Niamey, Niger – The African Continental Free Trade Area (AfCFTA) promises to raise the standard of living of over a billion people by making it easier for Africans to trade with Africans. But its impact will not be limited to the continent: The historic deal is likely to affect existing agreements in Africa with China, the US and Europe.
"In order for the deal to work, we will need Africa's main partners to support a multilateral trading system," warned World Trade Organization Vice-President Jonah Frederick Aga during the launch ceremony of the AfCFTA in Niger on 7 July.
As the United States and China seek a common position, the economic footprint of the average kingdom in Africa continues to grow and can benefit from both US unilateralism and the AfCFTA.
Praise to Beijing
"The launch of AfCFTA creates new grounds for cooperation between China and Africa," said Gen Shuang, spokesman for China's foreign minister. Beijing, he said, will continue to invest in "infrastructure, commercial facilities and industrial promotion." on the Belt and Road initiative of the country.
In 2018, trade between the United States and Africa shrunk to $ 61 billion, barely 45% of its value in 2008. During the same period, trade between China and Africa exceeded $ 200 billion, and estimates suggest that it is still growing.
AfCFTA's critics say cheap Chinese products will "invade" the African market, harm local businesses, but Tanzanian businessman Ali Mufuruki disagrees. "This is not news: our stores are already filled with Asian household, electronics and car items," he told Al Jazeera. "We've been importing everything for decades [ago]while all of our resources are shipped from the continent and our manufacturing sector is still too weak. & # 39; & # 39;
Instead, he said, "AfCFTA is an opportunity to reverse this trend." With a rapidly growing internal market of 1.2 billion consumers, "African companies will be pushed to get bigger and move internationally."
The entry into force of the AfCFTA
Only 28 countries have ratified the Africa-Africa Agreement and another 26 (as Eritrea is not yet readable) are expected to follow soon. Eritrea is not yet signed. On July 1, 2020, most countries that have ratified Africa will begin to abolish customs tariffs on 90 percent of imported goods produced in Africa, with the aim of eliminating them completely before 2035.
"At first, fragile economies may lose revenue from customs clearance and competition for cheaper goods from other continental partners," said African Union Trade and Industry Commissioner Albert Muhang. Thereafter, a dozen countries ratifying Africa will begin to abolish tariffs on only 75 percent of Africa's imports to mitigate the effects of liberalization on their internal market.
"The game has just begun," said Muhisa China, secretary general of the United Nations Conference on Trade and Development. The conference played a key role in shaping the technical details of the AfCFTA. "Investing in transportation, logistics and infrastructure will be a huge challenge as Ethiopian goods are now cheaper to reach China than Nigeria," Kituyi told Al Jazeera.
Ghana: tailgate for foreign goods?
Ghana will be home to the AfCFTA headquarters, and while the country is one of the rising stars on the continent, its success may prove a vulnerability for the bloc. With $ 3.3 billion in foreign investment in 2018, Ghana is a top destination for multinational companies. Nissan, Suzuki and Volkswagen will open factories in the country in 2020, turning the region into a hub for the African automotive industry.
Yet it is this openness that scares other African countries. "Let's take a Chinese company that will open a shoe factory in Ethiopia using cheap Chinese leather," Kituyi said. "Will they use the AfCFTA tariff exemption to sell their shoes in other African countries?"
The answer, he explained, is in the definition of "rules of origin", which Kituyi defined as "a process that will give a passport to any product."
"If shoes are defined as 'made in Africa' because their local added value is more than, say, 40 percent, then they will circulate freely," said Kituyi. "Otherwise they will be considered a Chinese product."
Ongoing negotiations on rules of origin will ensure "to exclude dumping of cheap goods from third countries", Kituyi noted.
"The agreement will open opportunities for Ghanaian producers," said Ghanaian Minister of Trade and Industry Alan Kirematen. He also noted that "it will stimulate new home-grown businesses and further attract foreign direct investment."
They complicate the relationship
Although the AfCFTA may complicate existing trade agreements – between the African countries, the US, the European Union and China, the Minister of Commerce and Industry of Ghana is not worried. This "will not be a problem since [the trade agreements] they are not mutually exclusive and will promote competitiveness, "Kieremith told Al Jazeera." Ghana is a portal for investors that will be able to reach all AfCFTAs from here. "
Kituyi worries that a recent move by US President Donald Trump's administration to restart "bilateral agreements with African countries" is working against Africa's efforts to build a common market. If the United States "changes its position and negotiates with the continent as a whole, we will have reason to celebrate," the UN official said.
Rwanda Foreign Minister Richard Cezibera said he would also welcome "negotiated agreements with the US, such as those we have with Europe".
His country's trade policy was the focus of 2016 when Rwanda President Paul Kagame raised taxes on second-hand clothing from the West, prompting the US to raise tariffs on imports to Rwanda.
"If we want continental free trade to benefit us, we need products made in Africa and the textile sector is a perfect example of this," Sesibera told Al Jazeera. In Rwanda, US retaliation has finally benefited Chinese clothing companies such as C&H Garments, which have opened huge factories in Kigali. Their products made in Africa may enter Africa in the near future.
Rwanda, said Cesibera, "is the second best place to do business in Africa and the 29th in the world according to the World Bank."
"We are growing our airline, attracting ICT companies and working to create low-cost energy," he said. "So for us, [last month’s] The Niamey Meeting is a story in the making. "
While intra-African trade becomes easier, security remains a challenge on the continent. "Our instability is also affecting our exchange and economic development," Central African Foreign Minister Silvi Baypo-Temon told Al Jazeera, citing the recent peace accord with the African Union that promises to end the deadly seven-year conflict .
But the free trade area, she said, "motivates us to step up the peace process so that we can regain control of our entire territory and activate our full economic potential, especially in agriculture, which uses 75 percent of our workforce and they need to become more productive. "