Experts are optimistic that when the African Union’s (AU) Continental Free Trade Area (CFTA) in Africa is successfully established, it will boost intra-African trade to about 22 percent of total African trade.
At present, intra-African trade is at as low as 12 percent, but comparatively intra-North American trade is at about 48 percent; intra-Europe 72 percent; intra-Asia 52 percent and intra-Latin America is at 26 percent.
African countries maintain high tariff barriers to trade within the continent at nine percent as opposed to around three percent for abroad.
Speaking in Addis Ababa, Ethiopia, ECA director of the regional integration Stephen Karingi noted that although intra-African trade is low, this is a trade area with potential in Africa as a key driver of growth, trade, employment and poverty reduction.
He was speaking at the Eighth Session of the Committee on Trade, Regional Cooperation and Integration of the ECA.
The CFTA, to be implemented by 2017 would add approximately $1 trillion to the global economy, which Malawi can tap from.
However, local trade experts have doubted the benefits of the African trade bloc, arguing that Malawi cannot reap much from it because of its weak and narrow export base.
In a recent interview, National Working Group on Trade Policy (NWGTP) chairperson Geoff Mkandawire pointed out the need for Malawi to critically analyse the proposal and decide what to do.
“We first need to improve our export base because it is weak and narrow. We have been talking of turning Malawi from predominantly importing and consuming country into a producing and exporting one, but not much has been done.
“We need to improve our policies to stimulate growth. Malawi should not just accept the agreements, but it should ask itself what it has to offer on the international market,” he said.
The experts argued that at present, Malawi does not have export products, suggesting that the country needs to first work on its supply side constraints.
Karingi added that whilst intra-African trade in manufacturing was relatively high, the amount of agricultural trade was low as 15 percent.
Being an agricultural economy, Malawi could take advantage of this to increase its agricultural exports.
Farmers Union of Malawi (FUM) president Felix Jumbe indicated that Malawi, as an agriculture based economy, has a comparative advantage in production of different crops because of a variety of weather conditions as well as good fertile soil.
In his view, Malawi needs to come up with programmes for agricultural exports apart from the already existing ones in the areas of tobacco, tea and sugar exports.
He noted that Malawi is currently losing the export market share of its agriculture commodities.
However, Ministry of Industry and Trade spokesperson Wiskes Nkombezi argued earlier that the current policies such as the National Export Strategy (NES) will take care of that.
“The strategy does not only look at access to international markets, but also at increasing our productive capacity and this will get rid of our productivity bottlenecks,” said Nkombezi.
CFTA is expected to provide the basis for the establishment of the continental customs union and later the creation of the African Common market.