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The first goods will begin to flow under a free trade pact across Africa on Friday, the culmination of more than five years of negotiations on lowering cross-border tariffs.
The deal comes to fruition at a time when trade tensions are rising in much of the rest of the world. The 55-nation African Union (AU) will mark the occasion in a ceremony that comes just hours after the UK leaves the European Union’s single market and a new post-Brexit trade deal takes effect.
Africa could be the world’s largest free trade zone by area when its treaty becomes fully operational by 2030. The bloc has a potential market of 1.2 billion people and a combined gross domestic product of $ 2.5 trillion.
The agreement “will fundamentally change the economic fortunes of our continent,” President Cyril Ramaphosa, who holds the rotating presidency of the AU, said in a speech on Thursday. “It is the beginning of a new era of trade between African countries, when the continent will produce the goods and services it needs, when its economies will grow, industrialize and diversify, when it will realize the great potential of its abundant natural resources. “
Intra-African trade fell to 14.5% of the total in 2019, from 15% the previous year. The free trade pact could boost the ratio to 22%, and intra-continent trade could rise to more than $ 231 billion even if all other conditions remain unchanged, the African Export-Import Bank said in a published report. December 15. for 52% of total trade in Asia and 72% in Europe, according to data from Afreximbank.
The agreement seeks to reduce or eliminate cross-border tariffs on most goods, facilitate the movement of capital and people, promote investment, and pave the way for a customs union across the continent.
All but one of the 55 nations recognized by the AU have signed to join the area and more than half have ratified the agreement. Eritrea, which has a largely closed economy, is the only one resisting. The formation of the trading bloc could protect the region against continued uncertainties related to the coronavirus and escalating trade tensions, as well as reduce its exposure to adverse terms of trade and price cycles for commodities, Afreximbank said last month.
Bloomberg
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