At a 2018 summit in Kigali, the African Continental Free Trade Area – known as the AfCFTA – was presented for signature by heads of African Governments. At the summit, 44 African countries out of AU 55 member states signed the AfCFTA Agreement and 30 signed the Protocol on Free Movement. Today, 52 countries have signed the AfCFTA Agreement (Benin, Eritrea and Nigeria are yet to sign) and 22 countries have completed the domestic process required to ratify the AfCFTA. With 22 countries being the minimum number required for the agreement to be implemented, the AfCFTA will enter into force within 30 days after all the instruments of ratification from the 22 countries are deposited at the AU.
This means that Africa is on the last leg towards becoming the single largest market in the world. Potentially, AfCFTA could improve intra-African trade by 52.3 percent, liberalizing trade between African countries. The importance of economic integration to Africa’s economic growth is not in doubt. Regional integration is necessary within the space of the restrictive nature of the global rules-based trade system on developing countries.
Under the WTO, the rules governing trade have become more restrictive especially for developing countries. Policy tools such as technology transfer, local content and trade balancing which were used by early industrializers under the earlier GATT regime are now prohibited under the WTO leading to peculiar problems for late developing nations. In addition, the proliferation of Bilateral Investment Treaties, and Preferential Trade Agreements have further eroded the wiggle room which African countries have to implement progressive trade policies for their countries as they typically involve a relinquishment of policy tools such as joint ventures, hiring pegs and profit repatriation. Increasing conditionality, restricted policy space, and reciprocity demands in trade agreements have hindered development agenda for poor countries within the WTO arrangement.
This reality grants increased significance to regional integration in Africa as it offers the opportunity to improve trade within Africa with lessened policy conditionalities. Regional integration allows for economies of scale, ensures food security through free movement of food across borders and affords African nations stronger negotiating capacity in the WTO. With all of these benefits, it seems like regional integration by way of the AfCFTA is definitely the way to go. However, there are definite challenges that we need to consider and there are two major lessons we should be taking from Brexit.
On June 23, 2016, the United Kingdom held a referendum for everyone of a voting age to decide whether the United Kingdom should leave or remain in the European Union (EU). Leave advocates won by a margin of 3.8% and so began the long process of divorcing the UK from the EU.
The EU is an example of a regional trade agreement made up of 28 European countries. Global trade is governed by the WTO which uses a rules-based system to define how countries trade with each other. The EU partnership allows preferential trade access between EU member countries. It is a “single market” which accumulates the markets of individual member countries to act like a single country market. As a trading bloc, the EU has triggered manufacturing, growth of businesses, investment, tourism and career aspirations of citizens in member countries. This is the arrangement that the UK voted to leave in 2016. The UK Prime Minister Theresa May started the withdrawal proceedings in 2017 and now the UK will be leaving the EU on April 12, 2019.
One of the major issues that led to Brexit is migration. Leave advocates were wary of the scarcity of resources occasioned by a negative net migration in the UK. So far, African countries seem to hold the same view of migration as leave advocates because they have been distinctly unenthusiastic about signing the Protocol on Free Movement. Till now, only 32 countries have signed the protocol and there is little momentum for it even though this would facilitate trade, tourism and investment. Economic powerhouses on the continent such as South Africa and countries in North Africa have argued that unemployment rate is high within their countries and free inflow of people would make resources scarcer and increase the likelihood of conflict. To address this, the AU has designed the implementation of the free movement into three phases: right of entry and abolition of visa requirements, right of residence and finally, right of establishment. Yet, many countries are hesitant to sign up to the first phase. The minimum number of countries required to ratify the protocol is 15 and only one (Rwanda) has done so till date. Despite the fact that visa abolition on the African continent was set for 2018, there have only been isolated progress in a few countries. Just like citizens in the UK, African countries do not seem keen to open their borders to other country nationals.
A second major reason for Brexit is the economics of the EU arrangement. I have maintained that for economic integration to work, the resources from the arrangement must be distributed equitably across member countries. Within the EU, member countries have not really achieved similar gains. For instance, unemployment in Southern Europe was 20% while in Germany it was 4%. In order for regional integration to be developmental, rents and resources ought to be equitably distributed. The goal of economic integration is to establish preferential trading platforms outside of what the WTO allows but typically such arrangements end up replicating the same dynamic as seen in the WTO on a less grand scale (regional). The extent to which integration allows for economic development for smaller and less advantaged countries is debatable.
At this point, the case can be made that the benefits for regional integration in Africa outweigh the demerits. However, we should ask the question whether African countries are ready to fully be part of a single market. Is it possible to achieve the levels of trade boost envisaged where countries are determined to keep their borders closed? Will economic integration on the continent help countries develop or will it only serve to make rich countries richer and poor countries poorer? These are major questions which led to Brexit and it would be remiss of the AU to dismiss the glaring drawbacks of this arrangement without setting up adequate ameliorating measures. Africa is a fragmented market and there is strong economic case for coming together to form a trade power bloc. To do this effectively, the agenda of every player at the table must be aligned and we must make sure that we are granting an opportunity to pull African countries up, rather than forcing them even further down.
Zainab Haruna is the founder of Decipher Solutions, a not for profit that works to support education and job creation efforts in Nigeria. She tweets from @Zennyharry.
The views expressed in this post are those of the author and in no way reflect those of Nigerian Diary