Thread by @PolicyNextgen

EXPLAINER

Hello Folks! Trade is the exchange of goods and services. But have you ever wondered what is the role and influence of governments in trade? Today we delve into Free Trade Areas among them The Africa Continental Free Trade Area(AfCFTA): 🧵

1. WHAT IS A FREE TRADE AGREEMENT?

A Free Trade Agreement (FTA) is a treaty between two or more countries to reduce or eliminate trade barriers, such as tariffs and non-tariff barriers eg. quotas, to facilitate the exchange of goods and services.

2. WHAT IS AfCFTA?
It is an initiative of the African Union under Agenda 2063 that seeks to create an African common market boosting intra African Trade and Economic Integration. It entered into force in 2019 and trade commended in 2021.

3. HOW IS IT BEING IMPLEMENTED?
Implementation is taking place in 3 phases:
Phase One (2018-2021): Focused on trade in goods and services and dispute settlement. It champions trade negotiations for the elimination of tariffs on 90% of goods in a span of 5 to 13 years.

Phase Two (Ongoing): It covers Intellectual Property Rights, Competition Policy , Investment and the position of women and youth in trade.

Phase Three: It focuses on e Commerce and Digital Trade with the Digital Trade Protocol still awaiting ratification. (Feb 2024)

4. WHAT SHOULD BE EXPECTED FROM THE AGREEMENT:
(a) An increase in intra African trade by 52% (UNECA).
(b) An increase in African GDP by 7% by 2035 (World Bank).
(c) An increase in intra African exports by 109% and international exports by 32%. (2035).

(d) Achieve Tariff elimination on 90% of goods in the next 5-13 years.
(e) Enhanced efficiency through innovation and competition.
(f) Regional Integration by harmonization of  trade policies.

5. WHAT HAVE BEEN THE ACHIEVEMENTS SO FAR?

(a) The creation of the largest free trade area encompassing 54 nations and a population of 1.3 Billion.
(b) A successful pilot program in Kenya and Ghana (2022).

(c) The launching of the Pan African Payments and Settlements System (PAPSS) in 2022. It facilities cross border payments in local currencies.
(d) Adoption of the Digital Trade Protocol (2024) which leverages technology for economic growth.

(e) Adoption of the Investment Protocol (2023) that seeks to promote sustainable investment in Africa.

6. WHAT HAVE BEEN THE CHALLENGES THIS FAR?

(a) Smaller economies fear that the larger economies such as Egypt, South Africa and Nigeria are set to benefit the most from the agreement therefore slowing down implementation.

(b) Non tariff barriers discourage trade eg. varying regulations, delayed customs clearance etc.
(c) Exporters are facing challenges during clearance as there is yet to be a harmonized Rules of Origin policy.

(d) Some countries are still practicing protectionism to protect domestic industries.
(e) Poor Infrastructure slows down or impedes trade.

7. WHAT ARE THE LONG TERM GOALS OF AfCFTA?

(a) Establishment of a Single Continental Market.
(b) Deepened Economic Integration.
(c) Sustainable and inclusive socio economic development.
(d) Industrial Development and Diversification of the Economy.

(e) Enhanced Global Competitiveness.
(f) The free flow of Persons and Capital.
(g) Creation of a Continental Customs Union and Common Market
(h)Promotion of Digital Trade and Innovation.
(i) Food Security and Agricultural Transformation.
(j) Improve policy coherence.

AfCFTA does not seek to replace regional political and economic blocs but seeks to harmonize trade policies throughout the Continent.

Ends!!