African Development Bank has recommended elimination of all bilateral tariffs and keeping rules of origin transparent around intra-African trade to realize full benefits.
The African Economic Outlook 2019 by the continental lender stated that open markets would increase intra-Africa trade by up to 15 per cent, for a gain of Sh284.7 billion ($2.8 billion).
According to the report, removal all non-tariff barriers on goods and services traded especially in larger economies in the continent will lead to cumulative income gains to Sh3.76 trillion ($37 billion) and the continent’s tariff revenues by up to Sh1.52 trillion ($15 billion).
“The gain is small but welcomed in these times of rising protectionist stances in the global economy and the China–United States and Britain–mainland Europe divide,” it stated.
Kenya signed the Africa Continental Free Trade Area agreement in March 2018 in Kigali, Rwanda to be among 49 other signatories.
The AfCTA has four legal instruments including the framework agreement establishing the African economic community. The instrument commits governments to remove tariffs on 90 per cent of 200 items traded on the continent, making them cheaper for consumers, and phase out the 10 per cent over time.
AfCTA targets to create the world’s largest single market of 1.2 billion people and over Sh406 trillion ($4 trillion) in combined consumer and business spending if all 55 countries join.
Other instruments include the protocols on trade in goods, protocol in trade in services, and the protocol in dispute settlement.
Kenya and South Africa have pushed for product-specific rules of origin.
This as South Africa also lobbied for adoption of the Southern African Development Community rules of origin on a sector- or product-specific basis.
“Do not impose sector-specific or product-specific rules of origin. Word in policy circles, however, has it that African trade negotiators already have identified 800 products for specific treatment,” it added.
The report also stated that a cumulative of Sh10.17 trillion ($100 billion) representing 3.5 per cent of the continent’s GDP, would be gained from implementation of WTO’s Trade Facilitation Agreement to reduce the time it takes to cross borders and the transaction costs tied to non-tariff measures.
AfCTA aims to boost African economies by harmonizing trade liberalization across sub-regions and at the continental level.
African leaders agreed to have the AfCFTA come into effect by September 2019.