Bridges Weekly Trade News Digest • Volume 12 • Number 36 • 30th October 2008
African Leaders Agree to Work toward 26-Country Trade Bloc
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The three largest African economic coalitions agreed last week to work toward establishing a free trade area that would span the length of the continent, and that might eventually be converted into a single customs union. The move, which was announced at a meeting held in Kampala, Uganda, has been welcomed by economists and development experts.
The first-ever tripartite summit of the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC) brought together 26 countries and heads of state and governments, including Zimbabwe’s Robert Mugabe and the new South African President, Kgalema Motlanthe.
Discussion at the summit revolved around how to achieve deeper regional integration, how to promote greater movement of workers and intra-regional trade, and how to lay the groundwork for a unified free-trade zone. The officials also considered the challenges that Africa faces in the current international financial crisis, as well as the positions that the continent’s leaders should take in the ongoing negotiations toward economic partnership agreements with the EU.
United states of Africa?
When realised, the single trade bloc and customs union that the leaders envisage would stretch from South Africa to Egypt and from the Democratic Republic of Congo to Kenya, encompassing a population of over 527 million and a combined GDP of US$ 624 billion. Spanning 26 countries, the new regional economic community would be just one member shy of the world’s largest economic community, the EU.
Work on the matter will begin immediately. The leaders have given a special taskforce six months to develop a roadmap for the creation of the free trade area and the merger of the regional economic communities.
The leaders also asked the three economic bodies to prepare a timetable for integration; to examine the legal and institutional framework that would be necessary to underpin the free trade agreement; and to develop measures to facilitate the movement of businesspersons across the regional trade blocs.
The three regional economic communities agreed to approve a memorandum of understanding on the establishment of the free trade area within six months. That document would then be up for signature by the chairs of each of the coalitions.
This tripartite arrangement is considered a crucial building bloc towards the attainment of an African Economic Community, which was first envisaged in the Treaty of Abuja in 1991. Many say that the move toward greater integration is long overdue, and that it will be a big step forward for Africa’s economic development.
Analysts say that the merger of the three main trade groups will boost inter-Africa trade by creating larger markets and more opportunities for economies of scale. Trade within the continent - which accounts for only 2 percent of global trade - is considered an underexploited growth area for Africa. Although the current global financial crisis is expected to dampen growth worldwide, Africa, the world’s poorest continent, is forecast to be relatively sheltered from the fallout.
Moreover, the deal is expected to strengthen Africa’s voice on the world stage. “By coming together, the member states will have a strong voice in advancing our interests on the international scene,” said South African President Kgalema Motlanthe, reported the BBC.
Ugandan President Yoweri Museveni concurred: “The greatest enemy of Africa, the greatest source of weakness has been disunity and a low level of political and economic integration,” reported the BBC.
Proponents also argue the deal will bring an end to problems arising from the fact that several countries belong to multiple regional trade groups. On average, each African nation belongs to about four of the continent’s 30 regional trade arrangements, Reuters reported.
Currently, all three regional groupings - COMESA, EAC and SADC - plan to create customs unions. In fact, Southern Africa just launched a free trade area in August, and plans to create a customs union in 2010. Technically, however, a country cannot belong to more than one customs union.
While the deal is likely to benefit more efficient, large producers over small businesses, increased competition could force medium-scale businesses to invest in better technologies and improve efficiency, reported Reuters.
But some analysts believe the proposed free trade zone will not come into existence easily. Challenges to the merger include security issues, protectionism and differing integration levels between the regions. Political instability, such as that in Zimbabwe and the Democratic Republic of Congo, is also likely to impede integration.
The African leaders also made progress toward greater collaboration on infrastructure development. Other measures put forward for joint implementation within the zone included cooperation in communications, transport and energy.
The global financial crisis
The current global financial crisis and its impact on world economic stability were also on the agenda at the tripartite summit. In particular, it was noted with concern that the global financial crisis threatens the growth of African economies, particularly in terms of tourism, employment, global demand for African exports of goods and services, foreign direct investment, remittances of the African diaspora, the achievement of the Millennium Development Goals, and the willingness of the donor community to meet aid commitments.
As such, the summit called for a collective action to help African and other developing and least developed countries to address the adverse impact of the financial crisis and the global economic meltdown. Moreover, the leaders urged international financial institutions to adopt effective remedial measures to mitigate the risks.
The continuation of the world food crisis was also on the radar of the African leaders, who agreed to make strategic interventions to enhance African food production and increase the accessibility of all markets.
On the subject of international trade negotiations, the tripartite summit directed the leaders of the three economic coalitions to ensure that their respective secretariats coordinate their positions in the negotiations on economic partnership agreement with the EU, as well as on multilateral negotiations, including the WTO’s Doha Development Round.
Taken as a whole, the summit reflected the current sentiment within the continent - that African economic unity and the status of African countries must be strengthened by prioritising economic cooperation and integration, with the hope of also addressing the commercial and economic marginalisation that has long plagued the continent.
Twenty-six African nations will be included in the new free trade zone: Angola, Botswana, Burundi, the Comoros, the DRC, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Lesotho, Libya, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Seychelles, South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
ICTSD reporting; “Africa’s giant trading bloc years in the making,” REUTERS, 28 October 2008; “COMESA-ECA-SADC concerned about global financial crisis,” LUSAKA TIMES, 24 October 2008; “Three African trading blocs look to join ICT governance,” NETWORKWORLD, 24 October 2008; “Kampala Summit adopts trade accords programme,” ANGOLA PRESS AGENCY, 23 October 2008; “African free trade zone is agreed,” BBC NEWS, 22 October 2008; “African leaders meet in Kampala for summit,” NEW VISION, 19 October 2008.
2 responses to “African Leaders Agree to Work toward 26-Country Trade Bloc”
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This sounds like good news, challenges notwithstanding!
Why is Ecowas left out on something so vital for the entire continent?