World Economy Brief
World Economy Brief
The Emergence of African Continental Free Trade Area Agreement and Lessons from the Asia-Pacific Trade Agreement
- Author Samuel Igbatayo
Africa’s regional integration agenda arrived at a cross roads in 2019, with the adoption of the African Continental Free Trade Area (AfCFTA) agreement. The AfCFTA framework came into force on 30th May, 2019, with its ratification by The Gambia, which brought the total number of African Union (AU) member state ratifications to twenty-two, the minimum threshold for AfCFTA implementation (Baker McKenzie 2019). As of May; 2022, forty-three of the 55 African countries have ratified the AfCFTA agreement (African Union 2018). The 12th Extraordinary Session of the Assembly of the African Union in Niamey on 7th July; 2019, witnessed the launching of AfCFTA’s operational phase, which is governed by five instruments, namely: the rules of origin, the online negotiating forum, the monitoring and elimination of non-tariff barriers; a digital payment system and the African Trade Observatory. In addition, the beginning of trade under the terms of the agreement was set for July 1, 2020 (TRALAC 2020).
A free trade agreement (FTA) can be aptly described as a pact between two or more countries on areas in which they agree to lift most or all tariffs, and other barriers to imports and exports among them (Barone 2019). Under a free trade framework, goods and services can be traded across international borders, with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
The theory of free trade Agreements is rooted in classical economics, dating back to the era of Adam Smith. During this period, David Ricardo (1772-1823), a British political economist, was acknowledged with pioneering thoughts on free trade as a key instrument for wealth accumulation. The evolution of preferential trade agreements is traceable to the rise of European countries after World War II, with the establishment of the European Coal and Steel Community in 1951, a development that eventually culminated in the creation of the European Union (EU) (Johnston 2019). Spurred by the success of regional bodies with free trade agreements and Africa’s poor trading performance; estimated at a paltry 3% of annual global trade, the African Union embarked upon the creation of the AfCFTA agreement as a tool for Intra-Africa trade and regional integration.
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