Implications of the African Continental Free Trade Agreement (AfCFTA) on the Economy of African States

Implications of the African Continental Free Trade Agreement (AfCFTA) on the Economy of African States

Benjamin Enahoro Assay
DOI: 10.4018/978-1-5225-7561-0.ch007
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The failure of some African Union member-nations including Nigeria to endorse the African Continental Free Trade Agreement (AfCFTA) that would create one of the largest free trade areas in the world has provoked a lot of controversies that are yet to be resolved. While some of the relevant stakeholders in the countries that have refused to sign the treaty are urging the heads of their countries' governments to withhold assent until when all the contending issues regarding the AfCFTA are amicably settled, others desire to have the agreement signed in order to harness its benefits for the continent. As the controversies rage, it appears that the implementation of the much awaited agreement has been put on hold, thus thwarting the progress of the continent. This chapter therefore wades through the controversies and points the way ahead for the AfCFTA to be acceptable by all.
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In this globalization era, there is no denying the fact that the economies of the world have become increasingly linked, through expanded international trade in services as well as primary and manufactured goods, through portfolio investments such as international loans and purchases of stock, and through direct foreign investment, especially on the part of large multinational corporations (Todaro & Smith 2011, Giddens & Sutton 2013). These linkages have had a profound effect on the developing world as the developing countries import and export more from each other, as well as from the developed countries.

Globalization is one of the most frequently used terminologies in the discussion of development, trade and international political economy (World Bank 2000, Anderson, Cavanaugh & Lee 2000, Saach 2000, Rodrik 1998, Dollar & Kraay 2000). From the economic standpoint, it is a process by which the economies of the world become more integrated, leading to a global economy and, increasingly, global economic policy making (Giddens 2001, Todaro & Smith 2013), for example, through international agencies such as World Trade Organization.

The emergence of international or multinational firms has been largely due to the globalization efforts which have created the new market opportunities of these firms. However, there has come to be, in recent times, a new trend of economic nationalism that tends to limit their operations worldwide. Championed by some developed countries and the ‘Third World’ the objective is to support economic activity and promote social cohesion. Some manifestations of economic nationalism are attempts to block foreign competition or acquisition of domestic companies.

Rising economic nationalism, according to Jaruzelski (2017), could encourage the continuation of protectionist policies in many countries which may affect corporate decisions about Research and Development. For example, China has pursued trade and intellectual property practices that many companies and global institutions consider overly restrictive. These include industrial policies and nontariff measures that in some cases favour domestic over foreign companies, the dominant positions of state-owned enterprises in some sectors, unequal access to subsidies and financing, and inadequate protection and enforcement of intellectual property rights.

Disparte and Wagner (2016) averred that the trend toward economic nationalism has been fueled by greater global income inequality, growing dependency on individual commodities for government revenues, too many countries hitching their economic fortunes on China, and an increasing propensity for oil producing countries to continue to produce oil outside proscribed multilateral agreements. The new wave of economic nationalism, which has prompted an increasing number of governments (developed and developing) to nationalize or re-nationalize strategy assets, will likely lead to an increase in the expropriation of more foreign assets in the oil and gas industry, manufacturing, and other sectors, acquisition of domestic companies affiliated to the multinational firms, decrease in trade, and foreign direct investment.

Key Terms in this Chapter

General Agreement on Tariffs and Trade (GATT): Is a legal agreement between many countries whose overall purpose is to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas.

International Trade: It is the exchange of capital, goods and services across international borders or territories.

Trade Deficit: A trade deficit is an economic measure of international trade in which a country’s imports exceeds its exports.

Trade Liberalization: It is the removal of restrictions or barriers on the free exchange of goods between nations.

Economic Growth: Is the increase in the market value of the goods and services produced by an economy over time.

Free Trade Agreement: It regulates tariffs and other trade restrictions between two or more countries.

Multinational Corporation: Is a corporate organization that owns or controls production of goods or services in at least one country other than its home country.

Trade Policy: It refers to the regulations and agreements that control imports and exports to foreign countries.

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