U.S.-Africa Leaders Summit a Good Opportunity to Move African Free Trade Area Forward

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About 50 African leaders are visiting Washington, D.C. starting today for the U.S.-Africa Leaders Summit. This is the first time that a U.S. president will bring together a number of a African heads of states at a single conference. The focus of the meeting is on Africa’s economic potential, to which U.S. investors and business owners should pay close attention. In addition to Africa’s economic potential and what that means for U.S. businesses, another issue should be discussed–the African Free Trade Area–which, according to the latest news, is scheduled to take place by 2015. In other words, what will the African Free Trade Area mean for the African economies themselves and trade between African countries?

Over the last few years, leaders from a number of African states have discussed the possibility of a large free trade area by 2015.  A continent-wide free trade area has the potential to promote intra-African trade. At the same time, several challenges must be addressed to boost intra-African trade.

The African free trade area will consist of 26 countries from the Southern and East African regions. Furthermore, it combines several regional trading blocs–Southern African Development Community (SADC), East African Community (EAC), and Common Market for Eastern and Southern Africa (COMESA).

A free trade area reduces or eliminates tariff barriers that hinder trade between member countries.

An African free trade area presents a number of opportunities for the African countries and businesses seeking to invest in and access markets throughout the continent.

Opportunities – Africa

  • Single market worth US$2.6 trillion
  • Promotes intra-African trade, which stood at only 10% in 2011
  • Output expected to expand by 50% by 2015 (South African President Zuma’s prediction reported in the news media)
  • Africa’s spending power expected to rise 30% by 2015 (Zuma’s prediction reported in the news media)

Opportunities – Foreign investors

Challenges

  • Poor infrastructure
  • Administrative and legal barriers

Africa’s growth and establishment of a wider free trade area also has the potential to give the African countries the ability to grow and shape their own economies. (See The Pursuit of Independence in the 21st Century). A free trade area also has the potential to benefit foreign investors and exporters. For those companies in the services sector, such as telecommunications, banking, retail and construction, pay close attention.

I will be watching the summit closely to see if Africa’s efforts to establish its own trade bloc will be discussed and what becomes of that effort by next year.

*To find out what contributes to Africa’s growth, check out the McKinsey and Company study

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About Dr. Sarita D. Jackson

is the President and CEO of the Global Research Institute of International Trade, a think-tank/consulting firm that examines trade policies and their impact on domestic businesses. Prior to heading GRIIT, Dr. Jackson was a tenured associate professor of political science in North Carolina and worked as a trade policy consultant for an Arlington-based consulting firm. She has participated in trade policy projects and conducted research on free trade negotiations in Botswana, Antigua and Barbuda, Dominica, Dominican Republic, Mexico and Panama. Dr. Jackson has also traveled to Chile and Argentina to study their political systems and economic integration policies.
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3 Responses to U.S.-Africa Leaders Summit a Good Opportunity to Move African Free Trade Area Forward

  1. Crispus Karanja says:

    Free trade area within the African continent can be very strategic for the productivity and growth of the continent, there remains some critical challenges in this pursuit among them are economical limitations like; under developed infrastructure, limited energy Production, developing capital developed markets, other limitations are political oriented among them, political risk and governance problems. Various tremendous steps have been taken to improve on those limitations but the main challenge remains the bottleneck of having an enriched supply chain to tap on the vast natural resources in Africa and competitively produce them to both global market and inter continental markets, the increased efforts and commitments highlighted in the recent US AFRICA summit tackles this problem with a promised commitment to electricity generation programs, other partners like China are also very much involved in mega infrastructural projects in the continent, multinational investors through private equity financing on various projects are also getting involved in strategic beneficial projects for the continent on the long term, whereas this efforts by foreign parties are vital for the continent especially on the solving of economic and technological challenges, a fast solution to geo-political challenges can also come from the various trade organisations that already exist such include COMESA, ECOWAS, EAC, SADCC and PTA . The strategic alliance and efforts by this Pan African trading blocks shall also be very crucial. The US AFRICA summit provides a good chance not only for re visiting existing trade policies between the two Africa and America like AGOA trade pact but it also provides a strategic opportunity for re defining how to improve Productivity of African resources as well as both intra and global African trade

    • Dr. Sarita D. Jackson says:

      Hi Crispus. Thank you so much for your detailed comment. I agree that a number of issues need to be addressed such as infrastructure and governance. As a former trade policy consultant for the Southern African region, it was apparent that trade agreements alone are not enough. Rather, policies need to be put in place to develop the capacity to take advantage of trade programs and facilitate the flow of intra- and extra-regional trade, as you point out. My next post discusses a shift in US trade policy that would go beyond AGOA toward an approach in which the African countries play a role in shaping the trade policies so that they can be even more beneficial–http://wp.me/p28ZWx-1vm. Thanks again for your insight.

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