The AU Continental Free Trade Agreement

The AU Continental Free Trade Agreement

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By ABBA MAHMOOD

Trade ministers from all the 54 African countries met in Niamey, the capital of Niger Republic, in early December last year to agree to final terms for the African Union’s (AU) Continental Free Trade Agreement (CFTA). The objective of the CFTA is primarily to engender more intra-African trade, which currently comprises just 15% of the continent’s total merchandise trade. As compared to other continents – 67% in Europe; 58% in Asia and 48% in North America — this is indeed quite low.

On March 14, 2018, the Federal Executive Council (FEC) approved the signing of the agreement and Nigeria’s bid to host the Secretariat of the African Continental Free Trade Agreement (AfCFTA) but a statement from the Ministry of Foreign Affairs on March 18 indicated that President Muhammadu Buhari had cancelled his attendance at the signing ceremony in Kigali, Rwanda, and that Nigeria would consult with stakeholders before taking a final decision on the AfCFTA.

The signing ceremony took place on March 21, 2018, during the 10th Extraordinary Session of the Assembly of the African Union on the AfCTA held in Kigali without Nigeria and South Africa, the two biggest economies on the continent. The chairperson of the AU Commission, Moussa Faki Mahamat, received the legal instruments signed by 44 African countries. Other African countries that stayed out of the bloc were Botswana, Lesotho, Namibia, Zambia, Burundi, Eritrea, Benin, Sierra Leone and Guinea Bissau.

With the signing of the agreement by 44 countries, individual countries would now ratify it in line with their sovereign laws, which will come into force if 25 countries out of the total AU member-countries approve it.

President Buhari later explained the reason he cancelled his trip to Kigali to sign the AfCFTA, noting that the agreement has the capacity to hinder local entrepreneurship and encourage the dumping of finished goods in Nigeria. President Buhari also said he has constituted a committee comprising the ministers of finance, budget, labour, foreign affairs, science and technology as well as the Central Bank of Nigeria, the Nigeria Customs Service and the Nigeria Immigration Service to review the content of the AfCFTA to enable Nigeria understand fully the economic and security implications of the agreement. The committee was expected to submit its report in two weeks.

Africa has a total population of about 1.2 billion people, with a combined GDP of a little over $2trillion. The need for intra-African trade cannot be over-emphasized, especially given the unfavourable trade with Europe, China and America. But only those nations manufacturing can benefit from trade in goods. Most African countries are not manufacturing; they export mainly raw materials; only South Africa has 25% manufacturing value-added. Nigeria’s manufacturing value-added has sharply fallen to less than 5%, from about 20% in the 1980s. China in the final analysis may be biggest beneficiary.

The Chinese in South Africa successfully got a court judgment declaring them as also previously disadvantaged group like the Black majority in that country, paving the way for them to buy up businesses with the support of the Chinese government. This explains the reason why China engineered the invitation of South Africa into the BRIC group. In neighbouring Equatorial Guinea, about 20% of that country’s population is now Chinese. And this is just one country. Thus, the ultimate beneficiary of the AfCFTA will be China as they bring their cheap goods and dump these using the weak African countries to penetrate the African continental market.

Economics ultimately influences politics. The Chinese initially started penetrating Africa for economic reasons. Like other powers, they are now interested in the political direction of African countries. As soon as Mr Jean Ping of Gabon whose father is Chinese became the chairman of the African Union Commission, China built the AU Secretariat for Africa, which marked the beginning of China’s foray into African political affairs, never mind the non-interference in political affairs principle that is now history. Mr Ping’s subsequent presidential ambition in Gabon was actively supported by China. The pseudo-democratic change of government in Zimbabwe last year had strong China backing. Even in the Sierra Leone election of last month, the Chinese backed the ruling party, that country’s APC that was eventually defeated. China knows its interests here and across the world and its interests may not necessarily be the same as ours. Indeed, for us here, if care is not taken, the 21st century will be defined by the contest for the control of Africa and its resources between France and China with the African leaders acting as puppets.

There is also the bigger issue of how African countries would extricate themselves from constraining bilateral and multilateral trade agreements with developed economies, which at first glance seem beneficial to the African countries but on further scrutiny have been found to be ultimately detrimental to Africa’s long-term industrial development. These include the World Trade Organization (WTO) agreement that African countries entered in the 1990s without looking at the long term implications as well as the bilateral agreements between each individual Francophone country with France their former and current colonial master. The European Union’s Economic Partnership Agreements (EPAs) top the list. For instance, in 2016, Africa’s trade with the European Union (EU) was valued at €262bn ($124bn), with a relatively small trade deficit of €28.6bn. However, the fact that 62% of Africa’s exports were primary products and 71% of its imports were manufactured goods puts that deficit in a different light, as discerned by many analysts.

As Comrade Issa Aremu recently wrote, “the uncritical membership of WTO of most African countries including Nigeria in the 1990s with attendant massive lowering of tariffs through wholesale trade liberalization arrested the nascent African manufacturing and development leading to massive collapse of labour-intensive industries like textile and automobile due to unfair competition. How would AfCFTA foster African re-industrialization process and uplift millions out of poverty is a critical question begging for answer”.

In any case, having a continental free trade without common currency makes very little sense. The Francophone CFA is tied to the apron strings of the French franc, and France has ultimate control of the monetary, trade, fiscal and even defence policies of its former colonies. None of the sub-regional groups has any existing effective fiscal and monetary policy currently and these are supposed to be the building blocks of the ultimate continental unity. And if the continental trade will be dollar-denominated, then it has no difference with what exists now and is therefore useless. With Brexit and the trade war between the US and China, the world’s two biggest economies, the timing of AfCFTA is simply not right. African development should be more seriously handled, otherwise we are giving birth to slaves as our children just as our parents and grandparents were colonized, God forbid!

History is on the side of the oppressed.

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