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Davos: Africa boosts free trade while global barriers go up
A
new African free trade area could be just weeks away as the last few
countries ratify an agreement signed last year. The plan to boost
intra-African trade by half is gaining much attention in
Davos this year.
new African free trade area could be just weeks away as the last few
countries ratify an agreement signed last year. The plan to boost
intra-African trade by half is gaining much attention in
Davos this year.
When
you ask Tony Elumelu if Africa would profit from free trade, the
Nigerian entrepreneur and philanthropist does not have to think long.
“If we look at other parts of the world, intra-regional
trade helped significantly. For us to develop in Africa, we must
embrace this,” he told DW at the World Economic Forum in Davos.
“We need to develop and broaden the market. We need to integrate Africa by trade also.”
you ask Tony Elumelu if Africa would profit from free trade, the
Nigerian entrepreneur and philanthropist does not have to think long.
“If we look at other parts of the world, intra-regional
trade helped significantly. For us to develop in Africa, we must
embrace this,” he told DW at the World Economic Forum in Davos.
“We need to develop and broaden the market. We need to integrate Africa by trade also.”
He
might not have to wait much longer for this to happen. Last year, 49
African countries signed the Continental Free Trade Area (CFTA)
agreement, which is supposed to do away with tariffs on most
goods and other trade barriers.
might not have to wait much longer for this to happen. Last year, 49
African countries signed the Continental Free Trade Area (CFTA)
agreement, which is supposed to do away with tariffs on most
goods and other trade barriers.
The
agreement will come into force once 22 countries have ratified it. With
only seven more to go, it might only be a matter of weeks. So in times
when others are erecting trade barriers once again,
leaders on the continent are edging closer towards establishing the
largest free trade area since the World Trade Organization’s inception.
agreement will come into force once 22 countries have ratified it. With
only seven more to go, it might only be a matter of weeks. So in times
when others are erecting trade barriers once again,
leaders on the continent are edging closer towards establishing the
largest free trade area since the World Trade Organization’s inception.
It
would create a market with a combined GDP of around three trillion
dollars and, according to the African Union (AU), boost intra-African
trade by 52 percent. As enterprises will get the chance
to enter new markets, unemployment is predicted to fall and economic
output to go up. And the effects in the long-run could be even more
substantial.
would create a market with a combined GDP of around three trillion
dollars and, according to the African Union (AU), boost intra-African
trade by 52 percent. As enterprises will get the chance
to enter new markets, unemployment is predicted to fall and economic
output to go up. And the effects in the long-run could be even more
substantial.
Create value, attract investors
“Those
nations who trade in raw materials are the ones that are poor. Those
that actually trade in value-added products are the ones that are
rich,” Akinwumi Adesina, president of the African Development
Bank, explained. But as African economies will be able to cooperate
more closely, he hopes companies will create more elaborate value chains
to produce higher-quality goods.
nations who trade in raw materials are the ones that are poor. Those
that actually trade in value-added products are the ones that are
rich,” Akinwumi Adesina, president of the African Development
Bank, explained. But as African economies will be able to cooperate
more closely, he hopes companies will create more elaborate value chains
to produce higher-quality goods.
Also,
he considers the CFTA a big chance to attract investors. “Africa is
open for business, the opportunities are there,” he said. “When people
look at Africa, think of the population, think of the
middle-class, think of the huge opportunities to invest across
borders.”
he considers the CFTA a big chance to attract investors. “Africa is
open for business, the opportunities are there,” he said. “When people
look at Africa, think of the population, think of the
middle-class, think of the huge opportunities to invest across
borders.”
Investments
would come at a crucial time when it is estimated Africa lacks up to
$100 billion (€88 billion) for infrastructure projects alone.
would come at a crucial time when it is estimated Africa lacks up to
$100 billion (€88 billion) for infrastructure projects alone.
Making it work for the 99 percent
But
as rosy as the economic future may seem, there are, of course, also
challenges that governments will have to overcome. Winifred Byanyima,
the head of Oxfam International, warned leaders of what
freewheeling globalization can lead to.
as rosy as the economic future may seem, there are, of course, also
challenges that governments will have to overcome. Winifred Byanyima,
the head of Oxfam International, warned leaders of what
freewheeling globalization can lead to.
“We
have richer countries, richer companies, richer people gaining from
trade liberalization and many others left behind,” she said. Whether
Africans with lower incomes will also benefit from the
CFTA would depend on what measures of success those in charge apply.
“The most important measure is the good quality jobs that will be
produced for our young people and for women.”
have richer countries, richer companies, richer people gaining from
trade liberalization and many others left behind,” she said. Whether
Africans with lower incomes will also benefit from the
CFTA would depend on what measures of success those in charge apply.
“The most important measure is the good quality jobs that will be
produced for our young people and for women.”
A new era — also for Nigeria?
Despite
these words of caution, euphoria for the CFTA is high. Before Africa
lies the beginning of a new economic era; and some regard it as only
that, a start. Bernard Gautier of French investment
company Wendel, for example, has already called for even deeper
integration by means of common currencies.
these words of caution, euphoria for the CFTA is high. Before Africa
lies the beginning of a new economic era; and some regard it as only
that, a start. Bernard Gautier of French investment
company Wendel, for example, has already called for even deeper
integration by means of common currencies.
And
Tony Elumelu advocates to not only let goods flow freely. “We need to
carry common passports or at least simplify the border entrance so that
people can move freely intra-Africa. People who move
freely can trade – and not otherwise,” the billionaire said.
Tony Elumelu advocates to not only let goods flow freely. “We need to
carry common passports or at least simplify the border entrance so that
people can move freely intra-Africa. People who move
freely can trade – and not otherwise,” the billionaire said.