CONTINENT-WIDE TRADE ZONE TO BOOST SOUTH-SOUTH COOPERATION
By Daniel Gumm
The plan to create a new 26-nation liberalised trade zone for Africa, spanning the length of the continent from Cape to Cairo, could open up more possibilities for South-South cooperation that would benefit Africans.
Members will come from three existing regional groupings, the Southern African Development Community (SADC), the East African Community (EAC) and COMESA, the Common Market for East and Southern Africa.
The idea is to improve regional integration and in the long-term create a single African trading bloc to compete with other joined-up markets in Europe, Asia and the Americas.
But how will this affect Africa's existing trade relations, and in particular the growing South-South links between African countries and emerging markets like China and Brazil?
Taking the example of South Africa, exports to the Brazil-Russia-India-China (BRIC) countries increased four-fold between 2006 and 2010. In the same period, imports doubled, indicating strong trade growth but still a trade deficit.
South Africa's Minister for Trade and Industry, Dr. Rob Davies believes forming the Tripartite Free Trade Area (T-FTA) will improve the quality of the continent's engagement with other emerging market partners.
He explained that 'they view it as an important development,' adding that, 'but so do we - from the point of view that we want to work towards improving the quality of our trade, moving away from supplying primary products like commodities to being able to export value-added products.'
Working together as a single bloc with a population of 600 million and a combined gross domestic product (GDP) of nearly $1 trillion, he said, would make this aim more achievable.
Simon Freemantle, a senior analyst at Standard Bank's African political economy unit, however sees little immediate impact from the T-FTA on South-South relations, due in part to the fact it could take at least a decade to come into operation.
In the longer term, though, Freemantle believes aspects of the T-FTA, like increased market integration and improved regional infrastructure, may help African countries be more competitive, particularly in the manufacturing sector.
'A lot of the imports that come from China and India, for example, are low-cost manufactured goods which African countries currently don't have the capacity to make,' he explained.
'But there is a huge market for these goods here. If that market were made more accessible by, for instance, reducing trade tariffs and improving regional integration, then there is no reason why these products could not be produced in Africa instead of being imported.'
Overseas investors could also share Africa's gains in terms of improved infrastructure and integration, he said.