African free trade still some way off

By Matthew Davies
Business reporter, BBC News

Image source, AFP/Getty Images

Some of you will have seen the news that a three-bloc trade deal is being signed between 26 African states in Egypt today.

This is an attempt to set up what will be called the TFTA (Tripartite Free Trade Area).

It will be signed between the Common Market for Eastern and Southern Africa (COMESA), the South African Development Community (SADC) and the East African Community (EAC).

Now there's been great fanfare in the press about this, mainly pushed by the politicians who are made to look good by this kind of thing.

But the headlines of "Common Market for Africa" or "EU-style bloc emerges in Africa" are misleading.

If the TFTA functions properly, it will be a free trade area, not a common market and certainly nothing approaching what the EU is.

The trouble is not all the players involved function properly themselves.

COMESA still has certain tariffs within it, while inside the EAC (arguably the most integrated of the blocs) there are still issues between Kenya and Tanzania on things like share ownership. And South Africa tends to dominate SADC.

But that's not to say that this tripartite agreement is a waste of time. Free trade from Cape to Cairo has been a goal since colonial times (Cecil Rhodes talked about it) and this agreement is a baby step towards that.

Intra-Africa trade

In theory, it'll boost intra-African trade, but that depends more on the capacity of African countries to make what each other want at competitive prices, rather than a simple lowering or scrapping of tariffs between the 26 members.

The devil will be in the details of this agreement. There have been concerns over protectionist measures for local industries and a method of settling trade disputes.

But it may boost intra-Africa trade. At the moment, trade between African countries amounts to just 13% of total African trade. Some academics have said that this tripartite agreement could boost it by 30% over the next few years.

But there will be challenges on the ground. For a start, customs officials and getting across borders is notoriously cumbersome in Africa. Also, manufacturing on a local level needs to be boosted.

The UN said three years ago that the best way to boost African trade was to concentrate on developing local capacity, rather than just lowering tariffs. That way, Africans would have things to sell to each other at prices that are more competitive than outsiders.

If that happens within a new free trade area, that's what would boost intra-African trade. Also there are various disputes between the members of this agreement, from gripes to outright hostility.

So, while there's a good deal of political will behind the TFTA, how it works on the ground will be the proof of the pudding.

And that won't be apparent for months or years to come. Pardon my cynicism, but the three blocs involved in this are by no means functioning perfectly.

With all the hype surrounding this TFTA, you'd think it was the panacea to all of Africa's economic and trade problems. It's not. But it is a tiny step in the right direction.

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