New integration report says gains from continental free trade area can sustain Africa’s economic growthPosted on Monday, July 23rd, 2012 by Economic Commission for Africa, Addis Ababa in News
With the establishment of a Continental Free Trade Area (CFTA), Africa’s intra-regional trade is expected to increase by US$34.6 billion in 2022, translating into real income gains of more than USD290 million according to a report launched on the sidelines of the African Union Summit of Heads of States and Government that concluded Monday on the theme, Boosting intra-African Trade.
Entitled Towards a Continental Free Trade Area, the fifth edition of Assessing Regional Integration in Africa is expected to shape the debate and the move towards fast-tracking the establishment of a CFTA according to the Information and Communication Service of the Economic Commission for Africa. The report is published jointly by the Economic Commission for Africa (ECA), African Union Commission (AUC) and the African Development Bank (AfDB).
Speaking at a press conference, Mr. Steven Karingi, Director, Regional Integration and Trade Division at the ECA said that the report has been published against a backdrop of a surge in the establishment of new Regional Economic Communities (RECs) and a commitment to strengthening existing RECs across the Continent.
He said that with the small economic and population sizes of most African countries and the current global financial and economic environment, “regional integration has become a formidable instrument for sustaining the current economic growth trends across Africa.”
“The ground-breaking tripartite initiative established by SADC, COMESA and the EAC is an encouraging sign – it is a springboard for achieving the CFTA with its sizable population of half a billion people, with a combined GDP of $630 billion,” he said and added that the initiative is expected to have a domino effect and drive Africa closer towards the CFTA.
The report highlights a number of challenges, including the lack of or poor conditions of trade-related infrastructure, burdensome customs and legal procedures and the lack of diverse production structures across the majority of countries. These, says the Report, are the major culprits behind the slow progress in boosting intra-regional trade in Africa. It emphasizes that establishing the CFTA and boosting intra-African trade would therefore “require countries to look beyond the short term losses in tariff revenue and commit huge financial resources to eliminating trade facilitation bottlenecks.”
Also speaking at the launch was Mr. Calvin Manduna, Principle Trade Expert at the African Development Bank (AfDB) who said that the findings of ARIA V highlight encouraging facts.
“There is greater enthusiasm; and we are seeing tangible changes taking place on the ground as ordinary traders and the private sector create the demand to make the CFTA a reality,” he said.
“In some RECs, citizens have the right to move freely across borders without visas and establish and invest in businesses,” he noted, adding that national and regional policies facilitated cross-border capital inflows, resulting in a six fold increase from USD 3.4 billion between 2000 and 2002 to 21.7 billion in 2010.
Mr. Manduna cautioned, however, that success will greatly depend on continued level of commitment to regional integration through addressing the key challenges, such as eliminating tariffs, and facilitating measures to ease customs procedures and port handling.
“We have to shift the mindset to attract the best skills from our neighbours rather than letting them go to emerging economies around the world,” he said, adding: The free movement of persons in Africa should be “the jewel on the crown of African integration.”
ARIA V is organised into eight chapters with two chapters aimed at theoretically and empirically assessing the gains and losses to Africa from the CFTA.
It lays great emphasis on the need for greater commitment to the removal of outstanding obstacles to trade, including barriers to the free movement of people, investments and factors of production across Africa. In addition there is great potential for African businesses to trade and invest within Africa in agriculture, mining, energy, transport and construction.
It recommends three phases towards the establishment of the CFTA: The first phase includes liberalization of trade in goods and the elimination of tariffs, creation of simple and transparent rules of origin, establishment of arbitration mechanisms and reduction and eventual illumination of Non-Tariff Barriers (NTBs).
The second phase includes liberalizing trade in NTBs and establishment of free movement of people, while the third phase would include measures to address intellectual property rights, competition policy and investments.
To access the new Assessing Regional Integration in Africa report, please click here.