Free Trade to Help Africa Rebuild After Virus, Even If Delayed

(Bloomberg) -- The first commerce under an Africa-wide free-trade pact will provide new stimulus to countries on the continent to overcome the economic damage of the coronavirus, even if it could be delayed for around six months, according to the most senior official of this agreement.

The secretariat of the African Continental Free Trade Area is exploring the feasibility of moving talks involving more than 50 countries and real-time translation into four languages online. However, full border closures by some 30 nations aimed at limiting the spread of the virus is likely to restrict trade flows over the coming months, Wamkele Mene, the secretary-general said in an interview.

While the agreement entered into force legally last year, protocols for trade in goods, including tariff concessions, need to be agreed for its implementation and commerce to start on July 1. Disruptions caused by the pandemic have set negotiations back by two and half months.

“The consideration for postponement doesn't mean that there no longer is political will and that there is no longer political commitment,” Mene said by phone from Addis Ababa on Wednesday. “We have to adjust to conditions that unfortunately nobody could have anticipated and we have to give the space to governments to solve the public health crisis as a matter of priority.”

Customs Union

Africa lags other regions in terms of internal trade, with intracontinental commerce accounting for only 15% of the total, compared with 58% in Asia and more than 70% in Europe. The agreement is meant to help change that, aiming to lower or eliminate cross-border tariffs on 90% of goods, facilitate the movement of capital and people, promote investment and pave the way for the establishment of a continent-wide customs union.

When fully operational by 2030, it will be the world's biggest free-trade zone by area, with a potential market of 1.2 billion people and a combined gross domestic product of $2.5 trillion.

The pandemic underscores the need for regional value chains across Africa and enhanced manufacturing capacity on the continent, Mene said.

“If anything, this crisis has demonstrated the need for us to reconfigure our supply chains, to reconfigure our trade links and to establish regional value chains in Africa that will advance our own African industrial development capacity without completely disconnecting from the rest of the world.”, he said. “The reliance on global supply chains presents one with challenges/ When you have a global supply chain disruption, you actually become very very exposed.”

The outbreak has also highlighted the need to address the extent to which intellectual property rights on the continent allow it to respond to a pandemic and set up a generic drug industry that can service industrial development and public health priorities, he said.