The African Continental Free Trade Agreement is a trade agreement that will eliminate trade barriers among African member states. It will be the world's most substantial trade agreement in terms of members since the formation of the World Trade Organization.
The vision for an Africa without borders for its citizens and businesses has been touted since the liberation icons won independence in each of their nations. Everyone agreed on the values and opportunities that an Africa without borders will bring to the continent, but the matter rarely gained any real traction.
The ACFTA planning and negotiations started in 2013 and culminated in the member nations agreeing to a deal in 2018. As an agreement that was brokered by the African Union, the ACFTA involves 54 of the 55 African Union nations. Eritrea is the only country that hasn't signed up to the agreement, and that could change as the political climate has recently changed. The market will have a population of over a billion people and $3.4 billion gross domestic product.
The ACTFA will initially see nations remove tariffs on 90% of their products in the free trade area. Africa is notoriously known for having better trade deals with countries from around the world but not within the continent. The myriad of regulations, tariffs, quotas, and other trade barriers has made intra-Africa trade expensive and uncompetitive. Trade among African nations only accounts for 16% of total trade.
The UN's Economic Commission of Africa estimates that trade between African countries could increase by 52% after ACTFA. Entrepreneurs are expected to benefit from:
-Streamlined regulations. Navigating 54 different regulatory authorities is expensive and tiresome
-Easier scaling up production of goods and services. Entrepreneurs will have access to the entire African market rather than 54 relatively small markets
The ACTFA will also:
-Simplify rules of origin along with customs procedures. The free movement of inputs, personnel, and finance will unlock new productivity levels for businesses.
-Become a solution to the nations' overlapping memberships in Regional Economic Communities (like the East African Community, the Southern African -Development Community, the West African Economic Community and the Common Market for Eastern and Southern Africa) which have been a point of confusion and lost opportunities.
-Provide remedies when trade rules are broken.
There are still significant hurdles to overcome to make economic integration possible, for example, infrastructure development to eliminate the corruption at the borders or the political strife in some areas. Nonetheless, the ACFTA is a significant step forward for the continent.
Stay tuned with Exports News for the latest information on this developing story.
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