African heads of state and government officials are meeting this week in Kigali, Rwanda, for the 27th African Union Summit. On their agenda will be taking the next steps to establish a free-trade area that would include all 54 African countries — which could be up and running by the end of 2017.
This is news to much of the global community. Here are seven things you need to know about Africa’s Continental Free Trade Area (CFTA):
1) The CFTA would constitute the largest free-trade area in the world. If negotiators are successful, the CFTA would involve 54 member states across Africa, and be the world’s largest free-trade area, by number of countries. It would establish a single market of more than 1 billion people — an estimated 2 billion or more by 2050 — with a gross domestic product of more than $3 trillion.
2) There’s a larger global trend. These types of mega-regional trade agreements (MRTAs) exist around the world and include the recently stalled Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), which is made up of the European Union and the United States, and the less-known Regional Comprehensive Economic Partnership (RCEP), made up of 16 countries including China, India and Japan.
3) The CFTA would help African countries develop. Few countries in history have achieved significant economic development without trade. In order to develop, African countries will need to trade more, both with one another and with the rest of the world. By breaking down barriers between African countries, the CFTA would significantly boost trade on the continent.
4) African nations need this boost in trade. Currently, trade among African nations accounts for just over 14 percent of their total trade, a considerably lower figure than trade within many of the world’s more developed regions, including Europe and North America — both of which have intraregional trade rates at over 60 percent. The United Nations Economic Commission for Africa estimates that the CFTA could increase trade between African countries by as much as $35 billion, an increase of more than 50 percent from current levels.
5) Negotiations are not starting from scratch. At least eight regional trade agreements exist, touching all corners of the African continent. One of these is ECOWAS, the Economic Community of West African States, a coalition of 15 countries in West Africa that have already established a free-trade zone. In June 2015, 27 Africa countries extending from Egypt to South Africa launched the Tripartite Free Trade Area (TFTA), which marks a major step towards the establishment of a continental agreement.
6) The CFTA has widespread political and economic support. Dating back as far as 2012, all 54 African heads of state agreed to move towards the establishment of free trade across the continent. The African Union, the continental governing body, has established a specialized unit to support the CFTA negotiations and is receiving significant economic support from African and non-African partners alike.
7) Though considerable work remains, the process is already underway. African countries have identified 2017 as the target deadline to complete the negotiations. While this goal may be ambitious given the challenges of reaching agreement among 54 diverse countries, negotiators are making progress. Two sessions of the negotiating forum took place in February and May of this year and additional headway is expected at the African Union Summit this week.
Yes, there is a future for multilateralism.
Following the United Kingdom’s June 23 vote to leave the European Union, skeptics may be wondering whether any hope remains for multilateralism. But as Europe faces its next steps, Africa continues to march forward. The CFTA, which would help reduce barriers between African countries, is just one example. The launch of an African Union e-passport, which is set to take place at this week’s AU Summit, is another.
The CFTA holds significant potential to increase trade across Africa, creating higher-wage jobs and driving economic development. It could also unlock considerable business opportunities for companies worldwide. A single market of 1 billion to 2 billion people will be much more attractive than 54 fragmented ones.
Given the CFTA’s potential and size, the United States and other international actors have reason to support the completion of the CFTA, and then to pursue new opportunities created by the agreement. This type of support might include directing resources to the African Union’s CFTA Unit, for example, as well as training and equipping trade negotiators. Moving forward, there will also be a need for existing U.S. trade policies, including the African Growth and Opportunity Act (AGOA), to coordinate with the CFTA in order to minimize barriers to trade across the African continent.
By breaking down barriers between African countries and creating a single African market, the CFTA has the potential to reshape the continent, with implications for actors both within and outside of Africa.
Luke Warford works in the Africa practice at global strategic consulting firm Albright Stonebridge Group. Previously, he was as a Fulbright-Clinton Fellow in the African Union Commission’s Department of Trade and Industry based in Addis Ababa, Ethiopia.