What Is The Most Likely Result Of A New Continent-Wide Free-Trade Agreement In Africa

The recent announcement by the Office of the United States Trade Representative (USTR) that it is reviewing South Africa`s eligibility for the United States Generalized System of Preferences („DPA“) is somewhat disturbing in this regard.1 Following the adoption of a petition by the International Intellectual Property Alliance („IIPA“), the USTR expressed concern about „South Africa`s compliance with the APS-IP criterion“ in the area of the protection and enforcement of the copyright. 2 The African Continental Free Trade Area (AfCFTA) Agreement has been postponed due to the impact of COVID-19 on the region. Once things finally move forward, likely in 2021, the benefits of continent-wide free trade will be crucial to Africa`s resilience and post-pandemic recovery. Virusha Subban, a partner specializing in customs and trade, explains why. Most of the AfCFTA`s revenue gains likely come from measures that reduce red tape and simplify customs procedures. Tariff liberalization combined with a reduction in non-tariff barriers – such as quotas and rules of origin – would increase revenues by 2.4 percent, or about $153 billion. The remainder – $292 billion – comes from trade facilitation measures, reduce bureaucracy, reduce compliance costs for trading companies and facilitate the integration of African companies into global supply chains. It is clear that much remains to be done. As Rwandan President Paul Kagame said when he opened the deal for signature last year, „the last mile of a race is often the most difficult.“ The biggest obstacle to this „last mile“ of African economic integration is undoubtedly the spectre of the resurgence of economic nationalism.

The creation of the AfCFTA is at odds with a trend that has been established in some of the world`s largest economies. The UK is still struggling to leave the EU, while the US continues to tighten immigration controls and enforce protectionist trade measures not only with China, but also with the EU and others. International trade in Africa has been severely affected in recent months by a decline in global demand for products and a lower supply of key components from China, Europe and other regions. Access to skilled workers has also been affected by numerous government lockdowns and travel bans around the world. According to baker McKenzie`s study, compiled in collaboration with Oxford Economics, the AfCFTA`s $3 trillion opportunity (AfCFTA report), manufacturing products, industrial machinery and transport equipment account for more than 50% of Africa`s import needs, with the main suppliers being Europe (35%), China (16%) and the rest of Asia, including India (14%). Supply chain disruptions in these regions affected Africa`s ability to access key products and components in the first half of 2020. The AfCFTA is a historic agreement that aims to bring together 54 African countries with a population of more than one billion people and a combined GDP of more than $3 trillion. At the high level, the AfCFTA focuses on stimulating growth, job creation and diversifying economies across the African continent through the creation of a single African market for goods and services.

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