Key highlights
- Cost and Trade Barriers of Africa trading with the world is equivalent to 350% tariffs and is 1.5 times larger than what you would find in developed countries.
- Costs are influenced by the barriers, as trading with trade in Africa is equivalent to a 435% tariff.
- Africa must deal with the costs and bring them down, if not it would be difficult for us to actualise good implementation of the AfCFTA.
President of the World Trade Organisation, Dr Ngozi Okonjo Iweala, has said that for Africa to make the African Continental Free Trade Area (AfCFTA) work, we must reduce the costs on the continent, to trade with ourselves and with the global community.
She stressed that the costs African exporters experience of trading within Africa and outside, are high due to certain tariffs and barriers, as she cited that it is an equivalent of 350% in tariffs, which she says is 1.5 times larger than what you would find in developed countries.
Okonjo Iweala disclosed this on Friday, as the IMF discussed its paper that talks about the potential for the AfCFTA.
Multiple Shocks
The former Nigerian Finance Minister noted that Africa is suffering from multiple shocks, and the continent in particular has been hit with the shock from the pandemic and war in Ukraine.
- “So many shocks, and recovering from these shocks need the continent to recover and to grow and that’s the first point.
- “ We see that supply chains globally have also exhibited some vulnerabilities, and this has led to the thinking that regional trade and strengthening, regional integration is a good instrument.
- “That is why at this particular time, making the AfCFTA work is important to enabling Africa to strengthen regional activity with each other.
Opportunities
She added that there are opportunities in the vulnerabilities, adding that the world is building resilience, which means diversifying supply chains, because they are too concentrated in certain areas and products.
- “For example, Africa was importing 99% of vaccines, and 90% of our therapeutics, why can’t we make them here, so if we look at this as an opportunity to build supply chains, so we are not caught napping when there is a pandemic.
- “It’s good to take advantage of this opportunity of building global resilience to attract investment in the continent.
She added that the AFCFTA is an instrument for the aspirations of the continent, a key instrument to deliver agenda 2063 of the African Union which seeks to industrialise the continent and bring growth.
Steps to reduce costs
The WTO Chief stressed that African policymakers need to do certain things to make it work, which includes, the costs on the continent to trade with outside and amongst ourselves, which she says are too high, she added:
- “This is an equivalent of 350% tariffs and is 1.5 times larger than what you would find in developed countries.
- “The costs are because of the barriers, trading with trade in Africa is equivalent to 435% tariff.
- “Unless we can deal with the costs and bring them down, it would be difficult for us to actualise good implementation of the AfCFTA
- “Let’s reduce costs, we are starting and assisting at the WTO, we spent about 4 million euros in the past 3 years helping different countries build capacity based on WTO standards and rules which is very good, we want this to happen, we need to look at the European Union, where trade is 60%, in ASEAN it’s about 21%, for us in Africa has ways to go.”
What you should know
The African Continental Free Trade Area (AfCFTA) increased intra-African trade by 20 per cent in 2022.
This was disclosed by the Acting Executive Secretary of the Economic Commission for Africa (UNECA), Antonio Pedro, at the Ninth Session of the Africa Regional Forum on Sustainable Development in Niamey, Niger.
The UNECA boss noted that despite the growth, it failed to hit the commission’s target of 52%, adding:
- “Certainly not yet. But the levels of intra-African trade have gone up from 13 per cent or so, before the African Continental Free Trade Area agreement was adopted, to now around 20 per cent but that is not good enough because other regions are trading amongst themselves.
- “I mean, above 70 per cent or so Europe, Asia. So, that certainly is our target.”
Quite good