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The right type of free trade matters

From a political and economic point of view, the African Continental Free Trade Agreement (AfCFTA) represents one of the most ambitious initiatives since the establishment of the African Union. Things were going as expected, until Covid-19 got involved, and so now the negotiation for implementing the agreement is temporarily suspended. The issues concerning rules of origin, dispute settlement, agreements of tariffs for certain products and more remain to be settled.
No Reason to panic! The AfCFTA is not going to peter out.
Yes, at this stage, the pandemic may produce less enthusiasm for the AfCFTA. Governments don’t know what to think. …to free or protect the economy!
Will our leaders learn the lesson, and realize that a closed economy is poorer? We’ll see. But the first indication is not inspiring.
African countries should continue negotiation to construct an effective AfCFTA regime that promotes development, and is beneficial in a balanced and fair manner, to all parties that participate in the market. The AfCFTA should offer a system that builds on deeper integration within a shared rule-based framework, provide benefits across the continent by restraining costly and inefficient protectionism, encourage cost-reducing scale economies in production of goods and services, and help prevent races to the bottom that would have otherwise have occurred from competitive pressures. No wonder why poorer countries want to be sure free trade is not only acceptable but is a promising solution for development.
Why should policymakers be concerned about poorer African countries?
Naturally, poorer African countries, in comparison to their trading partners, fear that benefits from increased trade are often heavily concentrated within the richer more developed economies, with superior firm level capacities as well as the national capacity to comply with the AfCFTA and international trade policies. It’s no surprise if these countries insist for some degree of protection in order to develop competitiveness in certain sectors, thus going against the process (at least temporarily) of “leveling the playing field” and free-er trade. According to a poll conducted by PACCI in 2019, roughly 69% of SMEs in the UN list of Least Developed Countries think that free trade would harm their economies. And yes, it may be the case that improvement in the productive capacity of one country can only be attained at the expense of another country’s general welfare. But where it’s feasible, there is clearly a justification for policies to enable the players to become more equal and to benefit from the AfCFTA.
The suspension of the negotiations, which hopefully will not last long, should be an opportune time for many countries to reflect on how to operationalize the AfCFTA.
Otherwise the road to Brexit might be irresistible!


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