New African free trade pact launched

The Tripartite Free Trade Area (TFTA) would cover just under two thirds of Africa's population and would aim to boost the flow of goods and investment within a common market.

But whether it stands or falls will depend on ratification and implementation as DW heard from Razia Khan, head of Africa economic research at Standard Chartered, the UK-based bank and financial services company.

DW: How significant is this pact for those countries that have signed it?

Razia Khan: There are two ways of looking at this. One is that compared to any other developing region, Africa is the region that sees the least amount of intra-regional trade. The latest data suggest that that has improved only very slightly from around 12 percent of total trade to maybe 14 percent of total trade. There is still a long way to go. One of the criticisms, however, was that many African countries had signed up to multiple trade blocs and they didn't really mean anything. So this agreement, which has been worked on for around five years already, is seen as a way of forming a super trade bloc and putting in place the necessary pieces that should allow for more trade to take place between those different regional trade blocs. They would no longer have to worry about competition between the different trade zones.

Usually with these trade pacts there are those who profit and those who lose out. Who do you see gaining the most from this deal?

In this instance it's particularly interesting because this tripartite area would bring together the Southern African Development community (SADC), the Common Market for Eastern and Southern Africa (COMESA), which had wide membership, and the East African Community (EAC). Now within some of those blocs, East Africa in particular, we had seen a lot more regional trade taking place but what we see even with the signing of this agreement is not necessarily the inclusion of ECOWAS - at least not just yet. So if we are looking at potential winners from this: a very broad way of looking at it would be a lot of the east African and southern Africa countries that already belong to this agreement will of course stand to benefit. It doesn't yet have any implications for West Africa. Within the trade bloc itself we are going to be seeing large economies like South Africa, like Egypt and of course smaller economies with less well established manufacturing sectors all part of trade of the bloc. But the really interesting implication is that at least there is an agreement in terms of how to deal with trade disputes, what kind of protection might be offered to small manufacturing firms.

There is a still a long way to go before the pact can go into effect - be ratified by the respective parliaments of the various countries. What other hurdles could this agreement face along the way?

It is precisely that. It is the implementation. The criticism leveled at what has happened in the space so far is that many countries sign up to all of these agreements but in terms of actual implementation, the record is very different. So you are right - this is only the beginning of a process and it is going to be a lengthy process - it could be some years before it is fully in effect, but at least there is a starting point. Key to watch going forward is going to be the level of implementation.

During the signing ceremony, the World Bank President Jim Yong Kim said Africa had made it clear that it was open for business. Do you see Africa's trade with the rest of the world increasing with this deal?

Well, the difficulty has not so much been the trade with the rest of the world but what is going on within the region and the reason why that was made difficult was because they were very few trade complementarities. All countries, especially in sub-Saharan Africa, that mainly produce commodities; the chances were that they were producing something that their neighbors didn't need a lot of. To the extent that this deal will eventually lead to greater intra-regional trade, it should allow for the emergence of those businesses that might have more viability when it comes trading on a more global level. So in the first instance, this is primarily something aimed at boosting trade within Africa. But that is something that can only strengthen Africa's external competitiveness ultimately and hopefully lead to wider trade and bigger welfare gains for the African economies as they trade more with all countries.

Are you optimistic that this free trade pact will hold.

Well we've seen lot of momentum swinging behind this. The encouraging thing is the realization that the so-called spaghetti junction of overlapping trade zones in the past was not really delivering anything meaningful. It's early days. We are far away from being able to judge how this is being implemented, how it is likely to be implemented. At this point, there is no reason to suppose that this is something that will not hold, but it is that key element of implementation that will need to be monitored carefully all the way through

Razia Khan is the head of Africa economic research at Standard Chartered, the UK-based bank and financial services company.

Interview Chrispin Mwakideu