The Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world in terms of the number of participating countries. The pact connects 1.3 billion people in 55 countries for a total gross domestic product (GDP) of $3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, but achieving its full potential will depend on the introduction of meaningful political reforms and trade facilitation. The perimeter of the AfCFTA is important. The agreement will reduce tariffs between Member States and cover policy areas such as trade facilitation and services, as well as regulatory measures such as hygiene standards and technical barriers to trade. Full implementation of AfCFTA would transform markets and economies across the region and boost production in the services, manufacturing and raw materials sectors. In principle, the implementation of AfCFTA will pave the way for the rapid removal of these barriers to cross-border trade. In addition to removing customs barriers, AfCFTA will also focus on outstanding non-tariff barriers (NTBs), an important step towards strengthening trade in the region, with studies showing that NBs are restricting intra-regional trade or even more than customs barriers. East Africa has already made some progress in this area, for example by setting up 25 border posts from an intermediate stop, which has significantly reduced the time customs pass through customs. Monitoring of regional programmes at AfCFTA, such as the African Union Action Plan for the Promotion of Intra-African Trade (BIAT), should help accelerate progress. Related Content Report Key to successful negotiations afCFTA Landry Signed and Colette van der Ven Thursday, May 30, 2019 Focus on Africa The United States and Kenya begin negotiations for a free trade agreement.
Will they succeed? Witney Schneidman and Brionne Dawson Wednesday, July 29, 2020 Africa in crisis? What crisis? COVID-19 and the unexpected resumption of regional trade in East Africa Andrew Mold and Anthony Mveyange Monday, September 28, 2020 A second challenge is specifically for the East African community. Of the six members, only three have ratified the AfCFTA. Given that the regional bloc of the EAC is a customs union and therefore has a common external customs duty (CET), without further ratification of afCFTA by the other three Member States, the integrity of the CET will be problematic. In principle, rules of origin may limit this problem, but their liberal application will increase bureaucratic overheads and increase the risk of trade diversion (trade being diverted from a more efficient exporter to a less efficient exporter because of the different tariffs applied). This could reduce the benefits of AfCFTA. The more harmonised trade policy in East Africa, the better, as it will facilitate further regional economic integration and pave the way for the final creation of an African customs union, as envisaged in the AfCFTA agreement. One of the great advantages for the AfCFTA region will be the removal of trade barriers between Kenya and Ethiopia, the two largest economies in East Africa. Despite previous efforts to deepen economic relations, the volume of bilateral trade between the two remains extremely low.