Trade

Coronavirus hits Africas mega trade deal plans

ADDIS ABABA, Ethiopia — Wamkele Menes first days at work were a huge anticlimax.

Last week, as he was sworn in as Africas new trade czar, the continent was becoming engulfed in the global fight against the coronavirus. Trade talks aimed at launching the African Continental Free Trade Area (AfCFTA) on July 1 are now on hold. And Menes move to Accra — the capital of Ghana where the AfCFTAs new secretariat will be based — is postponed indefinitely.

As the world grapples with its biggest health crisis in living memory and unrolls budgetary measures not seen since World War II to combat the economic impact of a pandemic that has caused more than 15,000 deaths, officials in Africa are now resigned to delaying the launch of what would become the worlds largest free-trade bloc indefinitely.

“It would be unreasonable for any government to direct resources to meet the deadline when the publics health is so gravely at stake,” Mene told POLITICO, adding that he expected heads of state to announce a delay in the coming weeks. “My view now is that the focus should be on saving lives.”

The launch of the AfCFTA has risen to the top of the political agenda under South Africas President Cyril Ramaphosa, whose country currently holds the rotating presidency of the 55-member African Union. The U.N. believes the accord could boost intra-African trade by 52 percent when duties on goods crossing borders are finally eliminated. And EU leaders are keeping a close eye. Before the coronavirus crisis hit, Commission President Ursula von der Leyen made two visits to the continent within her first 100 days in office.

“There is a nexus between peace and security and development, and trade is part of this” — Stephen Karingi, director of the trade division at the U.N.s Economic Commission for Africa

Apart from the potential economic opportunities for European companies, the EU — which has poured €60 million into the project — sees Africas continent-wide trade deal as an opportunity to bolster global commitments to multilateralism and rules-based trade. It is also as much about enabling peace and security on the continent as it is about giving those who live there a reason not to migrate northwards to Europes shores.

“There is a nexus between peace and security and development, and trade is part of this,” said Stephen Karingi, director of the trade division at the U.N.s Economic Commission for Africa. “The stakes tend to rise. When you are in a free-trade area you cannot afford to have conflict.”

Karingi also said there “is definitely going to be a delay” to the July 1 launch date. “We are already out of the schedule.”

African trade ministers first decided to press forward with forming an Africa-wide free-trade bloc in 2010, a decision that was endorsed by leaders in 2012. Concrete trade talks have been underway since 2015.

European Commission President Ursula von der Leyen in Addis Ababa in December 2019 | Eduardo Soteras/AFP via Getty Images

Coronavirus permitting, the intention is still for AfCFTA to launch this year, with officials looking to resume talks toward the end of May.

Quite apart from the practical difficulties of negotiating remotely, the pandemic is set to ravage African economies. The U.N. has scaled back its projection of Africas GDP growth from 3.2 percent to 1.8 percent this year.

Even without the interference of a pandemic, achieving a deal looked challenging — despite the progress so far. The current text proposes countries having five years to drop tariffs to zero on 90 percent of their goods. They then have seven years to drop tariffs on 7 percent of their tariff lines, while the remaining 3 percent can be protected. In reality, it could take much longer.

“In terms of bringing down the non-sensitive and the sensitive items, give it 13 years,” said Karingi, adding that 30 countries in Africa had so far ratified the deal. Ethiopia, Zimbabwe, Sudan, Mozambique and Zambia, meanwhile, all agreed earlier this year to drop tariffs on 90 percent of their goods.

Countries have almost concluded negotiations on rules of origin — products that can take advantage of the free-trade bloc must be made in Africa — though they still have a long way to go before agreeing on intellectual property rights, trade in services and competition policy.

Whats more, there is no guarantee that free trade really means free trade. Last year, Nigerian President Muhammadu Buhari partially closed his countrys border with Benin in an attempt to halt the smuggling of rice and other commodities. And tensions often flare between Tanzania, Kenya and Uganda over commodities such as sugar, carrots, beans and maize.

There is also a massive infrastructure deficit in Africa and a large amount of investment is still needed for roads, train linkages and air connections.

“What is most important is how we are going to guarantee the involvement of family farmers in the whole value chain” — Fatma Ben Rejeb, CEO of the Pan-African Farmers Organization

“There is still a lot of work that needs to be done,” said Vera Songwe, executive secretary of the U.N.s Economic Commission for Africa. Asked about the impact of the coronavirus on trade talks, she said “things are going to slip a little bit.”

Songwe was also realistic about the extent to which Africa will start trading once AfCFTA is launched, despite already having launched four competing regional trade zones — ECOWAS in the west, EAC in the east, SADC in the south and COMESA in the east and south.

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