Introduction
Globalization in the modern world economy is essential in shaping the economic development of many countries. Economic ties between countries are becoming closer because of the realization of significant mutual benefits. Trade is a major component of countries’ economic relations. The African continent is no exception and is committed to improving its capacity domestically and internationally. African governments use various tools and programs, such as the World Trade Organization (WTO). However, the most ambitious and promising project launched in 2018 is The African Continental Free Trade Area (AfCFTA) (Abrego et al., 2020). Its main task is to improve the situation regarding intra-African trade significantly. In the context of AfCFTA in this paper, issues such as “Next Steps for African Trade Integration,” “Implementation of Policy Reforms, Trade Facilitation Measures, and Young Population,” and “How will The West’s “Friendshoring” Affect Africa” will be considered. In addition, consideration will be given to the various factors necessary to create economic growth in African countries and reduce poverty. While an integrated approach is necessary to realize the full potential of AfCFTA, this trade area will be a turning point in Africa’s economic development.
Background
The African continent has high economic and trade potential. However, insufficient policies are a significant obstacle to its realization. One of the most problematic areas in African countries until recently was trade. Among the main issues that worsen the trading situation on the African continent, it is important to highlight such the shadow economy, consisting of black-market transactions, smuggling and undeclared work, as well as the non-development of regional value chains (Cilliers, 2021). These factors significantly worsen the overall trade performance of African countries. In addition, the COVID-19 pandemic has exacerbated the continent’s economy and contributed to the introduction of certain restrictions, including the trade sphere.
As a result, The African Continental Free Trade Area (AfCFTA) was developed to combat the factors mentioned above and reduce poverty in Africa. The decision to establish AfCFTA was made in 2012 during the summit of the African Union, and six years later, on 21 March 2018 in Kigali, each country ratified the treaty (Cilliers, 2021). Among the main advantages of AfCFTA, Cilliers (2021) highlights such as “generally boosts trade and assists in the transformation of African economies towards the production of higher value-added goods and decline in commodity dependence” (p. 268). As a result, Africa became the world’s largest free trade area and was able to recover more painlessly from the COVID-19 pandemic. However, it is important to consider further trading opportunities take effective policy reforms and trade facilitation measures, as well as possible investments and help from the West countries.
Next Steps for African Trade Integration
The advantage of The African Continental Free Trade Area is the prospect of improving both Africa’s internal and external markets. The main steps to improve the trading situation on the African continent, according to AfCFTA, relate to the reduction in trade costs. This factor makes it possible to significantly simplify and accelerate intra-African trade. However, to enhance the potential of the entire African region as the next step, it is important to consider further integration of the African market into the global. The creation of competitive products, logistics, and necessary infrastructure are among the critical factors in this process.
The Abuja Treaty was defined as a specific integration scheme of African Trade in 1994 (United Nations, 2017, p. 13). This document was defined by the African Economic Community and consisted of six main steps regarding continental integration. Remarkably, according to community information, the first phase was successfully completed. It was to define and recognize appropriate unios and communities to create a model of trade relations between African countries. According to United Nations (2017), “the first stage has now been completed, with eight RECs formally recognized by the African Union” (p. 14). Among the most effective of the eight regional economic communities (REC) are the East African Community (EAC), the Economic Community of Western African States (ECOWAS), and the Common Market for Eastern and Southern Africa (COMESA) (United Nations, 2017, p. 14). Each community shows different performance based on the effectiveness of specific policy reforms and the quality of management.
The second stage was incomplete and required the use of specific tools to complete it. It is a consolidation within each REC and implies strengthening the economic potential of the region (United Nations, 2017, p. 15). However, due to the lack of efficiency in some communities, the expected results were not achieved. RECs such as the Intergovernmental Authority on Development (IGAD) and Arab Maghreb Union (AMU) did not perform well in the fields of Free Trade Area, Customs Union, and Single Market (United Nations, 2017, p. 15). It is important to emphasize that the gradual removal of tariff and non-tariff barriers is considered concrete tool for implementing the second phase (United Nations, 2017, p. 15). Consequently, it may be suggested that it is vital to provide some assistance to underserved communities to ensure the quality of the second integration phase. As a result, fulfilling the conditions of integration according to the strategy of the Abuja treaty will provide the foundation for the following steps.
The next step, according to the Abuja treaty and African Economic Community, is the third stage of integration, which involves establishing FTAs and Customs Unions in each REC. It is important to stress that some communities that showed effectiveness in the second phase have moved to the third step. However, their small number does not allow for the full implementation of the third phase. According to the United Nations (2017), “only three of the eight recognized RECs have both an FTA and Customs Union (ECOWAS, EAC, and COMESA)” (p. 14). It is noteworthy that according to the integration strategy of the African Economic Community, there are six steps on the way to African Trade Integration until 2028. Among them are establishing FTAs and Customs Unions in each REC and creating an African Common Market (United Nations, 2017, p. 15). However, due to some of the unsatisfactory aspects of the second phase of the plan, consideration of further steps is premature.
Implementation of Policy Reforms, Trade Facilitation Measures, and Young Population to Reduce Poverty
African countries had different levels of poverty, which would affect the types of instruments that each country needed to address the problem. It is important to emphasize that countries such as Nigeria, the Democratic Republic of Congo and Madagascar have high poverty levels (Cilliers, 2021). It is vital to consider this when setting priorities for poverty reduction in Africa. In The Future of Africa: Challenges and Opportunities (2021), the author, Jakkie Cilliers, refers to the opinions of researchers regarding the rate of poverty reduction in Africa. He concludes that for most countries, this process will be long and slow (Cilliers, 2021). However, appropriate policy reforms that will be relevant to different areas of African life are essential to increase efficiency and speed. These include the reform of education, public provision, the establishment of the secure identity system and national population register and others. Moreover, it is important to note that substantial poverty reduction will not occur without significant and rapid economic growth (Cilliers, 2021). Therefore, to reduce poverty, African countries need to adopt policy reforms relative to the different factors described in the following paragraphs.
Rapid Economic Growth
When choosing rapid economic growth as a tool for poverty reduction in countries, it is crucial to create a balance in policy reforms. On the one hand, reforms should be aimed at creating conditions for economic growth. For example, financing various areas of the economy, such as agriculture, and the provision of appropriate infrastructure could be increased. On the other hand, it was important not to lose sight of the importance of the social dimension in efforts to reduce poverty. As Cilliers (2021) states, “social protection is an important tool that can be used to cushion the impact of policies that focus on economic growth” (p. 167). A competent ratio of financing both for the economic growth of the country and for the maintenance of the social sphere will provide a qualitative impulse for the country’s development, minimizing risks. As an example of specific policy reforms related to social protection, one can mention the field of education, which will be discussed in more detail in the paper.
Agriculture
The economy’s most important sector that can provide rapid economic growth is agriculture. The peculiarity of this factor is that agriculture is a qualitative tool for increasing the population’s wealth, particularly in low-income economies (Cilliers, 2021). According to Cilliers (2021), “agriculture is usually the sector with the biggest potential impact on poverty reduction” (p. 167). Many professionals and organizations, such as the World Bank, have paid considerable attention to the development of the agriculture sector to create the conditions for the growth of the African economy. As a model for the development of this industry, economists are advised to strive to implement the Comprehensive Africa Agriculture Development Program (United Nations, 2019, p. 15). Besides, the Framework for Boosting Intra-African Trade in Agricultural Commodities and Services was created. In creating the Framework, such structures as the African Union Commission (AUC), the Food and Agriculture Organization of the United Nations (FAO), as well as member states and RECs, were participating (Food and Agriculture, 2021, p. 4). The Framework’s significant decisions are creating and enhancing policies, institutional conditions, and support systems for the improvement of the agriculture sector of Africa.
Investments in Education
The next important step is to adopt policy reforms related to investment in education in Africa. The inability of parents to provide their children with education is a severe problem in many countries of the African continent. Since education was a critical factor in reducing poverty, creating conditions for its development was essential. As an example, Jakkie Cilliers (2021) emphasizes the possibility of giving people a “small amount of money” that will allow them to cover the most basic needs, such as the education of their children (Cilliers, 2021). It is important to stress that policy reforms, which determine the correct distribution of finances, can provide an opportunity to implement this approach. Consequently, more Africans will have access to education, which will positively impact the rate of poverty reduction in Africa.
Trade Facilitation Measures
When considering specific trade facilitation measures developed in the context of The African Continental Free Trade Area, it is important to note the features of the market of the African continent. Studies have shown that intra-African trade is more profitable than international trade. 25% of medium and high technologies are intra-African trade, and only 14% of African countries export to developed countries (Cilliers, 2021). According to Cilliers (2021), “African countries first need to trade with one another until their products and services are competitive while steadily expanding their participation in regional and global value chains” (p. 268). Therefore, appropriate trade facilitation measures should be primarily aimed at improving the terms of domestic trade on the African continent.
Trade facilitation is an essential tool for improving the trade situation in Africa, as well as the overall economic potential of the region. According to Gbadedo et al. (2020), “trade facilitation measures aim to lower transaction costs” (p. 5). It dramatically simplifies trade and reduces the cost of such indicators as domestic information costs, legal and regulatory costs, customs clearance procedures, and administrative red tape (Gbadelo et al., 2020). Therefore, trade facilitation measures are critical to improving the trade situation in Africa. The main advantage of this instrument is the improvement, in particular, of intra-African trade. This factor allows countries to significantly improve the trade of competitive products. In addition, trade facilitation is a crucial method to strengthen the course for a steady improvement of the African market, as well as a gradual strengthening of the global market position in trade with many countries.
An important factor when considering the application of trade facilitation measures is the geography of African countries. Transporting goods through rugged terrain is costly because it requires appropriate infrastructure. However, trade facilitation measures can make trade easier legally and financially. There are currently 15 landlocked countries on the African continent that are experiencing severe challenges regarding trade costs (Gbadebo et al., 2020). Among the main obstacles are transit-related obstacles, border crossing delays, and high transport costs (Gbadebo et al., 2020). For example, as Gbadebo et al., 2020 state, “customs delays in sub-Saharan Africa are the world’s longest” (p. 11). The simplification of various aspects of the border crossing between African countries is a crucial reason for the application of trade facilitation measures. This factor will reduce the impact of these problems on Africa’s domestic trade and increase the chances of economic growth, which will positively impact poverty reduction.
Young Population
Poverty reduction is a complex process that affects various areas of national life. The factors described above, such as education, medicine, infrastructure development, or rapid economic growth, are essential tools for poverty reduction. However, it is vital to emphasize that the effectiveness of the chosen methods will be significantly enhanced when Governments focus their decisions and actions on young and future generations. Such an approach would be highly effective, given the projected population growth in Africa and the increasing number of young populations. As Luke and Macleod (2019) state, “the population of Africa is projected to reach 2.5 billion by 2050, at which point it will comprise 26 per cent of what is projected to be the world’s working-age population” (p. 23). Hence, involving of young population in existing and prospective reforms of Africa’s economy and trade will significantly increase and accelerate poverty reduction.
As an example, additional investment in education for young people could be considered. As a result, African countries will receive a significant number of young professionals who will contribute to their development. Investment and policy reforms in education are among the most effective in creating a solid foundation for stability and economic prosperity in the future. In addition, infrastructure development is another area in which the young population can be involved to combat poverty reduction. As mentioned earlier in the paper, infrastructure is a crucial aspect of economic growth, and its development should be a priority issue. Therefore, young and healthy people can actively participate in the construction to provide and create conditions for rapid economic growth and improve trade. At the same time, young people can be involved in improving the situation regarding agriculture.
How will The West’s “Friendshoring” Affect Africa
Western countries are interested in the African region’s development, increased trade, and growth of the African economies. Through effective instruments and programs, Western countries are actively assisting Africans in their fight against poverty and in improving countries’ economic capacity. The World Trade Organization (WTO), the African Growth and Opportunity Act of the United States of America, the Everything but Arms initiative of the European Union, and others are examples of organizations and programs that actively promote their initiatives (United Nations, 2019, p. 16). Some of the agreements are free-to-trade agreements, which help to develop not only the potential of Africa’s internal trade but to facilitate its greater integration into the global trade market (World Bank, 2020). It is noteworthy that The African Continental Free Trade Area is the largest initiative that is second in size to the World Trade Organization (United Nations, 2019, p. 16). Therefore, it is essential to use all available instruments and Western support to unlock the region’s trade potential.
In this paper, various factors that could lead to significant economic growth and improvement of domestic trade in Africa were discussed. The potential of the African region when implementing competent policy reforms and development strategies will grow exponentially. Consequently, many of the world’s large economies, such as the US, China, Germany, and India, recognize the promise of further cooperation with Africa (Asche, 2021). Today, these countries are taking specific steps, such as developing joint programs with African countries aimed at rapprochement with the region in economic and trade relations. At the same time, it is essential not to forget that each country is guided by its own benefits and insists on making such decisions, which, above all, would contribute to its prosperity. Nevertheless, African countries could benefit significantly from global interest in the region. For example, the African economy can benefit from German investments in its manufacturing. On the other hand, the joint implementation of trade programs with the United States of America, described above in the paper, may give a qualitative leap for the rapid economic growth of African countries.
Results
The results obtained from the research of questions about the next steps of African Trade Integration, defined by policy reforms and trade facilitations, as well as the effect of Western countries on Africa, showed the need for a comprehensive approach. A significant number of factors shaping trade relations among African countries and the African market and international level of trade are crucial to creating the conditions for growth in African economies. In comparison, trade efficiency is directly dependent on infrastructure development, policy reforms, and lowering transaction costs. It was found that many steps and programs to improve economic and trade performance, as well as poverty reduction, had been established both by African Governments themselves and with the assistance of international partners and Western countries. However, the lack of effective implementation of such programs, particularly by RECs, significantly slows Africa’s economic growth and limits its ability to combat poverty. However, according to the study, it can be concluded that due to factors such as population growth and young population, as well as the agriculture sector, the outlook for African trade is buoyant.
Conclusion
In conclusion, it will be essential to emphasize the vital integration of African countries into the world trade market. As stressed in the paper, African countries form the world’s second-largest free trade market after the WTO. Moreover, during the discussion of the African Continental Free Trade Area, it was determined that a significant number of factors, such as industrialization, structural transformation, policy reforms, and others, must be considered to unlock the potential of this program. In addition, the importance of rapid economic growth, especially in the agriculture sector, which will contribute to poverty reduction and increase the trade capacity of African countries, was emphasized. Consequently, African capacity development through initiatives such as AfCFTA will not only help to overcome poverty in the region and create an enabling environment for economic growth but also improve the well-being of all humanity.
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