt is the strongest economy while Tanzania is a member of the Southern Africa Development Community (SADC) where South Africa dominates. Rwanda is a member of both the East African Community and Comesa.

Today, a shrewd businessman from Uganda or Kenya can import goods from Egypt, repackage them in Uganda and sell them to Tanzania as Ugandan goods.

The big sugar importers in Kenya -especially those with operations in multiple regions within the trading bloc have been found to exploit the current arrangements to reap huge profits.

Similarly, goods imported into Tanzania from South Africa could end up being sold in Kenya and Uganda as Tanzanian goods.

Customs authorities live in constant fear that goods that should not enjoy preferential market access are about flood their markets.

And since memberships to the regional blocs are not rationalised, governments have found themselves making multiple commitments to different trading blocs - thereby creating tensions within different blocs.

The second point I find significant in the signing of a continental free trade area for Africa is the fact that the designers of the new arrangement are demphasising trade liberalisation while emphasising elimination of non-tariff barriers, the upgrading of transport infrastructure and co-operation in industrial policy as the main pillars of the continental free trade areas.

In East Africa, we adopted the European Union model that put the accent on trade liberalisation: a customs union, a common external tariff and a common market protocol. We have been talking about introducing a monetary union and a common currency.

We have had to create a supranational bureaucracy in Arusha known as the East African Community (EAC) that is run by highly-paid bureaucrats carrying big titles.

I have never encountered so many “director-generals” in one place. Yet the process of economically integrating the region has remained slow. Clearly, economic integration schemes that emphasise trade liberalisation move at a snail’s pace. We have had a customs union protocol complete with a common external tariff since January 2005. Yet we still don’t have even a common customs administration.

Although inter trade has improved, we have also witnessed the proliferation of all forms of non-tariff barriers – police road blocks, weighbridges, multiple clearance forms at customs entry points and border controls – a whole host of them.

Way back in July 2010, we signed a full-fledged common market protocol that came with hopes of free movement of labour, services, capital and right of establishment.

Yet the economies of East Africa still remain very closed and restrictive to movement of persons, labour and capital. What lessons have we learnt? First, that in Africa, economic integration projects that put emphasis on trade liberalisation will always progress slowly.

Countries do not want to surrender sovereignty especially when it comes to immigration, land, labour and right of establishment. I see a trend where economic integration in Africa whereby progress will happen more where co-operation is based on developing chains and building transport on the corridor that connects them.

More and more, we are going to see willing neighbours signing memoranda of understanding, agreeing to come together to build oil pipelines, railway lines, and power transmission lines to connect their economies. What will bring Africa together economically are the large infrastructure projects.

And, instead of approaching integration through negotiations driven by supra-national bodies such as the Arusha-based bureaucracy, deals negotiated at inter-governmental levels are the ones that will push the integration project faster.

Indeed, what will drive economic integration in Africa faster are MoUs and loosely-negotiated inter-governmental deals.

When governments invest in infrastructure and supply chains that connect countries, it is the business community in the region that benefits.

Today, the partner states of the EAC find themselves constantly grumbling about delays in remittance of monies already approved as their contributions. Let us all support the new initiative.

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Note: The results are not exact but very close to the actual.