Imports to Africa to Cost Less Under New Pact.

Traders and manufacturers in Africa will soon access
an expanded market of over one billion people, following the launch of a mega
trade deal expected in March.

The Continental Free Trade Area (CFTA) agreement to be
launched by heads of state in Kigali, Rwanda comes amid fears that trade
liberalisation could lead to a loss of tariff revenue for smaller economies.

Dr Francis Mangeni, Director of Trade, Customs and
Monetary Affairs for the Common Market for Eastern and South Africa (COMESA) has
said.

COMESA is a regional economic community of 19 members’
states with headquarters in Lusaka, Zambia.

The CFTA is expected to remove taxes from up to 90 per
cent of the 200 items traded on the continent, making them cheaper for
consumers.

Only 10 per cent of goods will be classified as
“sensitive” and accorded protection to enhance growth of industries.
Sensitive items are those that require protection from cheap imports to allow
infant industries to grow.

The EastAfrican has learnt that the proposed CFTA
agreement will be signed on March 21 in Kigali at an extraordinary summit of
the African Union, to be hosted by President Paul Kagame.

However, no deal has been reached on negotiations
touching on the items to be classified as sensitive and those to be excluded
from taxation, as the least developed and developing economies are worried
about losing their key revenue streams.

“These issues are still being negotiated. No one knows
until the countries say which products they will designate as sensitive and
which ones they will exclude.

But from experience, sugar and milk tend to be
sensitive. And some Muslim countries exclude alcohol and pork. 

Nigeria tends to exclude products produced by
important personalities in order to limit competition on the market.

In the East African Community, maize, wheat, milk and
its by-products, rice and textiles are treated as “sensitive” and
therefore attract higher duty ranging from 35 per cent to 60 per cent”Mangeni
said.

He said the tripartite free trade area, which brought together
the 26 countries of the three economic blocs — EAC, Comesa and SADC – had agreed
that 80 per cent of tariff lines will be liberalised upon implementation of the
agreement, adding that the remaining 20 per cent would be negotiated over five
to eight years.

Mangeni however, noted that the regional trading blocs
were yet to agree on tariff offers.

The CFTA agreement, which had initially been slated
for signing in December 2017, has four legal instruments: The framework
agreement establishing the CFTA; the protocols on trade in goods; protocol in
trade in services; and the protocol in dispute settlement.

The signing of the agreement is expected to pave the
way for the conclusion of negotiations on outstanding issues which include
tariff offers and rules of origin, and the commencement of the next phase of
talks covering investment, competition and intellectual property.

It is estimated that 10 per cent of the tariff lines
on the continent will be excluded from tariff reduction but for countries like
Zambia which has fewer tradable goods, this could cover all intra-African
imports.

It is feared that excluding even a small portion of
the products from taxation could easily affect the most traded products in
Africa as the continent trades on only a few product lines estimated at 200 or
even 70 for some countries.

According to a report by the United Nations Conference
on Trade and Development (UNCTAD) released in February, African countries could
gain $3.6 billion per annum by completely eliminating tariffs on all goods
traded among them.

However applying taxes on even a modest five per cent
of products reduces this gain to $1.5 billion.

Comparatively, eliminating the non-tariff barriers
will increase the monetary gains of the countries by $20 billion.