For Africa and the European Union (EU) to achieve the much-talked about mutually beneficial trade cooperation, as well as economic integration among countries, all EU trade-related support at the national, regional, and continental levels should be reorganised into African Continental Free Trade Area (AfCFTA) support, a new report by the European Think Tank Group (ETTG) has said.
The report, titled, ‘Advancing EU-Africa Cooperation in Light of the African Continental Free Trade Area’, said given the AfCFTA’s central role in African economic development, the EU should organize and prepare its trade-related support at the national, regional, and continental levels as ‘AfCFTA support’, in order to achieve economic integration and ultimately, the full potential of the free trade deal.
“Support for the AfCFTA is especially important given the current circumstances, as COVID-19 has highlighted Africa’s dependence on imports for essential goods such as food, pharmaceuticals, and medical devices. At the same time, African exporters have been hard hit by price slumps in global commodity markets and disruptions in global value chains.
Reducing intra-African trade costs will open opportunities for post-pandemic economic recovery and improve Africa’s economic resilience to future external shocks. In this respect, external support for the AfCFTA should be seen as an investment in Africa’s post-pandemic economic recovery,” said the report by European Think Tank Group (ETTG).
Furthermore, it advocated that the EU could align European investment initiatives in Africa with the AfCFTA to take advantage of the economic opportunities it offers. Support for the AfCFTA needs to also be a key element in the G20 Compact with Africa and the European External Investment Plan.
In the area of economic reforms, it said that to achieve the overarching goals of the AfCFTA agreement, additional economic reforms—alongside trade liberalization—will be needed. “The AfCFTA, on its own, is unlikely to achieve the overarching goals set in the AfCFTA agreement. Considerable accompanying measures, reforms, and investment are also needed,” the report stated.
In this regard, it said the EU should focus on supporting African countries to build institutional capacity at multiple levels, reduce the costs of logistics, improve trade-related infrastructures, streamline non-tariff measures, improve the investment and business climate, build productive capacities and regional value chains, and advance training and education for a skilled workforce.
“The significant benefit of these broader reforms points to the high potential of EU support for the AfCFTA phase 2 and 3 negotiations, which focus on services, investment, intellectual property rights, competition and e-commerce,” it added.
The report also wants to see improved coordination of EU support as well as alignment to local needs, in light of the AfCFTA. “Given the limited capacities to translate AfCFTA’s potentials into concrete policy reforms, it is essential that the EU’s approach to AfCFTA support be well coordinated and aligned to African countries’ individual needs.
Policy coherence can be achieved not only across the EU and its member states, but also across the different issue areas, such as trade facilitation, private sector development, agricultural production, and infrastructure development, to name a few. Additionally, EU development cooperation needs to encompass both financial and technical assistance for the AfCFTA.”
To this end, the EU needs to include an operational joint declaration as part of the key outcomes of the next AU-EU Summit. Another area the report said could inure to the benefit of Africa-EU cooperation is for the latter to engage more with the private sector.
This is because Africa’s private sector, it highlighted, plays a crucial role in translating the AfCFTA’s institutional framework into practical action on the ground. Against this backdrop, the report said it is important to support the productive capacity of African countries so that private actors can attract investment and take advantage of new AfCFTA opportunities.
“Donors and external partners, such as the EU, should engage in dialogue directly with Africa’s private sector about its specific needs, instead of deferring to governmental and institutional contact levels. In particular, external partners could stimulate Africa’s business environment by supporting initiatives to reduce the costs of doing business,” it further recommended.
Impact of COVID and challenges
Although the report acknowledged that the Coronavirus pandemic has delayed the take-off date of the continental trade deal, it said it will not diminish the agreement’s potential impact on Africa’s economic development. Initially scheduled for July 2020, the new target date for the AfCFTA’s launch is January 2021.
“For example, the AfCFTA could dramatically increase African countries’ trade in manufactured goods and services, both of which feature more prominently in intra-African trade than in Africa’s global trade.”
This stance is backed by the International Monetary Fund, which estimates that trade among members could be lifted by 15-25 percent in the medium term if intra-African tariffs are removed as scheduled. On challenges, it highlighted political will, institutional capacity, among others as potential hurdles that members must work to overcome.