When looking at economic cooperation and integration I often find myself thinking about the relationship between the Ottoman Empire and city-state of Venice. These were very different societies yet they proved immensely valuable to each other owing to their mutually beneficial economic ties. Their trade treaties were a natural extension of, and reaction to, their geographical realities and a number of factors ranging from natural resource endowments to human capital and availability of skills. Today we see the value in forging similar economic ties but often don’t consider the opportunity costs associated with pursuing these publically visible agreements.
Africa’s economic integration is a cornerstone of the African Union’s (AU) agenda. Reducing intra-African trade barriers and unifying policy on matters of trade aims to create a predictable and more competitive environment that will benefit producers and consumers alike. Lower trade barriers mean lower prices for intermediate and final goods, arguably better positioning African producers to compete globally as well.
A continent wide free trade area is intended to be the first step towards full economic integration with the end goal being a continental economic and monetary union, an EU of sorts but for Africa, with a common currency and central bank.
The roadmap for establishing the Continental Free Trade Area (CFTA) by 2017 was agreed upon at the 18th ordinary AU session in 2012, but not without its opponents. For one the Intergovernmental Authority on Development (IGAD), an eight-country Regional Economic Community (REC) in East Africa, questioned the feasibility of the proposed deadline and whether resources could be better spent on infrastructure development, the removal of non-tariff barriers, advancing trade facilitation and addressing the challenges of food security. Arguably concerns that better address the reality and immediate needs of the continent.
The CFTA roadmap first calls for the various REC’s to reach the ‘free trade area’ stage of economic integration; for non REC member states to join REC’s; and the establishment of the Tripartite Free Trade Area (TFTA), an intra-REC FTA between the SADC (Southern African Development Community), COMESA (Common Market for Eastern and Southern Africa) and EAC (East African Community). The challenges faced in this phase of the roadmap are the dependence on REC’s to meet their integration deadlines and for states to join FTAs in REC’s.
Currently the AU recognises 8 REC’s, which are at various levels of economic integration and with overlapping member states. Moreover agreeing on the amount and recognition of claimed geographical areas as “states” is a point of controversy. The AU recognises 55 states in Africa, including Morocco and the Sahrawi Arab Democratic Republic (Western Sahara) as separate countries; however due to the AU’s recognition of Western Sahara as a sovereign state Morocco is the only non-AU African state. This is further complicated by the fact that Morocco is a recognised member of the United Nations while Western Sahara is not.
The TFTA and associated RECs on the other hand seems brimming with political will, albeit for a very particular aspect of the trade pact. The launch of the TFTA is scheduled for 10 June 2015 in Sharm El Sheikh, Egypt, during the 3rd Summit of the Tripartite Heads of State and Governments. The launch follows the apparent completion of negotiations on trade in goods for the TFTA with trade in services and trade-related aspects to follow suit. However, a number of member states failed to produce any tariff offers for the private sector to work with. And the thorny issue of rules of origin has yet to be engaged. Without agreement on rules of origin to govern tariff concessions the FTA will not have any meaning, bringing into question the entire project.
Members endorsed the draft agreement, citing the principle of variable geometry, reportedly to save face in meeting the deadline. The question then is what’s being launched? Without a comprehensive trade in goods regime, no trade in services or trade-related aspects and very limited participation it seems like a highly publicized gathering of intent is being celebrated.
Without being overly critical and cynical towards the deadline of the CFTA, the progress made by the TFTA does pave the way for further continental integration, even if it only remains at the shallow end of the integration pool. Reducing tariffs between African states is likely to have the desired effect of promoting economic development, via increasing intra-Africa trade, assuming that barriers to trade in goods continue to decline and are not simply replaced by other protective measures or behind-the-border barriers.
The second phase of the CFTA roadmap is to consolidate the regional FTA’s into the CFTA in 2015-2016. Negotiations on the CFTA are to be launched during the 25th AU summit in South Africa on the 15th of June 2015. The ordinary session is sure to be filled with integration zeal, as it will follow shortly after the launch of the TFTA. The final phase of the CFTA roadmap is its proposed launch in 2017.
But the CFTA project is likely to remain within the same narrow scope of the TFTA. The continental trade pact will include a substantial amount of negotiating parties, each with their own domestic concerns and agendas that will need to be coordinated during both the negotiation and implementation stages. To add more straw to the already strained camels back, the framework also need to be cognisant of the vast differences between member states’ economic development and related national interests.
During her opening statement to the Meeting of AU Ministers of Trade on 14 May 2015, H.E. Fatima Haram Acyl -Commissioner for Trade and Industry African Union Commission – stated that “Many of the largest countries in the world, and Africa’s most significant trading partners, are moving towards the establishment of Mega-Regional Trade Agreements.” referring to the TTIP, TPP and RECP. She continued this thread, referring to the potential impacts of mega-regionals on Africa, by stating “We will be better positioned and better off if we move to establish the CFTA as quickly as possible.”
The pressure of possibly being left at a weaker global bargaining position seems to play its part in motivating the continental push. Suggestions on strengthening the CFTA were made by UNCTAD at the African Union Trade Experts meeting in Addis Ababa, 8 to 10 May 2015. Among these suggestions was the call for the CFTA to be comprehensive in creating a vibrant and resilient economic space for trade in goods, services and agriculture as well as including aspects such as competition policy, investment policy and dispute settlement.
Which brings me back to my initial thought on Venice and the Ottomans. Is this a natural extension of market forces? Does the push for a CFTA justify the forgoing of the opportunity costs, specifically those mentioned by the IGAD? How will this decision to actively forge economic integration play out in the global context and in the long run?
If the precursor of the CFTA, the TFTA, is any indication of the speed and direction the economic integration efforts are heading in, then the assumption can be made that this will prove to be another rushed political exercise at the expense of more pressing development objectives, in the short run at least.