Advancing African Development Through Intra-Continental Trade

This is a guest post by Fily Camara, an intern for the Council on Foreign Relations Africa Program. He is a masters candidate at New York University.

Intra-African trade has been only eleven percent of the continent’s total trade over the last decade. By comparison, more than sixty percent of Europe’s trade is intra-continental. The equivalent figure for North America is about 45 percent and for Asia it is about twenty-five percent. The small scale of Africa’s intra-continental trade reflects the continent’s dependence on foreign markets for the vast majority of their trade relations. African policymakers, as well as their Western counterparts, have long acknowledged the need for more intra-continental trade. It is a paradox that, for much of Africa’s postcolonial history, it has been a pioneer in regional integration. In addition to the African Union (AU), there are eight, smaller regional economic communities—many of which have successfully implemented common currencies and external tariffs in addition to cooperating on matters of security and justice. Nevertheless, commerce among countries in Africa remains low, with significant negative development ramifications.

The emphasis in current African development discourse has been to encourage partnerships in which foreign governments and corporations can help African economies through mutually beneficial cooperation and joint business ventures. This concept is summarized by the phrase, “trade not aid.” Given the political and economic instability many African countries face, their desire to secure agreements and partnerships with the relatively stable and wealthy markets of the European Union, the United States, Japan, or China is understandable. However, when an African country’s economic success is subject to foreign markets, it is at the mercy of factors beyond its control.

Such has been the case for much of the past year and a half. In June 2014 the price of oil began its decent from $140 per barrel to below $40 in recent days. For Africa’s crude-dependent countries this has severely troubled governments and economic outlooks. In 2015, China’s slowing growth rate was a factor in the worldwide plummet in demand for commodities highlighting the vulnerability of African states to international shocks. Where the United States and Europe can rely on established domestic consumer markets to spur economic activity, African exporters often have little insulation from the macroeconomic trends and political events afflicting the world.

Observers cite a number of causes for the low levels of trade amongst African countries. The legacy of colonialism is, among other things, one of poor, extraction-oriented infrastructure and illogical borders that have left some countries with significant geographic disadvantages. Today, inadequate transportation networks, security concerns, persistent protectionism, poor data collection, and a lack of information sharing exacerbate the consequences of colonialism.

Recent initiatives to address intra-continental trade appear promising. In 2012, the AU decided to establish a Pan-Africa Continental Free Trade Area (CFTA) by 2017. It also endorsed an Action Plan for Boosting Intra-African Trade. Tangible steps toward achieving the objectives in these plans were taken in June 2015 when the Common Market for Eastern and Southern Africa, the East African Community, and the Southern African Development Community launched the Tripartite Free Trade Area. In late November, the AU reaffirmed its intention to use intra-continental trade to create a “prosperous and peaceful Africa by 2063.”

Increasing intra-state trade in Africa would be an important step toward improving the continent’s development outlook. It would encourage competition among states to create an attractive climate for business and industry. Moreover, infrastructure could be improved, and the flow of people and ideas across borders could spur innovation. Eventually, the costs of goods could decline as shipping between African countries becomes easier, and getting certain goods from other continents less necessary. Additionally, a Pan-Africa CFTA would be the world’s largest by population and could provide Africa with the clout necessary to negotiate more favorable conditions in regional and sectoral trade agreements and World Trade Organization negotiation rounds. If properly managed and implemented, linked and diversified economies may be one answer to Africa’s development quandary.