Sierra Leone: On providing a solid base for the African Continental Free Trade Area (AfCFTA) to flourish, the World Bank in their report titled “Distributional Impacts of Trade: Empirical Innovations, Analytical Tools, and Policy Responses” discusses issues around implementation of the agreement.
With 54 countries, the African Continental Free Trade Area (AfCFTA) will be the largest free trade area in the world in terms of membership, potentially covering a market of 1.3 billion people with a combined gross domestic product of US$3.4 trillion.
Although free trade agreements (FTAs) create significant opportunities, history shows that maximizing their potential benefits is not automatic.
“AfCFTA institutions and especially member states, many of which lack a track record on implementing the trade agreements they have signed, will continue to need additional support.
The goal of that support is to effectively implement agreements, identify critical domestic bottlenecks, and prioritize actions to ensure a smooth transition to free trade and to attract more investment. It will thus be key to ensuring fairness and a level playing field for traders.
Drawing on the experience of similar negotiation exercises by other developing countries, the World Bank finds that designing a complementary agenda to maximize the potential benefits of an FTA entails concrete actions on at least three fronts.
Firstly, implementation and administration of the AfCFTA agreement. Capacity building (in the form of training, direct advice, and implementation support) benefits not only the ministries of trade but also other key ministries as well as border management agencies (especially customs) tasked with the future implementation of an agreement that they may previously have had only exposure to during the negotiation phase. This is essential to enable the compliance, administration and problem solving, economic monitoring, and socialization of the AfCFTA.
Secondly, trade-related institutional support for implementation. Capacity building to agencies (other than the ministries of trade) that are in charge of trade and investment-related matters that in practice affect the correct functioning of the AfCFTA.
Lastly, transition to free trade. Sector-specific initiatives aimed at enabling domestic firms (notably small and medium enterprises) to address economic distortions affecting competitiveness in a free-trade environment.
A key issue is whether and how the AfCFTA institutions and member states address weaknesses that have limited the impact of previous regional FTAs in Africa. To a great extent, the possibility that the AfCFTA will become a milestone for development in the region will depend on (a) the depth and breadth of detailed commitments to remove trade barriers that are to be negotiated, (b) the extent to which AfCFTA commitments are effectively implemented on the ground, and (c) complementary initiatives that ensure a smooth transition to free trade and induce greater flows of productive investment in non-traditional sectors, leading to more and better jobs.
As part of its engagement with the African Union, the World Bank has been helping AfCFTA stakeholders gather needed evidence to make informed decisions about the negotiation process over the past year.
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