Forty-four African countries sign a free-trade deal

 Rwanda’s president and the host of the AU summit, had no time for sceptics. “Some horses decided to drink the water. Others have excuses and they end up dying of thirst.”
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“LET’S get together,” sang the choir to the rhythm of Bob Marley, as a succession of African leaders signed an ambitious, continent-wide free-trade agreement in Kigali on March 21st. Although all 55 members of the African Union (AU) had been involved in negotiations around the grandly named Continental Free Trade Area (CFTA), not all were ready to sign as one. On the day, 44 put pen to paper. Among the holdouts was Nigeria, Africa’s largest economy. Paul Kagame, Rwanda’s president and the host of the AU summit, had no time for sceptics. “Some horses decided to drink the water. Others have excuses and they end up dying of thirst.”

The logic of the deal is sound. Trade in Africa is still shaped by relationships and infrastructure dating back to the colonial era. Countries mostly sell primary commodities to other continents. Only 18% of their exports are traded within Africa, where they often face high tariffs. The CFTA is meant to change that by creating a “single continental market for goods and services”. UNCTAD, a UN agency, reckons that eliminating import taxes between African countries would increase regional trade by a third and lift African GDP by 1% over time. Currently, nearly half of this trade is in manufactured goods. Services would also be opened up.

But not everyone is convinced. Muhammadu Buhari, Nigeria’s president, cancelled his flight to Kigali amid domestic pressure. An official says Nigeria was given just a few days to read the text, which he worries will hurt incumbent businesses.

Some protectionists fret that importers will slap “Made in Africa” labels on goods from elsewhere. “It will kill our industry and kill our jobs,” says Ayuba Wabba of the Nigeria Labour Congress. Such instincts run deep in Nigeria. Its biggest company, Dangote Cement, was nurtured with import restrictions, which shielded it from foreign competition. Chiedu Osakwe, Nigeria’s chief negotiator, is nevertheless confident that his country will sign in due course. Big countries such as Nigeria stand to gain most from the deal, which will help their firms expand regionally.

Many of the details of the accord are still to be agreed upon. Countries are supposed to eliminate tariffs on a list comprising 90% of products (although they have not yet agreed what will go on this list). In practice, however, that could allow them to leave unchanged duties on most of their current imports, which are concentrated in a narrow range of goods.

Tariffs are not the most important barrier to trade. A bigger obstacle is that standards and licences are different across Africa. Take the example of a large South African retailer with stores elsewhere on the continent. It has a big warehouse where employees take products such as tubes of toothpaste out of the cartons that are used in South Africa and repack them into ones that comply with labelling rules in other countries. Red tape also slows things down. The Trade Law Centre, a South African think-tank, looked at the time taken for customs and port handling in Africa and in Singapore, and then imagined closing the gap by a fifth. The economic gains would be roughly double those expected from eliminating tariffs. The CFTA will try to lower these hurdles to trade, though there is little sign of the EU-style machinery that makes Europe’s single market work.

Big plans can go stale. A mooted free-trade area for the Americas is now defunct. This one will come into force only when it has been ratified by 22 signatories. Trade patterns will not change until countries start making things that their neighbours want to buy. But some countries are galloping ahead, hopeful the rest will catch up

 

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