A World Bank report has re-emphasised the importance of the African Continental Free Trade Area (AfCFTA) agreement in becoming a game changer on the continent, especially, as African countries seek to bounce back from the devastation caused by the coronavirus pandemic.
According to the World Bank, economic growth in the region is projected to decline from 2.4 percent in 2019 to between −2.1 percent to −5.1 percent in 2020, the first recession in the past quarter century. It will also cost the region between US$37 billion and US$79 billion in terms of output losses for 2020.
Again, the report adds, the COVID-19 crisis is also contributing to increased food insecurity as currencies are weakening and prices of staple foods are rising in many parts of the region. Also, policy responses that result in subregional trade blockages will increase transaction costs and lead to even larger welfare losses.
In Sub-Saharan Africa, the bank says, these policies will disproportionately impact household welfare as a result of price increases and supply shortages. Welfare losses would amount to 14 percent relative to the no-COVID-19 scenario if countries were to close their borders to trade.
Furthermore, border closings, which were intended to stop importation of the virus to other countries, have disproportionally affected the poor, particularly small-scale cross-border traders, agricultural workers, and unskilled workers in the informal sector.
It is for these reasons that the Breton Woods institution sees an advantage in the continental trade deal which will create the largest free trade area in the world, measured by the number of countries participating, saying it will boost trade and other economic activities to help countries come back to a path of growth.
“A successful implementation of AfCFTA would be crucial. In the short term, the agreement would help cushion the negative effects of COVID-19 on economic growth by supporting regional trade and value chains through the reduction of trade costs. In the longer term, AfCFTA would allow countries to anchor expectations by providing a path for integration and growth-enhancing reforms.
Furthermore, the pandemic has demonstrated the need for increased cooperation among trading partners. By replacing the patchwork of regional agreements, streamlining border procedures, and prioritizing trade reforms, AfCFTA could help countries increase their resiliency in the face of future economic shocks,” the World Bank stated in a report titled: The African Continental Free Trade Area, Economic and Distributional Effects.
The trade pact connects 1.3 billion people across 55 countries with a combined GDP valued at US$3.4 trillion.
Despite the envisaged advantage of the trade agreement, critics have raised questions about the implementation of the deal, arguing it has been rushed and not adequately planned. But Secretary General of the AfCFTA Secretariat, Wamkele Mene has debunked such claims, saying it is a process that must start from somewhere.
“In some parts of the world we get criticism. We get criticized and we are told that we are rushing things and that we are not quite ready. But I want to ask those who hold that view, tell me of a trade agreement where all countries are ready at the same time. I don’t know yet. I have never heard of a trade agreement, where in that particular arrangement, every single country is ready on day one.
Not to my knowledge, it doesn’t exist. And so, I regret that as Africans we are held to a much higher standard to how trade agreements should operate in practice. We negotiated this agreement in record time and we are still continuing with negotiations, but there have been other arrangements that have taken much more than us to negotiate and to enter into force. There are other agreements and negotiations that have been going on for decades, and we have been able to do this in less than five years,” Mr. Mene said.
Source: thebftonline
