No prize for guessing the only country refusing to join African Free Trade

The World Bank estimates that the African Continental Free Trade Agreement (AfCFTA) will lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day. [See below]

So far 54 of Africa’s 55 states have signed up. One is outstanding…Eritrea.


 

Screenshot 2020-08-02 at 08.14.21

Source: Africanews

By Abdur Rahman Alfa Shaban

ERITREA

Eritrea on Tuesday explained why it has not signed up for the African Continental Free Trade Area, AfCFTA. The Horn of Africa nation remains the only country yet to sign the agreement let alone deposit instruments of ratification as of July 2020.

According to Information Minister, the country’s posture is ingrained in the government of Eritrea, GOE’s historic stance in advocating regional integration over such continental aspirations.

“In terms of the academic discourse on ACFTA, Eritrea’s long-held stance is crystal-clear. First articulated at the 1994 OAU Summit, GOE’s pragmatic position transcends abstract platitudes to focus on incremental / achievable results; i.e nurturing first the building blocs or RECs,” Yemane Meskel posted in Twitter.

As at October 2019, Eritrea had failed to sign up to the AfCFTA, the agreement achieved maturity on May 30, 2019 after it received the required number of 22 signatories.

In March 2018, 44 government representatives signed the deal at a meeting in the Rwandan capital, Kigali. The official launch slated for this year was pushed to possibly early next year due to disruptions related to COVID-19 pandemic.

West African neighbours Nigeria and Benin were the 53rd and 54th nations to ratify the agreement in June 2019. Nigeria, the continent’s biggest economy, signed up on June 7, 2019 during an extraordinary African Union, AU, summit in Niamey.

AU head of Trade Albert Muchanga in a July 2019 tweet said: “Officially confirmed! Benin to Sign AfCFTA Agreement during Niamey Extraordinary Summit & become 54th signatory State. Good development!

“One more signatory state before all 55 African Union Member States are signatories. One African Market in formation,” he said in a tweet. The one more signatory was and still remains Eritrea.

The AU initiative aims to create a continent-wide market of 1.2 billion people worth $2.5 trillion. Different African countries have made varying levels of commitment.

The highest being the ratification and deposition of necessary documents with the AU. The other class being the signing of the agreement and the non-commitment level being those that have yet to even sign up.


 JULY 27, 2020

The African Continental Free Trade Area

Factory workers package products at Decorplast, a manufacturer and regional exporter of injection-moulded plastic goods in Accra, Ghana

Factory workers package products in Accra, Ghana. Photo: © Nyani Quarmyne (Panos)/IFC


Story Highlights

  • The African Continental Free Trade Area (AfCFTA) presents a major opportunity for African countries to bring 30 million people out of extreme poverty and to raise the incomes of 68 million others who live on less than $5.50 per day.
  • With the implementation of AfCFTA, trade facilitation measures that cut red tape and simplify customs procedures would drive $292 billion of the $450 billion in potential income gains.
  • Implementing AfCFTA would help usher in the kinds of deep reforms necessary to enhance long-term growth in African countries.

The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.

AfCFTA report covoer

Download the report

The scope of AfCFTA is large. The agreement will reduce tariffs among member countries and cover policy areas such as trade facilitation and services, as well as regu­latory measures such as sanitary standards and technical barriers to trade. Full implementation of AfCFTA would reshape markets and economies across the region and boost output in the services, manufacturing and natural resources sectors.

As the global economy is in turmoil due to the COVID-19 pandemic, creation of the vast AfCFTA regional mar­ket is a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investment.

The World Bank report, The African Continental Free Trade Area: Economic and Distributional Effectsis designed to guide policymakers in implementing policies that can maximize the agreement’s potential gains while minimizing risks. Creating a continent-wide market will require a determined effort to reduce all trade costs. Governments will also need to design policies to increase the readiness of their workforces to take advantage of new opportunities.

Key Findings | Data | About the Authors


“Creating a single, continent-wide market for goods and services, business and investment would reshape African economies. The implementation of AfCFTA would be a huge step forward for Africa, demonstrating to the world that it is emerging as a leader on the globe trade agenda.”
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Caroline Freund
Global Director of Trade, Investment and Competitiveness

“The African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans. The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers—women and men, skilled and unskilled—across all countries and sectors, ensuring the agreement’s full benefit.”
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Albert Zeufack
Chief Economist, Africa

Key Findings

The African Continental Free Trade Agreement represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion. Implementing AfCFTA would:

  • Lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day;
  • Boost Africa’s income by $450 billion by 2035 (a gain of 7 percent) while adding $76 billion to the income of the rest of the world.
  • Increase Africa’s exports by $560 billion, mostly in manufacturing.
  • Spur larger wage gains for women (10.5 percent) than for men (9.9 percent).
  • Boost wages for both skilled and unskilled workers—10.3 percent for unskilled workers, and 9.8 percent for skilled workers.

Under AfCFTA, extreme poverty would decline across the continent—with the biggest improvements in countries with currently high poverty rates.

  • West Africa would see the biggest decline in the number of people living in extreme poverty—a decline of 12 million (more than a third of the total for all of Africa).
  • Central Africa would see a decline of 9.3 million.
  • Eastern Africa would see a decline of 4.8 million.
  • Southern Africa would see a decline of 3.9 million.
  • Countries with the highest initial poverty rates, would see the biggest declines in poverty rates.
  • In Guinea-Bissau, the rate would decline from 37.9 percent to 27.7 percent
  • In Mali, the rate would decline from 14.4 percent to 6.8 percent.
  • In Togo, it would decline from 24.1 percent to 16.9 percent.

Of the $450 billion in income gains from AfCFTA, $292 billion would come from stronger trade facilitation—measures to reduce red tape and simplify customs procedures.

  • Tariff liberalization is important, but by itself it would boost the continent’s income by just 0.2 percent.
  • Adding trade facilitation to the mix—including measures to reduce red tape, simplify customs procedures, and make it easier for African businesses to integrate into global supply chains—would boost the income gains by $292 billion.
  • These gains will require major efforts by countries to reduce the burden on businesses and traders to cross borders, quickly, safely, and with minimal interference by officials.

The World Bank report is designed to guide policymakers in implementing policies that can maximize the agreement’s potential gains while minimizing risks.

  • Creating a continent-wide market will require a determined effort to reduce all trade costs. In general, this will require legislation and regulations to enable the free flow of goods, capital and information across borders; create competitive business environments that can boost productivity and investment; and promote increased foreign competition and foreign direct investment that can raise productivity and innovation by domestic firms.
  • In a few sectors facing job losses, governments will need to be ready to support workers with adequate safety nets and policies to retrain workers.
  • Governments will need to design policies to increase the readiness of their workforces to take advantage of new opportunities.

Achieving the gains from AfCFTA is especially important due to the COVID-19 pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020 alone.

  • COVID-19 has caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.
  • By increasing regional trade, lowering trade costs and streamlining border procedures, full implementation of AfCFTA would help African countries increase their resiliency in the face of future economic shocks and help usher in the kinds of deep reforms that are necessary to enhance long-term growth.

2 comments

  1. African countries should be delighted Eritrea is not signing the free trade agreement. What have they got to lose? Eritrea’s GDP is smaller than the smallest district in Lagos.

    Eritrea would have had everything to gain – inward capital investment, employment opportunities and prosperity for its people. But those are the very things the regime does not want its people to have.

    The Eritrean regime’s sole aim is to starve its people to submission, nothing else. The sooner our African brothers know that the better.

    Let’s hope and pray African governments make a success of the free trade. Sooner or later a New Eritrean government will be knocking at your door to join this noble and ambitious initiative.

    For now, please do not take not of what people like Comical Ali (the so called info minister) say. That’s is the only way he can keep his head in place.

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