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27.08.2019 Feature Article

Foundations Of AfCFTA

Foundations Of AfCFTA
LISTEN AUG 27, 2019

The worthless nature of International Trade of Africa with the advanced countries makes a free trade area worthwhile for the continent. In fact, Africa has been a losing partner in International Trade for so many years. The development of an Economic bloc for the African Continent will noticeably prevent the Cobweb of Aid. Aid has been a bait for many advanced countries to trap the “semi-independent” nations in Africa. This Economic bloc must be utilised properly to create an efficient market for members in the area. The benefits of such a bloc are huge as the market size is equal to that of India or China in terms of population. All the heads of states that signed to the agreements of the bloc must make efforts to harness the opportunities available.

The African Free Trade Area will thrive on many home-grown economic policies. The economic environments within this bloc are different in many facets. These economic environments nonetheless, should not be limiting the eventual implementation of the agreements in this economic resolution. The macroeconomic variables will have much impact on the positive implementation of the treaties of this bloc. This opinion does not discount the overall importance and benefits of the bloc created. Yet, this viewpoint is fitting in analysing the underlying factors that will determine the effectiveness of the trading bloc created. The practical operative power of the bloc will certainly depend on a number of economic factors which may include these:

The removal of trade tariffs on the goods of member countries signifies the forfeiting of revenue. This demands loyalty from members in executing the protocol. Member countries then need to be loyal in all regards and be committed to the agreements to meet the smooth and effectual performance of the codes of the agreement. The opportunity of buying cheaper raw materials from sources within the area will be enlarged. The abolition of tariffs or the imposition of lower tariffs on a host of raw materials that are used by producers in the region will lower the cost of production. With patriotic feature exhibited by producers within the area, goods will be cheap for member countries. The loss of revenue in tariffs should not deter members from pursuing the goals of the bloc. All states that subscribed to the bloc must ensure loyalty to the guiding principles in the agreements.

The recently created Africa Free Trade Area will independently be effective if it is predicated on well-developed regional capital markets. The Capital Markets should be able to serve the funding needs of the entrepreneurs within the area. Internal funding at lower interest rates will definitely affect the realization or otherwise of the goals of the bloc. Producers and entrepreneurs should be able to have available funds to expand in order to take advantage of the market created. The capital markets must be developed to create a larger capacity to absorb the needs of the countries their corporations. A well-functioning economic bloc should be able to guarantee efficient capital markets.

Factors of production which are key in determining the cost of products are relatively higher in terms of prices in this region. There are relatively higher prices of products for some member countries. This can affect the determination of the level of inflation in other countries. There should be a standardised pricing-scheme for uniformly produced goods in an industry. A range of prices for products in an industry should be determined if possible. Though exchange rate volatility does not allow uniform factor pricing for countries, there can be a standard to stabilize prices.

The economic indicators, namely macroeconomic indicators largely affect the growth of economies world-wide. Controlled macroeconomic indicators will offer great benefits to countries to fully realise the useful returns of the bloc. The macroeconomic indicators for some member countries within the area are averagely bad. It is fit for all member countries to put an economic surveillance on the macroeconomic indicators to stay within a particular band. This will prevent the erosion of the welfares from the bloc. Inflation and higher prices can be imported and exported between and among countries.

Knowledge transfer, technology and domestic laws and policies will deeply impact on the long term growth of the trading bloc. There should be an easy means to by which knowledge can be transferred between and among member countries. In reality, some countries have developed competitive methods to produce or manufacture some items. Any technology that is developed elsewhere should be available in order to be transferred with ease to other countries. There should be different forms of technology to verify genuine products that are developed within the continent. Detecting fake products imported from elsewhere should be made with advanced technology that is usable in the countries of the continent. Domestic policies and laws on retailing as well as trade in general should clearly be delineated to avoid complicated execution of the protocols of the alliance.

The African Free Trade Area is an essential trading bloc expected to be created several decades ago to shake off the continent of the eternal effects of worthless trade that are experienced with the advanced economies. This is a golden opportunity for Africa to chart its own path in trade to maximise its fruits internally. The fundamental constituents of the bloc that will ensure its competent functioning must be dealt with properly by all states.

Emmanuel Kwabena Wucharey

Economics Tutor- Kintampo SHS.

Emmanuel Kwabena Wucharey
Emmanuel Kwabena Wucharey, © 2019

The author has 41 publications published on Modern Ghana. Column Page: EmmanuelKwabenaWucharey

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