Actualising economies of scale through economic integration

March 14, 2016
Source: thebftonline | Ghana
Actualising economies of scale through economic integration

As part of a broader effort to increase intra-regional trade within the continent, plans to establish a pan-Africa trade pact are well underway.

The proposed Continental Free Trade Agreement (CFTA), which is to become operational by 2017, will create a single market for Africa that will allow Africa’s over one billion population, goods, services and skills to move freely; creating a larger, more vibrant economic space for trade and investment.

Considering the current low level of intra-African trade, reckoned at 12 percent of total trade compared to 60 percent for Europe and 40 percent for North America and 30 percent for ASEAN, according to World Trade Organisation (WTO) statistics, the CFTA seeks to encourage intra-African trade to bring more benefits to Africans.

The United Nations Economic Commission for Africa is optimistic that African countries will reach consensus on the proposed CFTA, as preparations are being led from Addis Ababa. Leaders at the African Union Summit, which took place in 2012 under the theme ‘Boosting Intra-African trade’, endorsed a plan to set up a Continental Free trade Area (CFTA) by 2017 and forms a key component of the AU’s strategy to boost trade within the region by at least 25-30 percent in the next decade.

In spite of reservations about the timelines, the idea excites us since enhancing such trade can contribute significantly to sustainable economic growth, employment generation, poverty reduction, inflow of foreign direct investment, industrial development, and better integration of the continent into the global economy.

Others like former Nigerian President Goodluck Jonathan believe the 2017 target is unrealistic, and that there are no quick-fixes to integration. He may have a point since some regional groupings on the continent share his sentiment, but this does not invalidate the plan.

We should rather focus on the advantages to be derived from such a pact, and member-states, regional economic groups and development partners ought to adopt the necessary measures toward effective implementation of the action plan that details priority action clusters to address obstacles to increasing intra-African trade.

It is refreshing to hear the Director-General of the World Trade Organisation (WTO), Pascal Lamy, support the initiative -- stating there is absolutely no contradiction between accelerating regional integration and deepening the multilateral trading system, as well as encouraging leaders to operationalise intra-African trade.

There can be no better endorsement, and it is our hope that the initiative will be deepened at the up-coming 10th WTO Ministerial Conference in Nairobi, Kenya.