By Felix Andrew
TARRIF on goods traded between the tripartite countries will come down soon after all members’ states rectify the agreement establishing the TFTA.
Egypt is the first country to rectify the agreement establishing the Tripartite Free Trade Area (TFTA).
According to the agency, already 19 states including South Africa have signed the agreement, and it will enter into force once 14 countries have submitted their instrument of rectification.
Once the agreement enters into force it will reduce the tariffs on goods traded between the tripartite countries and new opportunities for exports as well as regional value chains.
The TFTA was launched by the Heads of States at Sharm el-Shaik, Egypt in June 2015 and South Africa did not signed the agreement at that stage since there was still outstanding work in some of the annexures to the agreement.
All the annexures have been completed and adopted by the tripartite Sectoral Ministers Committee, enabling South Africa to sign the agreement. This TFTA represents an integrated market of 26 countries with a combined population of 625 million people and a total gross domestic product (GDP) of $1.6 trillion.
Critics argue a single trading bloc will not work where individual sub-regional ones have failed. To the contrary, the consolidation of the three trading blocs will build on previous trade gains and will result in the whole being larger than the sum of its parts.
Between 2004 and 2014 trade within the COMESA region grew from US$8 billion to US$22 billion. Over the same period trade within SADC grew from US$20 billion to US$72 billion and for EAC it rose from US$2.6 to 8.6 billion. The overall trade between the three areas rose from US$30.6 billion to US$102.6 billion over the same period.
Despite the growth, only about 12 percent of Africa's trade is intra-regional. It is 22 percent for South America, 40 percent for North America, 50 percent for Asia and 70 percent for Western Europe. The tariff liberation of 60–85 percent will have a significant impact in facilitate the cross-border flow of goods and services.
The TFTA will benefit Africa in at least six mutually reinforcing ways, first, the conclusion of the agreement will generate the impetus for the creation of similar arrangements in western Africa, bringing economic powerhouses such as Nigeria into a continental free trade area.
In fact, negotiations for an overarching agreement will be launched in 2015, with the projected creation of an Africa-wide free market in 2017.
Second is a much larger market whose free flow of goods and services will help to maintain economic growth at 6–7% per year. At this rate the combined GDP of Africa is projected to reach $29 trillion by 2050, which would be equal to the current combined GDP of the EU and the US. With additional policies, such growth will contribute significantly to spreading prosperity and reducing poverty.
The other is TFTA will serve as an impetus for investment in Africa's cross-border infrastructure. It is estimated that Africa needs to invest nearly $100 billion annually in infrastructure over the next decade. Less than half of this target is met currently.
One of the reasons for the low level of investment has been poor coordination across the different trading blocs. Building infrastructure will also create additional jobs and foster the development of engineering services.
By providing a single economic space with harmonized trade policies and a regulatory framework, the TFTA solves the problem of multiple memberships, rationalizes trade negotiations, reduces the cost of doing business, supports industrialization, and stimulates cross-border infrastructure projects.