Africa's New Trade Deal
The African Continental Free Trade Area (AfCFTA) is a free trade area, outlined in the African Continental Free Trade Agreement among 54 of the 55 African Union nations. The free-trade area is the largest in the world in terms of participating countries since the formation of the World Trade Organization.
The African Continental Free Trade Area Agreement or the (AfCFTA) is an agreement entered into only a few short months ago at the end of 2019. Comprised of 55 member states of the African Union, from members of different economic development. All experience difficulty in development, and production capacity. The primary trading capacity with most African countries is with global trading partners which isn’t projected to change much.
What the AfCFTA has the ability to do is putting systems in place to reduce the trade issues in intra-African trade. These larger integrated markets could make outside investment more prevalent and it could lead to new tech and new learning.
As with all international trade - tariffs play a large role, and though trade within African borders is low, revenue from tariff collection is essential to governments, and to protect domestic industry through limitation of import competition.
LDC’s or least-developed-countries, are currently working to achieve 90% liberalization, and those more developed are given 5 years to achieve the same. the remaining 10% is divided into sensitive and non-sensitive products. 7% of tariffs can be designated sensitive, and 3% are allowed omission from liberalization. Lesser developed countries have been given 13 years to eliminate tariffs on sensitive products, and have been granted maintenance of current tariffs for the beginning 5 years, and retroactively implementing the remaining 8 years. More developed countries are given 10 years to eliminate tariffs beginning liberalization after their 5th year. Lesser developed and more developed countries alike are allotted 3% of tariff lines to be excluded - but they cannot account for more than 10% of their total trade.
A select group, named Africa’s G6 - namely Madagascar, Malawi, Sudan, Ethiopia, Zambia, and Zimbabwe arguing they face major developmental challenges and have secured a special 15-year phase-down period.
The coming years will reveal the rollout of the limitation of tariffs and we’ll continue to keep you posted as changes develop. We’re excited to see how the agreement will help to build Africa’s infrastructure.
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