(3 minutes read)
In about two-and-a half months time from now African Continental Free
Trade Area (AfCATA) will be completing the first anniversary of its
formation. Billed as the largest free trade area of the world, the
agreement in theory mandated a massive slashing of the intra tariff
to pave the way for achieving a US$2.5 trillion trade turnover within
the region in the given time. It is instructive to see whether the
target set is achievable or they are pious wishes that remain only in
papers.
Removal tariff alone will not suffice. They can be replaced by
non-tariff barriers. It is important to see what are the non-tariff
barriers? They can assume overt and covert propositions. For
instance, closing of borders to prevent trade flow can be a non-tariff
barrier. Jingoism, which is let loose against migrant workers and
traders can be another form of non-trade barrier. It can also take the
form of non-adherence to the tariff cuts due to hectic lobbying from
pressure groups. In such cases, tariff cuts, as proposed in the free
trade agreement may not lead to the desired results if there is strong
resistance to implement the agreement on the ground in letter and
spirit.
What is the basic principle of reduction of tariff? It is to encourage
Africans trade amongst them. While propounding that requirement,
often it is pointed out what other trade blocs are doing. The
intra-trade in EU is close to 61%, NAFTA trades close to 40% amongst
them and the figure for ASEAN is 23%. The intra-trade among African
countries is a paltry 16%. That means that a little less than 85% of
the trade in Africa is outside the continent.
Why it is happening? Trade analysts point out many reasons. Foremost
is the infrastructure disruption. According to World Bank’s
evaluation, half of the15 most disadvantaged countries from
infrastructure point of view in the world are in Africa. There is
no magic wand to mitigate the infrastructure gap. According to some
estimates, there is close to US$ 100 billion gap in financing
infrastructure projects in Africa on a yearly basis. This has to be
seen against the backdrop of low and middle-income countries facing
cost handicap of US$300 billion per year just from outages of water
and electricity. States that are able to tackle this infrastructure
deficit will reap rewards by way of boosting the business activities.
Instead what is happening on the ground is gross negligence at the
governance level. Pilferages, corruption, nepotism etc are rampant,
which are working against the economic integration. Indeed,
integration of a gigantic market like Africa needs solid action at
every level, strong financial architecture, boosting of intra-trade
trade, reduction of transaction cost, development of entrepreneurship
etc. since the commanding heights of public sector evidenced
everywhere in the continent lost its development steam. Is the
political apparatus mature enough the experiment with private sector
is a question that is being asked. Everyone agrees to the postulate;
but only a few are really getting things done . That needs a new
mindset and courage to take radical stands. The good news is that some
of the countries have started taking such measures notwithstanding the
political backlash. That is the courage world is expecting from
African leaders.
