27 June 2018

Africa: The Continental Free Trade Area - a Game Changer for Africa

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Currently under negotiation, the African Union's Continental Free Trade Area (CFTA) will create a single market for goods and services across the continent, bringing benefits for businesses and consumers and strengthening Africa's position in world trade.

The CFTA is a flagship project of Agenda 2063 and refers to a continental geographic zone where goods and services move among member states of the African Union (AU) with no restrictions.

The CFTA aims to boost intra-African trade by providing a comprehensive and mutually beneficial trade agreement among the member states, covering trade in goods and services, investment, intellectual property rights and competition policy.

This is an urgent issue because countries across the world are concluding mega-regional trade agreements (MRTAs), thus reshaping and changing the global trading landscape.

The establishment of the CFTA will allow Africa to strengthen its position vis-à-vis the rest of the world, speak with one voice and act in unison on all continental and international trade issues.

The CFTA will create a wider market of more than 1.2 billion people with a combined GDP of $2.19 trillion. This will induce investments, result in the pooling of African resources to enhance structural transformation and the development of regional value chains.

The benefits to Africa will include:

Boosting employment opportunities.

Increased food security through reduction to barriers on trade in agricultural products.

Increased competitiveness of African industrial products through harnessing the economies of scale of a continent-wide market.

Increased rate of diversification and transformation of Africa's economy and the continent's ability to supply its import needs from its own resources.

Better allocation of resources, improved competition and reduced price differentials.

Reduced vulnerability of countries to external trade shocks by reducing the trade balance deficits of African countries.

Enhanced participation of Africa in global trade and reduced dependency on aid and external borrowing.

By taking into consideration the need to develop Africa's productive capacity and industrial integration, the CFTA will provide an enabling environment where businesses can build efficient regional supply chains and encourage intra-industry trade, thereby promoting investment, growth and the creation of jobs.

The private sector and SMEs will benefit through the implementation of trade facilitation measures to boost speed and reduce the cost of customs procedures and port handling.

This will increase cross-border trade and investments, thus enhancing market access for goods and services produced in Africa.

The CFTA will also promote innovation and enterprise through protection of the intellectual property rights of the African private sector.

Consumers

Consumers will benefit too. The CFTA will create a competitive environment with lower prices and a wider variety of goods and services.

The CFTA will also ensure the maintenance of quality standards to safeguard the health and safety of consumers.

Measures will be taken to allow the least developed countries to compete with the more developed countries.

Flexibility will be accorded to member states that have special trade needs, specificities and circumstances.

Special and differential treatment will apply in transitional periods for liberalisation. Exemptions and other measures within the scope of the CFTA negotiations will be applicable to member states at different levels of socio-economic development.

The negotiations for the CFTA agreement are being conducted by AU member states through the CFTA-negotiating institutions with the support of the African Union Commission and Regional Economic Communities (RECs).

After conclusion of CFTA negotiations, the CFTA agreement will be signed and will enter into force after ratification by 15 member states of the AU.

The CFTA will establish and administer a suitable dispute settlement mechanism to decide technical issues and ensure protection of sovereignty and the good neighbourliness of member states.

Find out more about the AU, Agenda 2063 and AfCFTA by visiting www.au.africa.

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