Industrialise first. Free trade will follow.

Michael E Odijie, a postdoctoral research fellow at the University of Cambridge’s Centre o African Studies, argues that implementing the African Continental Free Trade Area agreement will not catalyse industrialisation on the continent. Rather, governments should start with regional industrialisation.

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The African Continental Free Trade Area is a continent-wide agreement that came into force in May 2019. It covers trade in goods and services, investment, intellectual property rights and competition policy. Of the 55 African Union member states, only Eritrea has yet to sign it.

The immediate objective of the free trade area is principally to boost trade within Africa by eliminating up to 90% of the tariffs on goods and reducing non-tariff barriers to trade.

In 2017, the exports and imports between African countries represented only 16,6% of Africa’s total exports. This figure is low compared with exports within other regions: 68,1% in Europe, 59,4% in Asia, and 55% in the US.

Proponents of the free trade area say that increasing intra-Africa trade will provide larger markets for African producers and encourage manufacturing. It will also help achieve a better connection between production and consumption. The UN Conference on Trade and Development argues that the phase of transition to the free trade area alone could boost intra-African trade by 33% and increase manufacturing in Africa.

In this line of argument, free trade leads to industrialisation and structural change. But in my view, it works the other way around: industrialisation leads to free trade.

TO CHANGE TRADE, FIRST CHANGE PRODUCTION

Low intra-Africa trade is indeed an indication that African countries do not consume what they produce. But this is a problem of production (product focus), not trade. The export products of most African countries, which follow the colonial pattern, influence trade strategies, trade agreements, and trade-related infrastructure.