Africa Free Trade area: Why it’s important

The African Continental Free Trade Agreement (AfCFTA) has been a significant topic of discussion, with experts analyzing the potential impact it could have on the continent's economy. Despite an expected loss of approximately $4 billion in tariff revenues, the benefits of the free trade area are projected to be more than four times higher. One of the key objectives of the AfCFTA is to eliminate non-tariff barriers and create a more open and integrated market across the continent. Vera Songwe, the Executive Director of the United Nations Economic Commission for Africa, highlighted the importance of understanding the trade-offs that come with such agreements. She emphasized the need to assess the trade that is foregone when markets are not accessible and the barriers that hinder the flow of goods. Non-tariff barriers can restrict the entry of competitive products, leading to inefficiencies and higher costs. The goal is to strike a balance between protecting domestic industries and promoting trade openness. Songwe stressed that protectionism should not come at the cost of trade efficiency. The AfCFTA aims to encourage countries to identify and include 90% of the goods they produce in the free trade area, promoting a more diversified and competitive market. By expanding the market size from individual countries to the entire continent, businesses will have access to a larger consumer base and more opportunities for growth. Specialization in different sectors will help countries capitalize on their competitive advantages and drive economic development. For instance, by reducing trade barriers, Africa can capitalize on its agricultural potential and address issues of overproduction and import dependency. The agreement will facilitate intra-African trade in products like rice and maize, creating opportunities for job creation and value addition. By promoting a shift towards local production and reducing reliance on imports, the AfCFTA aims to boost economic growth and foster innovation. Songwe pointed out the need for African countries to focus on adding value to their raw materials and investing in sectors like light manufacturing. She challenged the continent to look at opportunities for producing machinery locally instead of relying on imports. The AfCFTA seeks to promote intra-African trade in value-added products like textiles, encouraging countries to leverage their resources and capabilities. By connecting markets and fostering collaboration, the agreement aims to drive economic transformation and create a more sustainable and prosperous future for Africa.