A shot at economic logic

India needs to anticipate the promising impact of the African Continental Free Trade Area
The 12th Extra-Ordinary Summit of the African Union (AU) which concluded on July 8 at Niamey, the capital of the Niger Republic, saw 54 of 55 of its member states signing the African Continental Free Trade Agreement (AfCFTA) for goods and services. Of these countries, 27 have already ratified it. Actual cross-border free trade could start by July 2020 with an elimination of custom duties on 90% of the tariff-lines. If taken to its logical conclusion, this audacious project would eventually create an African Common Market of 1.2 billion people and a GDP of over $3.4 billion — the metrics are comparable to India’s. The AfCFTA would be world’s largest FTA, and in a world dependent on African markets and commodities, it would have global impact.
Hurdles and optimism
However, there are three main reasons to be sceptical about the viability of the AfCFTA. First, the African Union (founded as the Organisation of African Unity in 1963) has been largely ineffective in dealing with the continent’s myriad problems such as decolonisation, underdevelopment, Islamic terrorism and the Arab Spring. The AU’s grand plans, including the Muammar Qadhafi-funded Africa Unity project, have been spectacular flops. It is, therefore, natural to take the AfCFTA, the AU’s most ambitious project so far, with a ladleful of salt. Second, serious political, organisational and logistical challenges to the AfCFTA notwithstanding, the national economies in Africa are generally weak with a low manufacturing base. They also lack competitiveness and mutual complementarity. Only a sixth of Africa’s current total trade is within the continent. Third, the AfCFTA seems to be countercyclical to the ongoing global protectionist trends as seen in the U.S.-China trade conflict, Brexit and the stalemates at the World Trade Organisation and the United Nations Conference on Trade and Development. World trade is likely to grow only by 2.6% in 2019, a quarter of last year’s figure. Commodity prices are stagnant and globalisation is often being reversed. With Africa accounting for only 3% of global trade, can the AfCFTA defy the contrarian global tendencies?
Finally, once the AfCFTA is accepted as beneficial game changer, the African elite could perhaps contemplate crossing another Rubicon: an India-African FTA.
Before Africa was “discovered” by the West, it had a thriving overland trade. Large camel caravans ferried commodities such as ivory, gold, mineral salt, precious stones and slaves across prosperous trading centres such as Timbuktu, Ghana, Kano, Burnu, Agadez, Edo, Zinder, Ghat, Addis Ababa, Dar es Salaam and Cairo. Subsequent colonialism and mercantilism destroyed internal trade routes, replacing them with an ecosystem in which Africans had better links with their foreign “mentors” than among themselves. By the AfCFTA, the Africans are only trying to correct this historic distortion.

Source : https://www.thehindu.com/todays-paper/tp-opinion/a-shot-at-economic-logic/article28325511.ece

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