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The call for a continental free trade area by 2017 in a move designed to boost intra-African trade looks like good news for Africa. To date the main characteristic of Africa’s trade is its high external orientation and relatively low level of intra-regional trade. Looking at the figures issued by various economic development organizations, intra-African trade stands at around 10 per cent compared to 60 per cent, 40 per cent, 30 per cent intra-regional trade that has been achieved by Europe, North America and ASEAN respectively.
Some argue the figure does not take into account the informal cross border trade, but even if allowance is made for Africa’s unrecorded informal cross-border trade, the total level of intra-African trade is not likely to be more than 20 per cent, which is still lower than that of other major regions of the world.
The Pan African Chamber of Commerce and Industry is organizing a conference here in Addis Ababa before the end of the year to discuss why African countries do not trade much with each other, and why they remain unable to fully harness the synergies and complementarities of their economies and take full advantage of the economies of scale and other benefits, such as income and employment generation that greater market integration would have provided. Study show that there are cases where products and services could have been sourced competitively from other African countries but were procured from outside the continent.
Observers worry that because Africa does the bulk of its trade with the outside world and the exports are heavily concentrated on primary commodities, the continent has been particularly vulnerable to external macroeconomic shocks and protectionist trade policies. This was evident from the recent global economic and financial crisis which, although not of the making of African countries, has had serious negative impact on the continent’s economic performance. Although in today’s increasingly interdependent global economy, Africa cannot delink itself from trading with the outside world. However, the continent can reduce its vulnerability to external shocks and improve its trade and economic performance if its market integration is deepened and the countries do more of their external trade with each other. Thus, a major lesson to be drawn from the systemic shocks in the global economy is the need for Africa to promote intraregional trade.
At the press conference held early in the week, the Executive Director of PACCI, Kebour Ghenna, explained that ‘today’s Africa would not accept a zero-sum game in trade, commerce or economic growth. We cannot accept, he said, a world where only few countries prosper at the expense of many, we need to work together and act together. African countries should prioritize the establishment of economic ties with each other, while at the same time seek a balanced ties with the world to ultimately reach a win-win situation for all.’ Kebour indicated that launching the Continental Free Trade Area is a good first step but stressed there are considerable challenges to actually achieving a free trade area”.
On 28 November African national chambers of commerce will gather in Addis Ababa to reaffirm their support and work towards a Continental Free Trade Area. “We reaffirm to achieving free and open trade and investment in Africa” reads the press release issued by the Secretariat. The conference expects to bring together national business leaders from 30 countries across Africa.