{"id":1952,"date":"2017-06-01T12:00:13","date_gmt":"2017-06-01T11:00:13","guid":{"rendered":"https:\/\/blog.iese.edu\/africa\/?p=1952"},"modified":"2017-06-07T10:56:57","modified_gmt":"2017-06-07T09:56:57","slug":"a-continental-free-trade-area","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/africa\/2017\/06\/01\/a-continental-free-trade-area\/","title":{"rendered":"A Continental Free Trade Area"},"content":{"rendered":"

African nations are planning to set up a Continental Free Trade Area (CFTA)<\/strong> by the end of 2017. This would create a single continental market for goods and services<\/strong>, and free movement of business persons and investments<\/strong>, accelerating the establishment of a continental customs union<\/strong>.\u00a0Leaders at the African Union Summit<\/strong><\/a> agreed to this plan during a meeting in Addis Ababa, Ethiopia, in January 2012 and the CFTA forms part of the Agenda 2063<\/strong><\/a>.<\/p>\n

But how is a CFTA beneficial to African economies<\/strong>? And how far has the plan gone?<\/p>\n

A CFTA is aimed at raising the low levels of intra-African trade<\/strong>, which represents only 13% of total trade in Africa. The expectation is to boost trade to the levels of other trade areas<\/strong> such as ASEAN<\/strong> <\/a>(30%), NAFTA<\/strong> <\/a>(40%) or the EU<\/strong> <\/a>(60%). \u00a0So far, the big expansion in real GDP experienced<\/strong> in sub-Saharan Africa since 2009 (average growth rate of 4.5% per year) has been accompanied by large current account deficits<\/strong> (average -3.3% per year).* Lifting intra-African trade would correct this imbalance without slowing economic growth<\/strong>. Besides, a high volume of trade among sub-Saharan African countries would incentivize much-needed infrastructure improvement<\/strong>, and positively impact productivity<\/strong> in the medium and long run through higher competition exposure<\/strong> of local firms.<\/p>\n

\"The<\/a>
The CFTA will boost African economies<\/figcaption><\/figure>\n
Despite initial skepticism<\/strong> about the late 2017 deadline<\/strong>, experts say significant progress<\/strong> has been made. The CFTA was launched in Johannesburg on June 2015<\/strong>. The African Union Commission has hosted 5 meetings of the CFTA. The last one took place February, 27 to March, 4 2017. At the time, Commissioner for Trade and Industry at the African Union Commision<\/strong>,\u00a0Mrs. Fatima Haram Acyl<\/strong> remarked<\/strong><\/a>: \u201cI am very confident<\/strong> that the end of 2017 will usher Africa into a new era where our traditional borders<\/strong> will become less important<\/strong> as a result of establishment of the Continental Free Trade Area\u201c.<\/div>\n

In the previous meeting, held in Kigali<\/strong><\/a> in February, technical working groups<\/strong> met to track the evolution<\/strong> of this process. They focused on trade in services; non-tariff barriers and technical barriers to trade; sanitary and phytosanitary issues; rules of origin; legal and institutional affairs; trade remedies; and customs procedures and trade facilitation.<\/p>\n

Despite the noticeable progress, there are inevitable challenges<\/strong> associated with the unequal distribution of gains<\/strong> among members, which could eventually aggravate their economic imbalances<\/strong>. It\u2019s also important to note that in Africa there are already a number of regional economic communities<\/strong> at different stages of integration<\/strong> (see the post The African Economic Community<\/a>). A successful harmonization<\/strong> of existing trade arrangements will be needed for the CFTA\u2019s ultimate success<\/strong>.<\/p>\n

Any comments on the feasibility of these ambitious goals?<\/p>\n

* Data source: Regional Economic Outlook<\/a><\/p>\n

Nadim Elayan, Research Assistant at IESE Business School, collaborated in this article.<\/em><\/p>\n

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