Africa a step closer to free trade area
THE TRIPARTITE initiative between the Common Market for Eastern and Southern Africa (Comesa), the East African Community (EAC) and SADC is rooted in the AU’s Lagos Plan of Action and the Abuja Treaty, which aim to establish an African Economic Community. The three Tripartite communities have reached an important milestone in integrating their markets and economies by agreeing on the legal text to underpin the Tripartite Free Trade Area (TFTA).
The underlying rationale for African economic integration is that domestic markets are small by global standards, certainly too small to support economic diversification and industrialisation. The establishment of the TFTA is not only a political vision but makes business sense.
By establishing a larger free trade area, regional trade will be enhanced. Creating larger markets with greater critical mass will enhance the African investment proposition; it is also the only way Africa will be able to decisively move-up the value-chain and become a more effective player in the global economy. Regional integration is therefore critical to accelerated, inclusive and sustainable growth in Africa.
In the context of increased competition for access to the African market, it is not surprising that African countries are striving for greater regional integration. Despite geographic proximity and cultural affinity, African countries’ trade is still low by global standards and accounts for only 16 percent of Africa’s total trade. The TFTA therefore represents an important effort to enhance regional co-operation.
Trade agreements between developing countries have historically been less successful in promoting intra-community trade, than in the case of blocs of developed countries.
The trade potential among countries that produce and export the same, mostly primary products, while importing most manufactured goods they consume, is very limited.
Well developed and diversified manufacturing capacity is largely lacking in many member states of the Tripartite. Clearly therefore, we have to address this if this integration initiative is to foster economic development.
It is for this reason that the Tripartite initiative, which is structured not merely to focus on market integration but informed by the perspective of development integration, has two additional pillars: co-operation to promote industrial development; and co-ordinated infrastructure development.
This is essential to enhance productive capacity and the development of regional value-chains. On infrastructure, the main aim is to promote connectivity and reduce the costs of doing business in eastern and southern Africa.
The interventions sought include policy and regulatory harmonisation, development of physical infrastructure and facilitation.
Furthermore, the market integration pillar has been structured in two distinct phases: focusing on the conclusion of a free trade area covering trade in goods; while a second phase will extend this to the liberalisation of trade in services, as well as enhance co-operation in certain trade related areas such as intellectual property and investment.
Free trade area
The negotiations towards the TFTA were launched on June 11, 2011 in Johannesburg.
Four years later, the heads of state and government of the 26 participating countries met in Egypt yesterday to launch the free trade area, which signifies the conclusion of negotiations on the free trade agreement.
The launch will be followed by the finalisation of negotiations on tariff reduction schedules and rules of origin. Progress has been achieved in these areas with negotiations advanced between some Tripartite states, while a number of rules of origin have been agreed on. This signals that we are on track to create a market of over 625 million people with a combined gross domestic product of approximately $1.6 trillion (R19.9 trillion).
This is sending a powerful message that Africa is committed to its economic integration agenda and in creating a conducive environment for trade and investment.
The TFTA will therefore increase Africa’s prospects of stimulating industrialisation, employment, income generation and poverty reduction.
Importantly, by providing a larger market, it offers the opportunity to improve economies of scale and efficiency, thereby improving Africa’s competitiveness both in its own markets and globally.
The TFTA if properly utilised, can be a springboard that catalyses a wave of growth in the manufacturing sector.
The challenge for the member states is to ensure that they take advantage of the opportunities and proximity to fast growing African markets.
For South Africa, the Tripartite area already absorbs a significant share of South Africa’s exports.
Over the past three years, South Africa has exported on average, annually, goods to the value of $16.8 billion to this region. This constitutes 18.3 percent of the country’s global exports. Hence, the importance of this initiative to South Africa’s industrial and employment objectives.
Rob Davies is the Minister of Trade and Industry