African Union must create compensatory mechanisms for free trade area members

11th October 2019 By: South African Institute of International Affairs

African Union must create compensatory mechanisms for free trade area members

The African Union has to develop compensatory mechanisms for the African Continental Free Trade Area (AfCFTA) member states that may suffer losses over the intensified economic integration.

The AfCFTA, which entered into force on May 31 after being ratified by the required minimum of 22 signatories, aims to create a tariff-free pan-African market that will foster intracontinental trade, help develop business and industry and create jobs.

“If you are talking about creating a free trade area you have to be able to create incentives for the countries that are going to lose out. So if you look at the EU example, countries that lost out from monetary union and common markets were countries like Greece, Portugal or Ireland to some extent,” Sidiropoulos said, adding that introduction of compensatory mechanisms within the African Union was being discussed now.

The AfCFTA will face a number of difficulties in the near future and will not be about creating a single market at first, Sidiropoulos said.

“It’s really about removing barriers to trade, not all of which are tariffs, many of them are non-tariff barriers, using it as an opportunity to facilitate and galvanize creation and emergence of manufacturing hubs, linking different countries into a value chain … I don’t think it’s going to be easy,” Sidiropoulos added.

The AfCFTA agreement was signed in March last year by 44 out of the 55 members of the African Union at a summit in the Rwandan city of Kigali.

Research by Elizabeth Sidiropoulos, SAIIA