Africa Takes First Step Toward $2 Trillion Free-Trade Bloc

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African nations moved closer toward creating a free-trade zone with a combined size of $2 trillion as heads of state gathered in Johannesburg this week.

Negotiations on removing the barriers to trade and the movement of people between the continent’s 54 countries will begin on June 15 at the African Union summit and conclude by the end of 2017, Fatima Haram Acyl, the AU’s trade commissioner, said in an interview on Thursday.

Progress on creating a continental trade bloc took a step forward on June 10 after an agreement on a free-trade area was signed in Egypt between three regional groups: the Common Market for East and Southern Africa, the East African Community and the Southern African Development Community.

The three groups cover a market of 26 countries with a combined economy of about $1 trillion. Nations will now work toward agreeing and ratifying tariff rules in line with an agenda agreed at the launch of the trade bloc, South Africa’s Department of Trade and Industry said in a statement on Friday.

“The fact that it has been signed is quite a milestone,” Mark Schoeman, a researcher in the economic diplomacy program at the South African Institute of International Affairs, said by phone from Johannesburg. “Usually there is quite a long window period to allow states to make the necessary changes” before implementation.

The agreement, which was first proposed in 2008, will make the process of creating a continent-wide free-trade zone easier, Haram Acyl said.

Tariff Barriers

“They negotiated on goods, negotiated their schedule of liberalization,” she said. “This is very good news for us, so we are not starting from scratch.”

A regional FTA doesn’t necessarily mean that trade will improve between countries, said Schoeman. In SADC, where a free trade zone was achieved in 2008, about 20 percent of trade is conducted with other countries in the region, compared with 70 percent in the European Union, he said.

“On paper it sounds really great,” Schoeman said. “But it has to be understood in the context that, for example SADC signed a free-trade agreement in 2008 to remove import tariff barriers, but since then there has really not been a lot of increase in trade among SADC members.”

Non-tariff barriers to trade, such as health and safety standards, have impeded exports and imports in the region, he said.