Ethiopia: Why All Are Eagerly Waiting for AfCFTA, World's Largest Free Trade Area

(file photo).

Signed by 55 African countries and ratified by 34 of them by their parliaments', the African Continental Free Trade Area (AfCFTA) is expected to become operational as of 1 January 2021. The AfCFTA is expected to deepen economic integration of the African continent and to lift millions from extreme poverty.

AfCFTA is the largest free trade area in the world, covering 1.3 billion people across the continent with a combined GDP valued 3.4 trillion, according to the World Bank. Africans' are eagerly waiting for the operationalization of the agreement which needs further political will and significant policy reforms during its implementation phase, according to experts in the sector.

During a recent webinar on challenges and opportunities of AfCFTA hosted by International Food Policy Research Institute (IFPRI) researchers in the sector argued that, the implementation of the agreement will boost intra-regional and continental trade and will lift millions out of extreme poverty.

According to the researchers it requires political leaders' strong political will, significant policy reforms and trade facilitation measures in order to ensure that the agreement is implemented to its full potential.

Senior Economist at the World Bank, Maryla Maliszewska, during the webinar stated that once completed, AfCFTA will be the largest free trade area in the world, comprising 55 nations, 1.3 billion people with GDP valued at 3.4 trillion USD. She added that the scope of AfCFTA is also large as it covers tariffs and policy areas.

According to Maryla the scope of AfCFTA includes trade facilitation, trade in services, as well as regulatory measures such as sanitary standards, technical barriers to trade, competition, investment and ecommerce.

For Maryla the free trade area will diversify trade and economy, attract foreign direct investment, accelerate growth, provide new job opportunities and reduce poverty to African countries. However, Maryla stated, achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures. Faster progressive liberalization and exchange of offers by member states are mandatory, according to her.

With the proper implementation based on the agreement and plans, according to Maryla, AfCFTA could increase Africa's real income by seven per cent or USD 445 billion; it will lift an additional 30 million people out of extreme poverty and will significantly increase African trade especially intra-regional trade in manufacturing sector.

She further noted that AfCFTA will also lift 67.9 million people out of moderate poverty. Half of the people lifted from moderate poverty will be from Ethiopia, Nigeria, Tanzania, DRC, Kenya and Niger, Maryla stated.

As to Maryla AfCFTA will create better opportunity for unskilled workers both in increasing wages and creating additional job opportunities. The proportion of workers in agriculture, food, energy, intensive manufacturing, trade services, and recreational services will increase at high rate.

Wages for unskilled workers will be 10.3 percent and wages for skilled workers will be 9.8 per cent higher than the current wages in Africa, according to the senior economist.

According to Maryla by enhancing regional collaboration, building flexible economy and diversifying the economy, AfCFTA will play a significant role to build a more resilient economy during and pots-COVID-19 of the continent.

Hence, she argued, countries and political leaders of the continent should give due concern for the proper implementation of the agreement by implementing policy reforms and easing the barriers during its implementation phase.

Dr. Andrew Mold, Chief of Regional Integration and AfCFTA Cluster UNECA Office for Eastern Africa on his part argued that AfCFTA will create a unified regional market, but it needs to be inclusive and to carry the general public.

Focusing on the opportunities of AfCFTA to Eastern Africa, Dr. Andrew stated that the implementation of AfCFTA will avail USD 1.8 billion welfare and over one billion USD new intra-regional export in Eastern Africa.

According to him the implementation of AfCFTA will create additional over two million job opportunities as it boosts services and labor intensive manufacturing sector.

As Dr. Andrew AfCFTA will also pools the regional power of Eastern Africa and minimizes fuel import bill in the region. He added that the Grand Ethiopian Renaissance Dam (GERD) will play a crucial role in this case as Ethiopia plans to export hydro electric power to Eastern African countries.

This power sharing saves billions of dollars for fuel bill. For example, Ethiopia stands to save 15 to 20 per cent of its annual bill of 3.4 billion USD allocated for fuel importing, he stated. He also pointed out that AfCFTA will increase Eastern African countries trade within the continent.

According to him Eastern Africa is not duly connected with the continental trade and the implementation of this agreement will boost the region's involvement in African trade. With exception, Uganda's over 50 per cent trade is within the continent even before the implementation of the agreement.

He suggested that the Eastern Africa needs deeper integration to integrate the wider African economy and should know the AfCFTA as a catalyst for change. In addition, AfCFTA needs to be inclusive for its effective implementation and will need to carry the general public.

David Laborde, from IFPRI also argued that AfCFTA will foster intra-regional agriculture and trade. The removal of tariff barriers and the liberalizations will play crucial role in boosting the trade and investment within the continent.

But, he said since the agriculture sector is sensitive, projection of sensitive products takes time to be liberalized. Because of food security concerns and political sensitivity, agriculture sector needs more flexibility in the negotiation and implementation, David argued.

Hence, for David, identifying role of sensitive products and their selection in tariff liberalization and give more protection for agricultural products may necessary. In this case, complementary policies are key for the proper implementation of the free trade agreement, he stated.

The Ethiopian herald December 23/2020

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