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The newest and most ambitious trade agreement to-date is being signed and ratified this summer by the member nations of the African Union (AU). The African Continental Free Trade Area (AfCFTA), which has been in eight rounds of negotiations since 2015, has been signed by already 49 out of the 55 member states of the AU.
One of the primary goals of the agreement is to boost African economies by fostering intra-African trade. By reducing 90 percent of tariffs in the first stage and then phasing out the other 10 percent of tariffs gradually, goods are expected to become more accessible and cheaper for African consumption.
If all 55 states sign and ratify the agreement, the AfCFTA would create a liberalized trade area for 1.2 billion people, with a cumulative GDP of $2.5 trillion in household consumption and $4.2 trillion for business-to-business consumption. That would make the agreement the largest trade liberalization effort in the history of free trade.
AfCFTA has the potential to strengthen the manufacturing economies of Africa nations and increase job growth substantially. The agreement may also increase the stability and transparency of African governments as countries will seek to create more welcoming business environments.
Since March 2018, African nations have begun signing and ratifying the agreement. 22 member states in total must ratify before it can be fully implemented.
Inter-regional trading is an important part of a country and continent’s economy. Europe exports 69 percent of its goods regionally, and Asia 59 percent. The UN Economic Commission on Africa estimates that by 2022 the AfCFTA would increase intra-African trade to 52.3 percent.
Professor George Ayittey, the president of the Free Africa Foundation, explains that a move towards a more capitalist economy can create a more just African market. After reaching independence, many African countries associated capitalism with colonization, and therefore regarded such a system as inherently bad. In response, countries decided to take the socialist path.
“In Africa, socialism was implemented through the one-party state apparatus. The state would own everything and direct economic activity,” explains Ayittey.
The AfCTFA will mean “more integration (and) more growth for the whole continent,” Mahamadou Issoufou, President of Niger has declared.
Some years will pass until the full effect of the new agreement will be felt but for the people of Africa, the potential benefits could be incredible.
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