Question

What could the impact of CFTA be on Africa?

Answer 1

ABOUT CFTA -

In 2012 , the fifty - fourth member state of African union agreed for the establishment of CFTA ( Continental Free Trade Area ) for the growth and development of the economy . By the introduction of CFTA the try to strengthen the integration among the African countries and boosting up the economy . Mainly the objective behind this is to eliminate the tariff on the intra - African trade in goods . In an increasing globalizing world , the CFTA is playing a great roll for the African countries .

ADVANTAGES OF CFTA -

1 - It helps in creating a bigger and integrated market for the African products .

2- Allowing the producers to enjoy the benefits from the economies of scale and getting cheaper raw materials and intermediate goods to them .

3 - Helps in providing regional value chains integrating to Global value chains .

4 - Providing the consumers to get cheaper imported goods and services from the other African countries .

5 - By this they will be able to get better allocation of resources and faster trade and economic growth .

6 - ENCOURAGE the intra - African and external direct capital flow in the African countries .

IN long run in both the scenarios that is eliminating all tariffs and allowing the permanent exemption of sensitive products from tariff liberalization the employment has been increased including is the agriculture too . An an increase in the intra - African trade also by 30 percent which will contribute in the structural transformation on the industrial technologies to grow and develop in order to produce and trade more sophisticated products . With the extension of the African market providing the free trades , benefits from the effective allocation of the resources leads to the promotion of economic diversification , technology process and human capital development .

Where as , At the time of transaction period adjustment cost in the form of decreasing tariff revenue , temporarily increases unemployment and reducing economic activities which are likely to occur due to the reallocation of resources in some of the sub - sectors . The benefits of the free trade areas cannot be shared equally if the financial and institutional capacity of the of the country is not sufficient in nature . The lack of labor mobility is one of the biggest challenge for the developing countries .

CONCLUSION -

As to achieve the set targets by the government the African countries needs to think above reduction of tariffs the increase in the efficiency and connectivity in the trade logistics helps in the improvement in the labor movement as well as capital . And eliminating no tariff barriers and harmonizing the regulatory measures helps in the promoting the integration of member states to the regional and global value chain in Africa .

Where as , the trade liberalization can create challenges for the government in promoting the competition in the market as some of the firms are already enjoying the economies of scale , Due to which they will grow faster than the other firms and will attain the dominant position in the market . For the smooth transaction the complementary policies like consumers protection and competition policies needs to be introduce .