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Africa-Wide Trade Zone Could Boost South-South Cooperation

Louise Redvers

JOHANNESBURG, Jun 28 2011 (IPS) - The plan to create a new 26-nation liberalised trade zone for Africa, spanning the length of the continent from Cape to Cairo, could open up more possibilities for South-South cooperation that would benefit Africans.

Members will come from three existing regional groupings, the Southern African Development Community (SADC), the East African Community (EAC) and COMESA, the Common Market for East and Southern Africa.

The idea is to improve regional integration and in the long-term create a single African trading bloc to compete with other joined-up markets in Europe, Asia and the Americas.

But how will this affect Africa’s existing trade relations, and in particular the growing South-South links between African countries and emerging markets like China and Brazil?

Taking the example of South Africa, exports to the Brazil-Russia-India-China (BRIC) countries increased four-fold between 2006 and 2010. In the same period, imports doubled, indicating strong trade growth but still a trade deficit.

South Africa’s Minister for Trade and Industry Dr. Rob Davies believes forming the Tripartite Free Trade Area (T-FTA) will improve the quality of the continent’s engagement with other emerging market partners.

In an interview with IPS he said that the BRIC grouping, which now includes South Africa, had reacted positively to the concept of a more economically united Africa.

“They view it as an important development,” he said, “But so do we — from the point of view that we want to work towards improving the quality of our trade, moving away from supplying primary products like commodities to being able to export value-added products.”

He added: “We want to see principles like mutual benefits and reciprocity put into the trading values between Africa and the emerging markets and to have a more balanced trading relationship.”

Working together as a single bloc with a population of 600 million and a combined gross domestic product (GDP) of nearly one trillion dollars, he said, would make this aim more achievable.

Simon Freemantle, a senior analyst at Standard Bank’s African political economy unit, however sees little immediate impact from the T-FTA on South-South relations, due in part to the fact it could take at least a decade to come into operation.

In the longer term, though, Freemantle believes aspects of the T-FTA, like increased market integration and improved regional infrastructure, may help African countries be more competitive, particularly in the manufacturing sector.

“A lot of the imports that come from China and India, for example, are low-cost manufactured goods which African countries currently don’t have the capacity to make,” he explained.

“But there is a huge market for these goods here. If that market were made more accessible by, for instance, reducing trade tariffs and improving regional integration, then there is no reason why these products could not be produced in Africa instead of being imported.”

Overseas investors could also share Africa’s gains in terms of improved infrastructure and integration, he said. “Depending on how the T-FTA develops, we could also see more Asian companies coming here to make the most of Africa’s existing trade links with other regions.”

The example he gave is of a Northern intervention — the U.S.’s African Growth and Opportunity Act (AGOA), which gives eligible African countries preferential trade allowances – causing a number of Asian textile operations to move into countries like Swaziland and Lesotho.

Such relocations, although not without their own controversy around low wages and working conditions, create jobs and insert money into the local economy.

Dr Lyal White, director of the Centre for Dynamic Markets at the University of Pretoria’s Gordon Institute of Business Science, while sceptical that Africa is politically ready for such a large combined trade area, believes it could improve the continent’s engagement with emerging markets.

He told IPS: “It could provide the BRIC countries with an incentive to look at Africa more as a whole and more collectively, especially in terms of infrastructure, like building port facilities.

“At the moment you see these countries engaging individually, without integrated approaches. Africa could also take advantage of its own political integration to drive more infrastructural links, like using Chinese investment to build roads between two countries rather than just inside borders.”

White said that, following the emergence of groupings like BRICS, there had been a trend for countries to come together in blocs.

“Individual countries alone are insignificant but as a sum they have more collective impact,” he said.

“Africa is feeling pressure to create an identity for itself and it’s using that identity to help galvanise an African agenda which will help it find a place among the new emerging economies.”

However, both White and Freemantle agree that there is much groundwork to be done before any grand T-FTA can work.

“We already have a number of trade zones operating in Africa and there are still many aspects that are not working,” White explained. “I think we need to iron out the problems within the regional groupings first before we move onto continent-wide discussions.

“Dealing with the intricacies of infrastructure — literally the poor state of roads and border posts — is where we need to start. We need to change mentalities on the ground rather than just relying on high level handshakes.”

Davies defended the decision to create a larger liberalised trade zone, saying that it was precisely from issues in the localised regions, like countries having overlapping memberships in different groups, that the idea for the pan-African grouping had emerged.

“We want to build unity and have a unified approach,” he said. “What Africa needs is a bigger regional market to be able to compete on a global scale.”

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