Fighting the Trend: How Africa is Uniting Amidst the Global Retreat from Multilateralism

While trade has been declining globally, encouraged by tariff and non-tariff barriers, protectionism has been on the rise. Events such as Brexit, the U.S.-China trade confrontation, and more recently the risk of U.S.-Mexico trade tariffs have challenged global trade cooperation, opening the door to the wider use of economic sanctions and trade wars.

The 2019 Think 20 (T20) Summit Communique, and later the G20 Leaders’ Declaration, echoed growing global concern over rising protectionist sentiment. As mentioned by the Social Cohesion, Global Governance and the Future of Politics T20 Task Force, “political backlash against globalization has gathered strength in many parts of the world. There is a lingering crisis of multilateralism and an erosion of trust and social cohesion in many countries.”

In contrast to these global trade tensions a new giant is rising to its feet, namely, Africa. The continent is in the process of combining the potential of 54 economies to create the world’s largest trading bloc. In 2017, Africa’s midyear population was just below 1.3 billion, whilst the economically active population reached 466 million. In the same year, the continental real GDP growth rate was 3.7%, with East Africa leading the economic growth. In comparison, the population of the European Union reached 511 million in 2017, while GDP growth rate was approximately 2.5%. Otherwise put, the continent has immense resources that could encourage real, long-term growth.

The African Continental Free Trade Agreement (AfCFTA) entered into force on May 30, 2019 after its 22nd ratification, signaling the start of a long and tedious negotiation process that will largely determine the nature and exact conditions of the agreement. Schedules of tariff concessions and services commitments, rules of origin, investment, intellectual property, competition, and a possible protocol on e-commerce still need to be established.

While trade has been declining globally, encouraged by tariff and non-tariff barriers, protectionism has been on the rise. Events such as Brexit, the U.S.-China trade confrontation, and more recently the risk of U.S.-Mexico trade tariffs have challenged global trade cooperation, opening the door to the wider use of economic sanctions and trade wars.

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The 2019 Think 20 (T20) Summit Communique, and later the G20 Leaders’ Declaration, echoed growing global concern over rising protectionist sentiment. As mentioned by the Social Cohesion, Global Governance and the Future of Politics T20 Task Force, “political backlash against globalization has gathered strength in many parts of the world. There is a lingering crisis of multilateralism and an erosion of trust and social cohesion in many countries.”

Globally, trade integration has been declining over the past decade. The golden age of trade, from 1990 up until the 2008 financial crisis, is long over, as mentioned in the European Central Bank (ECB) Economic Bulletin.

Such changes have been attributed to geographical shifts in economic activity, changes in the composition of aggregate demand, the rise in demand for traditionally less trade intensive services and the growth of emerging markets with lower trade intensity, according to the ECB and International Monetary Fund (IMF). Global developments have resulted in a highly connected and increasingly interdependent financial system. What happens in one part of the world today can trigger a global chain reaction.

Amina Mohammed, a T20 keynote speaker and former chairwoman of the World Trade Organization's General Council, spoke of the potential impact of such conflicts. She noted, “Are we going to support protectionism and if we do, then haven’t we opened the door for that to spread across the globe? If we reject it and that position is then later rejected, what does that do to the multilateral trade dispute settlement system?”

She went on to add that damage to the integrity of the multilateral trading system could directly affect countries reliant on fair trade practices.

Africa Bucks the Trend

In contrast to these global trade tensions a new giant is rising to its feet, namely, Africa. The continent is in the process of combining the potential of 54 economies to create the world’s largest trading bloc. In 2017, Africa’s midyear population was just below 1.3 billion, whilst the economically active population reached 466 million. In the same year, the continental real GDP growth rate was 3.7%, with East Africa leading the economic growth. In comparison, the population of the European Union reached 511 million in 2017, while GDP growth rate was approximately 2.5%. Otherwise put, the continent has immense resources that could encourage real, long-term growth.

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As noted by Landry Signé from the Brookings Institution, African nations easing trade barriers regionally would allow for third parties to enter the African market via one country. He added that this would be made possible by successful negotiations and the proper implementation of the African Continental Free Trade Agreement (AfCFTA).

The Agreement entered into force on May 30, 2019 after its 22nd ratification, signaling the start of a long and tedious negotiation process that will largely determine the nature and exact conditions of the agreement. Schedules of tariff concessions and services commitments, rules of origin, investment, intellectual property, competition, and a possible protocol on e-commerce still need to be established.

Negotiations are comprised of two phases, the first focusing on schedules of tariff concessions, schedules of services commitments and rules of origin, and the second on investment, competition policy, and intellectual property rights. Ensuring the practicality and impact of the AfCFTA largely depends on what the parties are able to agree on during the first and second phases of negotiations.

Africa is rapidly changing and the continent is approaching a point of change that could reaffirm the continent’s new geopolitical role. With Nigeria and Benin having signed the AfCFTA Agreement at the Extraordinary Summit of the African Union in Niamey, Niger, the African movement of multilateralism is gaining force. And whilst the 2019 G20 Leaders’ Declaration underlined global willingness to “realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment”, only time will show how feasible reinvigorating the rules-based trading system will be and which path Africa and other nations will stick to.