Tuesday, 4 November 2008

Good News Story? Africa Free Trade Area

Amid the renewed violence in the DRC, a disputed election in Zambia and the splitting of the ANC in South Africa, there has been little coverage of the Tripartite Summit that met in Kampala recently to agree on the first steps towards a vast African free trade area stretching from Egypt to South Africa. It will encompass 26 countries, 527 million people and a combined GDP of $625 billion (See BBC Map right).

There are several reasons this could be of huge significance for African economic development. The first is stature on the world stage. There has been a marked shift in recent years in the politics of world trade because of the decision of Brazil, Russia, India and China (B.R.I.C) to negotiate together on many issues. This combined clout has made it harder for the West to impose their agenda on the rest of the world. An African bloc of this size would be in far stronger position to ensure their interests are also met.

Second, the bloc will provide a large internal African market for exporters. Currently high tariff levels, bureaucracy and transport costs mean inter-state trade is running well below its potential. If these issues can be addressed capital circulation within Africa can be increased and capital flight to the West reduced, thereby boosting economic growth.

Third, the agreement will bring an end to the confusing nature of African economic integration which currently has some countries as members of four different organisations. It will also address one of the main concerns of the new Economic Partnership Agreements with the EU (they were negotiated with small groupings of countries), which was that they would economically fracture Africa rather than foster regional integration.

Finally, the greater political and economic integration that such an area will bring improves the chances of a peaceful continent. States which have a vested interest in each other's stability are far less likely to engage in conflict.

Of course there are concerns about the ability of small businesses in less developed countries to cope with an influx of competition, and it is likely to be several years before the institutional capacity is in place to launch the free trade area. However, in the medium to long-term I am confident this will be a great leap forward for African economic and political development.

No comments: