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Saturday, May 18, 2024

One year of African Continental Free Trade Area: Opportunities for Pakistan

With a shift from geopolitics toward the geo-economics of the AfCFTA, the agreement comes in tandem with Pakistan’s Engage Africa policy’ which revolves around economic engagement with the continent - with the aim to boost its trade with Africa more than two-fold by 2025.

The African Continental Free Trade Area marked its first anniversary on January 1, 2022, by becoming the largest free trade area in the world measured by the number of countries participating. However despite its wide scope of economic integration within the continent, so far trade activity has remained very limited and the rapid spread of the pandemic has caused disruptions of global supply chains.

AfCFTA established in January 2021, includes all African nations with the exception of Eritrea. Initially, the aim behind the agreement was to eliminate tariffs on imports by 97% among the African States, which in return would boost manufacturing, create jobs, and thus work towards bringing prosperity and social equality to the continent. As of now, African nations currently trade more internationally than with each other.  However, AfCFTA wants to do more than just boost trade in goods within the continent; its scope includes services, investment, intellectual property rights and competition policy, although these aspects are still under negotiation. The continental agreement aims to achieve these dreams by 2064.

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A Slow Start

According to the UN Conference on Trade and Development (UNCTAD)’s Economic Development in Africa Report 2021, the total untapped export potential of intra-African trade is around $21.9 billion, equivalent to 43 per cent of intra-African exports (yearly average for 2015–2019), with an additional $9.2 billion projected through partial tariff liberalization under the AfCFTA over the next five years. During the year 2021 on an individual level, African countries have not been able to scale up their economic activities due to a variety of reasons;

  • Many African countries are still holding out on ratifying some of the phases of the AfCFTA. These countries, which make most of their revenue from exports to non-African countries, are not convinced of the benefits that the AfCFTA can add to their economy.
  • Lack of information about the AfCFTA and the ways to take advantage of it by African businesses. With many countries favoring protectionist policies in their African trade outlook, there has been a dearth of information about AfCFTA and how it can help African trade.
  • Lack of capacity in AfCFTA’s Secretariat to push the integration agenda, given its launch in the middle of the pandemic.

Hence there is a need for a deeply integrated and outwardly united front to achieve cohesion. This must be done in order to boost the scale of economic activity in Africa and foster economic growth and development. Trade restrictions amongst the African countries along with the fast spread pandemic have adversely impacted the performance and growth of the agreement. Moreover, the lethargic reaction of African leaders towards opening up their borders and liberalizing trade has negatively impacted the agreement.

Despite AfCFTA’s projection of negotiations for all three phases of ratifying AfCFTA (trade in goods and services, intellectual property rights, investment and competition policy, and e-commerce) being finalized by the end of 2021, there are still many loopholes in negotiations that have so far not been finalized among member countries. This has been a significant setback in the chances of AfCFTA’s success in 2021 as there is still a feeling of uncertainty concerning where countries stand on the agreement— an uncertainty that has affected the AfCFTA trading mechanism.

Africans have always traded with each other, even with the presence of trade barriers like currency, movement and language. Therefore, if African governments can get over their individual reservations and collectively provide all the policy-related cooperation needed by AfCFTA, then that is the boost needed for the economic integration promised by the AfCFTA to become a reality, and in turn better an economic lot of over 1.3 billion Africans.

Read more: Look Africa: Pakistan Africa trade development conference being held in Nigeria

Opportunities for Pakistan

With a shift from geopolitics toward the geo-economics the AfCFTA, the agreement comes in tandem with Pakistan’s Engage Africa policy’ which revolves around economic engagement with the continent – with the aim to boost its trade with Africa more than two-fold by 2025. In this regard it is already in touch with South Africa Customs Union (SACU), Economic Community of West African States (ECOWAS) and East African Community (EAC) to negotiate trade agreements.

Ongoing efforts under the ‘Engage Africa Policy’ have enabled Pakistan’s trade with African countries to touch US$4.18 billion in 2019-20, signifying an increase of seven percent as compared to the previous year (US$1.38 billion) despite the challenges posed by the pandemic. Africa has some of the fastest-rising economies in the world, including Ethiopia, Rwanda, Côte d’Ivoire, Senegal, Benin, Uganda & Kenya.

They provide an untapped market for Pakistan’s exports of Pharmaceuticals, Surgical goods and Light Engineering and Electronic products including; Tractors and Agricultural implements, two and three-wheelers, Commercial and Domestic Fans, Water pumps, and Electrical Machinery and equipment. Pakistan can also export its agricultural produce, IT services and cement and construction services. By improving trade ties with African countries and using AfCFTA as a harbinger Pakistan can achieve its goal of advancing foreign relations through economic diplomacy. Moreover, it can work for opening more diplomatic, economic and commercial channels for trade and activity.

Read more: Engage Africa: Pakistan, Tunisia agree to upgrade economic relationship

Conclusively, AfCFTA is at a nascent stage and considering the need for trade it has to overcome bureaucratic challenges in order to (unveil the trade potential of the continent to its fullest) make this a boost for continental trade as well as connecting it to the global trade.

 

Written by Areeba Arif Khan

Areeba Arif Khan is a Researcher at the Institute of Strategic Studies Islamabad working on the Africa Desk. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.