Liberia joined other African countries in signing the long awaited African Continental Free Trade Area Agreement. But what exactly is this agreement and what does it mean for President George Weah’s audacious “economic diplomacy” agenda?
Weah announced plans to focus his administration’s international policies on “Economic Diplomacy,” and has taken his boldest step by joining other African countries in signing a landmark agreement that seeks to promote intra-African trade.
The AfCFTA deal is the biggest multilateral free trade agreement since the establishment of the World Trade Organization in 1995, and it aims at “closer African economic integration” through continental free trade commitments.
The deal is a commitment towards reducing trade barriers such as the removal of import duties and other non-tariff barriers as a means of boosting increased trade among African nations, the kind of trade this continent has long needed.
As of 2016, the statistics made for a dismal reading – only 10 percent of trade by African countries was done with other African countries. This deal could drastically improve the numbers and correct this “historical anomaly,” as David Luke, coordinator of the African Trade Policy Centre at the UN Economic Commission for Africa, succinctly puts it.
The commission has estimated the implementation of the agreement could increase intra-African trade by up to 52 percent in the next five years.
This agreement could possibly rival the World Trade Organization, an organization that has mostly benefitted developed economies and thwarted the growth of developing economies.
This free trade agreement will have a significant impact in facilitating the cross-border flow of goods and services.
A thorough implementation of AfCFTA will bring together a combined gross domestic product of more than US$2 trillion and help grow African economies and trade within the region.
In the case of Liberia, this agreement comes at the right time.
Trump’s recent tariff on steel and aluminum imports will hit our mining sector hard as the U.S. remains Liberia’s major iron ore export partner, but this trade agreement could help us redirect and make use of the African market.
We remain the second highest exporter of iron ore in Africa, behind only South Africa, so this deal could give us access to an African market that imports a combined US$335 million worth of iron ore annually.
This is already a significant figure which could further increase as a result of possible investment in Africa’s cross-border infrastructure to give support to the agreement. With robust plans, Liberia will be poised to become a major supplier in the African iron ore market.
Our rubber industry could also significantly benefit from this intra-African free trade agreement. Just like the iron ore industry, we are also the second major rubber exporters in Africa.
We can become a major supplier of rubber on the African market, worth an estimated US$112 million dollars.
This means that our two major exports will have access to a market that is worth approximately half a billion dollars. It is a significant market which could translate into additional jobs for our people and stimulate growth.
This ‘larger-market-agreement’ and its possible supporting infrastructure and technological development could also spur industrialization. This will also create further jobs and help diversify our economy, an economy that has largely been dependent on raw materials.
On the other hand, as a non-oil producing nation, petroleum products account for the largest share of Liberia’s imports. Africa has a good number of oil producing countries, including Angola and Algeria. This African free trade deal, which calls for a reduction in tariffs, will mean lower spending on Liberia’s importation of petroleum products as a result of reduction in the prices. This will help in reducing our negative balance of trade.
However, it is worth mentioning that multilateral trade liberalization agreements come with some challenges, and the AfCFTA is not an exception.
President Weah will need to look into policies that will assist local workers and businesses when competition increases from other African entities.
Africa’s more advanced countries could hold some advantages with their developed manufacturing capabilities and the Coalition for Democratic Change government will have to think about building productive domestic manufacturing capacities.
Another thing President Weah will need to look into is the development of a more skilled Liberian workforce that will be adaptable to the demands of this new ‘Africanization,’ as competition tends to have a very detrimental impact on low-skill workforce.
There will also be a need for the possible creation of social policies for those who may lose jobs due to increased competition.
Overall, this African Continental Free Trade Area Agreement is exactly what our crumbling economy needs and with Liberia joining this deal just two months into the CDC administration, it is safe to say that King Weah knows exactly what he is doing!
Photo by Steve Johnson on Unsplash