Muhammad Umer Saleem Bhatti: The writer is a Civil Servant in the Government of Pakistan.
Existing Regional Trading Arrangements in Africa are already bombarded with multi-dimensional problems. This article informs the readers that these problems will still be there while negotiation a CFTA, it also identifies some challenges, which are even more fatal for trade than the traditional NTBs and finally suggests a futuristic view as to what can be done to mitigate such issues?
As per the decisions of February 16th 2015 announced after the 9th Ordinary Session of the African Union (AU) Conference, the Ministers of Trade reiterated that functional regional trading arrangements within Africa presented a strong base for the establishment of the Continental Free Trade Area (CFTA) across the African Continent.
The CFTA is supposed to be evolved from an already proposed 26-country Tripartite FTA involving Southern African Development Community (SADC), the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and other regional FTA processes. The deadline to finally set up a CFTA is 2017.
It is to be noted that there are some 14 existing Regional Trading Agreements (RTAs) in effect within Africa. These RTAs/FTAs are already infested with multifaceted challenges which are, inter alia, a complete and timely implementation of these FTAs, doing away with the non-tariff barriers issues within these FTAs, boosting a significant increase in overall regional trade as a result of these FTAs and promotion of regional industrialization.
Naturally, while negotiating the CFTA, these challenges would still be there and even on a broader scale as all the countries across the continent would be negotiating, so there will be more difference of opinion and the ground realities existing in each country.
Keeping all this in view, is it rational or realistic to think that the negotiations on CFTA would be finalized by 2017? It is difficult to say yes, but an ambitious approach towards the CFTA may make it possible as well.
Implying to the deadline set up for CFTA, the Intergovernmental Authority on Development (IGAD) which is an eight-country regional development organisation in East Africa said in 2012 that “there are many deadlines that have been set and surpassed.”
Similarly, Nigerian President Goodluck Jonathan is of the view that “There are no quick-fixes to integration.”
So, while no exact time can be given as to when the CFTA negotiations are going to be completed, we may possibly think of a roadmap which may work in overcoming the above-mentioned and other challenges in a steady and progressive way.
Intra-African Trade is 12% out of the total African trade with the world. This figure for EU is 60%, NAFTA is 40% and ASEAN is 30%. True, the intra-African trade is low, but it can not be called as abysmally low as it is in the case of South Asian Intra-Regional trade figure of a mere 4%.
Given almost all sorts of the problems existing in Africa like security issues, poor infrastructure, poverty, unemployment, lack of better health facilities, food security issues and what not, a figure of 12% is not that bad for Africa vis a vis EU, NAFTA and ASEAN, where such problems are either non-existent or very little.
Trade Inhibitors and not Non-Tariff Barriers
Low African regional trade is not more because of high import tariffs or the conventional Non-Tariff Barriers (NTBs), but because of the presence of some formidable “Trade Inhibitors.” Tariff or Non-Tariff Barriers impede the process and flow of the trade, whereas the trade inhibitors can not even allow starting the process from the very beginning. These Trade Inhibitors are civil wars within a few countries, which do not allow political stability in a particular country, due to which, economic stability is compromised and so the trade and integration; then there are militant and extremist organizations like Boko Haram in Nigeria, Al-Shabab in Somalia and AQIM (Al-Qaeda in Islamic Maghreb), which are against all the modern and moderate values and which make the cross-border trade impossible, especially when the most of the trade within Africa has to be through land routes; then there are pandemics like Ebola, due to which, migration of labour and the normal movement of people within the continent is jeopardized; then there are issues of food security, as a vast area of the continent is not cultivable and the people are already poor, so a fairly large number of populace is malnutritioned and hence cant take part in any kind of economic activity. So, the nature of African Trade Dynamics is very much peculiar.
High intra-regional trade figures for NAFTA, EU and ASEAN are totally because of almost non-existent Trade Inhibitors and also other conventional NTBs within these regions.
So, one may say that the first of all the trade doesn’t even start due to these trade inhibitors, and if at all it starts, it is further challenged by the conventional NTBs like cumbersome custom procedures, over-documentation and other standards and regulations. In my view, the trade inhibitors are more crucial than the traditional NTBs. You first need to create the favorable environment and only then you can think of starting a process. It is just like the humans can not be alive without oxygen, but once oxygen is supplied, less or more, they can at least think of starting their lives. Moreover, all the major densely populated areas of the world have been developed at such a place where resources like water, energy, land, life and food security etc are easily available. In case of Africa, we see that most of the continent is sparsely populated, and that is mostly because of the trade inhibitors described above.
African nations are very much aware of such problems and they are doing everything possible to improve the situation. Due to these problems, a major chunk of African Countries can not even think about trade, so at least the removal or reduction of such problems would automatically create an environment of exchanging goods and services first in a traditional way, then by strengthening the infrastructure and having more organized trade and last by developing industries, which would make the whole region economically interdependent. In fact, economic interdependence is the essence of EU’s huge intra-regional trade.
Phasing out of the not-so-beneficial existing RTAs
As mentioned earlier, there are some 14 RTAs existing in Africa. Then a single country may be a member of more than one, two or three different RTAs. Such RTAs rather create a farrago of economic and trade complexities instead of facilitating and opening up the regional trade.
According to Jamie De Melo, a professor emeritus in the University of Geneva, for the main RTAs in Africa, intra-regional imports represent less than 10% of total regional imports, and this share shows an increasing trend post establishment of an RTA only for two RTAs- the Pan-Arab Free Trade Area (PAFTA) and the South African Development Community (SADC).
De Melo further tells that the little success of African RTAs can be explained by many factors like low trade complementarities between members of an RTA, which blocks the inter-industry trade in the region; high non-tariff barriers in the bloc (high trade costs), related to both ‘hard’ infrastructure, like transport costs, and ‘soft’ infrastructure, like harmonised rules and regulations; and a high degree of diversity among members of an RTA (resource-abundant vs. resource-poor, landlocked vs. coastal, artificial borders, etc.), which results in diversifying interests for different members. So Phasing out of the unbeneficial RTAs would smoothen the negotiation process for the CFTA, because its scope will be broader and there would be little conflict of interest between the countries, because they would then be negotiating for a common CFTA for a mutual interest.
What is the latest and forthcoming?
One thing has to be very sure on the readers that until now, only decision of having a CFTA has been taken and its formal negotiations are yet to be started. In the meeting of Ministers on 15 and 16 of May 2015, the date of starting the negotiations will be decided, which may be somewhere in the neighbourhood of 6th of June 2015. In the latest meeting of the African Union held in the second week of May 2015 in Addis Ababa, Ethiopia, the trade experts from United Nations Conference on Trade and Development (UNCTAD) prevailed upon the members of the AU that while going for CFTA, they should adopt an ambitious and aggressive approach. The UNCTAD people were of the view that since CFTA will be a special and so far the biggest FTA across the world, the members should have a holistic approach going about it i.e. they should negotiate goods, services, intellectual property, investment etc simultaneously without any exception. It is surprising to note here that the scope of Tripartite FTA mentioned above doesn’t cover ‘Services’ and the negotiations are only being done for goods and then African Countries are aiming for CFTA and it is quite possible that its scope would also be limited to goods, as it is believed to be evolved out of this Tripartite FTA. UNCTAD is also of the view that the African Union must have a dedicated workforce available in its secretariat for CFTA, as again it’s a special and biggest FTA going to be negotiated.
CFTA is a far cry but definitely not impossible and if Sub- Saharan African countries can provide United States with better market opportunities and strong commercial partners in Africa for US companies through African Growth and Opportunity Act (AGOA), why not such benefits can be shared by the African countries within themselves.
In the closing, we may say that there is a direct relation between deepening regional integration and multilateral integration and African countries must be encouraged to operationalize intra-African trade with a broader scope and by focusing on one single CFTA rather than negotiating various other RTAs, which will be an added impediment in materializing the CFTA.
“The views expressed in this article are of the writer’s own and in no way express the Government of Pakistan’s or any of its Mission’s views”