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The guided trade initiative offers Africa’s free trade agreement a boost

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On July 26, 2022, the African Continental Free Trade Area (AfCFTA) Secretary-General, H.E. Wamkele Mene, announced in his keynote address at the 9th Meeting of the Council of Ministers, the AfCFTA Secretariat Guided Trade Initiative (GTI). The Secretary-General described the GTI as a solution-based approach to achieve its goal by matching businesses and products for export and import between interested state parties.

In its pilot phase, eight countries have been selected to trade under the AfCFTA Guided Trade Initiative. These eight countries include Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia, representing the five regions in Africa. The initiative aims to test and develop the basis for trade, legal and environmental policy in Africa with a view to identifying businesses, goods, customs procedures and logistics practices which are essential for an effective trading relationship. Other countries can participate upon meeting the requirements by deploying the AfCFTA E-Tariff Book, the Rules of Origin Manual, and by publishing their tariff rates for approval by the Secretariat. These requirements were established to harmonize regulations and standards and reduce non-tariff barriers to trade.

Read also: Africa’s services sector and what AfCFTA can do differently

In line with the AfCFTA approach to value chain developments, products identified for trade in this initiative include ceramics tiles, batteries, tea, coffee, processed meat products, maize starch, sugar, pasta, glucose syrup, dried fruits and sisal fibres. During this pilot phase, the selected countries can access some markets at preferential rates for these products. However, in time, at least 96 products will be traded under the GTI and the initiative will be reviewed annually to expand the list of countries. In the framework of the AfCFTA, up to 90 per cent of liberalized goods will have their tariffs reduced by the latest 2030, 7 percent of goods will be liberalized by 2035, while countries will be allowed to tax the remaining 3 percent of produced goods.

The Guided Trade Initiative through the African Continental Free Trade Area (AfCFTA) represents a significant step forward, offering the promise of increasing intra-African trade, boosting economic growth, and reducing poverty across the continent. Although some African countries have recognized the potential benefits of the Guided Trade Initiative and are actively seizing the trading opportunities that abound under it, the number of nations taking proactive steps remains relatively few. It is essential for African countries to collectively and individually redouble their efforts to fully embrace and implement this transformative initiative

Maximizing the Potentials of the Guided Trade Initiative

The Guided Trade Initiative aims to improve the operationalization and implementation of the AfCFTA for increased intra-African trade, which is expected to increase economic development in the continent. For the year 2023, the AfCFTA Guided Trade has placed a particular emphasis on enhancing trade in services within five priority areas. These include tourism, transport, business services, communication services, and financial services. African countries with potential in these five priority areas can leverage on this guided trade initiative for national economic growth.

It is essential for African countries to collectively and individually redouble their efforts to fully embrace and implement this transformative initiative

For instance, Ethiopia, a country with immense tourism potential, can greatly benefit from the promotion of tourism and travel-related services under the AfCFTA. By streamlining visa processes and removing travel-related barriers through the guided trade initiative, Ethiopia can attract more international visitors, leading to increased revenues, employment opportunities, and economic growth. Such national benefits translate to regional and continental economic integration, and demonstrate the potential of the AfCFTA Guided Trade Initiative to transform African economies through job creation and diversified economic activities.

Furthermore, the development of the AfCFTA Guided Trade Initiative to connect businesses and products for export and import between interested state parties is a step in the right direction to uptick trade under the AfCFTA. African countries with export goods can maximize the initiative to export certified goods to other countries and increase their trade volume. Countries like Kenya have leveraged on the Guided Trade Initiative to export two AfCFTA-certified batches of car and truck batteries to Ghana—with a value of about USD 60,000 per container—as well as a consignment of Kenyan-grown tea. In addition, Igire Coffee, a women-led Rwandan company shipped locally-processed arabica coffee beans to Ghana within the first six months of the establishment of the Guided Trade Initiative.

Read also: AfCFTA: FG calls for collective action among African nations

The AfCFTA Guided Trade Initiative is a trade policy tool that African countries can leverage to tackle trade barriers that have long prevented the continent from achieving economic development and prosperity. While Kenya and Rwanda are leading the way in harnessing the potential of the Guided Trade Initiative to foster intra-African trade and tap into the immense economic opportunities present on the continent, however, it is imperative for more African nations to follow in their footsteps and propel the initiative’s objectives. By following in these footsteps, African nations can jointly contribute to the economic development and integration of the continent.

 

Adinnu is a trade fellow at the Ominira Initiative for Economic Advancement. She is currently studying for a master’s degree in Food Safety and Quality Engineering