By Abraham Zaqi Kromah ([email protected])
Liberia joined other African countries in singing the long awaited African Continental Free Trade Area Agreement (AfCFTA). But what exactly is this agreement and what does it mean for president Weah’s audacious “Economic diplomacy” agenda?
Weah announced plans of focusing his administration’s international policies on “Economic Diplomacy”, and has taken his boldest step by joining other African countries in signing a landmark agreement that seeks to promote intra-African trade.
The AfCFTA deal is the biggest multilateral free trade agreement since the establishment of the World trade organization (WTO) in 1995, and it aims at “closer African Economic Integration” through continental free trade commitments.
The deal is a commitment towards reducing trade barriers such as the removal of import duties and other non-tariff barriers as a means of boosting increased trade among African nations, the kind of trade this continent has long been in need of.
As of 2016, the statistics made for a dismal reading of only 10% intra-African trade and this deal could drastically improve the numbers and correct this “historical anomaly”, as David Luke, coordinator of the African Trade Policy Centre at UNECA, succinctly puts it.
The UN Economic Commission for Africa (UNECA) has estimated the implementation of the agreement could increase intra-African trade by up to 52 percent in the next five years.
This agreement could possibly rival the WTO, an organization that has mostly benefitted developed economies and thwarted the growth of developing economies.
This free trade agreement will have a significant impact in facilitating the cross-border flow of goods and services.
A thorough implementation of AfCFTA will bring together a combined gross domestic product (GDP) of more than $2 trillion and help grow African economies and trade within the region.
In the case of Liberia, this agreement comes at the right time.
Trump’s recent tariff increase on iron ore will hit our Economy very hard as USA remains Liberia’s major iron ore export partner, but this African free trade agreement could help us redirect and make use of the African market.
We remain the second highest exporter of Iron ore in Africa behind only South Africa, so this deal could give us access to an African market that has a combined iron ore imports figure of 334.7 million dollars.
This is already a significant figure which could further increase as a result of possible investment in Africa’s cross-border infrastructure to give fulcrum to the agreement. With robust plans Liberia will be poised to become a major supplier in the African iron ore markets.
Our Rubber industry could also significantly benefit from this intra-African free trade agreement.
Just like the Iron ore industry, we are also the second major rubber exporter in Africa.
We can become a major supplier of rubber in the African market which has an estimated combined rubber import figure of 112.2 million dollars.
This means that our two major exports will have access to a market that is worth approximately half a billion dollars. It is a significant market which could translate into additional jobs for our people and stimulate growth.
This ‘larger-market-agreement ‘and its possible supporting infrastructure and technological development could also spur industrialization. This will also create further jobs and help diversify our economy, an economy that has largely been dependent on raw materials.
On the other hand, Liberia, as a non-oil producing nation, petroleum products account for the largest share of our imports. Africa has a good number of oil producing countries including Nigeria, Angola and so on. This African free trade deal which calls for a reduction in tariff will mean lower spending on Liberia’s importation of petroleum products as a result of reduction in the prices. This will help in reducing our negative balance of trade.
However, it is worth mentioning that multilateral trade liberalization agreements come with some challenges, and the AfCFTA is not an exception.
President Weah will need to look into policies that will assist local workers and businesses when competition increases from other African entities.
Africa’s more advanced countries could hold some advantages with their “developed manufacturing capabilities”, and the CDC led government will have to think about building productive domestic manufacturing capacities.
Another thing president Weah will need to look into is the development of a more skilled Liberian workforce that will be adaptable to the demands of this new ‘Africanization’, as competition tends to have a very detrimental impact on a low-skilled workforce.
There will also be a need for the possible creation of social policies for those who may lose jobs due to increased competition.
But this is an incredible deal that in fact exempts “sensitive items”-albeit temporarily- from the tariff reduction plan. But the CDC led government will need to be careful and conduct expert consultations on those “sensitive items” for exemption.
Overall, this African Continental Free Trade Area Agreement is exactly what our crumbling economy needs and with Liberia joining this deal just two months into the CDC administration, it is safe to say that King Weah knows exactly what he is doing!