Monday, 17 November 2008

A Word of Warning on the Free Trade Area

A couple of weeks ago I wrote about the potential of a Free Trade Area for Africa in terms of strengthening regional integration, growing inter-state trade and even promoting peace on the continent. However, I was probably too brief on the potential problems in setting up such an agreement and on the economic imbalances that exist between countries. Karl Lyimo in The East African has summarised some of the issues here:

http://www.theeastafrican.co.ke/opOrEd/comment/-/434750/491166/-/9ocypo/-/index.html

An extract:

" To that end, these new dreamers on the socio-economic development bloc propose a memorandum of understanding in six months that would commit them to the establishment of an FTA with a combined GDP of $625 billion — about 58 per cent of the continent’s total, nearly half of which is South Africa’s. This is still less than the $700 billion in taxpayer funds that US President George W. Bush sought to bail out his country’s ailing financial sector.

The disparity in GDP levels among the 26 is disruptive enough to be distortional in FTA terms. According to the CIA, South Africa’s GDP is $282.6 billion while Egypt’s is $127.9 billion. On the other end, Somalia’s GDP is $2.48 billion; it’s $1.726 billion for Zimbabwe and $1.001 billion for Burundi "

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