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Zambia 2015 | DIPLOMACY | FOCUS: TRIPARTITE FREE TRADE AREA

The breaking down of trade barriers across Africa represents an enormous opportunity for the continent.

Measured by intra-regional trade flows, Africa is the least economically integrated region in the world, but not for long. In June 2015, the Egyptian town of Sharm el Sheikh was the scene of the signing of an agreement of epic proportions involving the northern, eastern, and southern regions of the African continent: the Tripartite Free Trade Area (TFTA).

The TFTA is a proposed free trade agreement between the Common Market for Eastern and Southern Africa, the East African Community and the Southern Africa Development Community (COMESA-EAC–SADC) that, after three and a half years of negotiations, envisages the creation of an African Customs Union by 2019 and an African Economic Community by 2028.

The COMESA-EAC–SADC bloc is formed by 26 countries covering half of the African continent and represents about 58% of the continent's total GDP with about $1.3 trillion. The TFTA has the potential to change the lives of a combined population of more than 630 million

This agreement could contribute to poverty eradication in an unprecedented way by promoting trade and investment in the region and boosting job creation. The TFTA is designed to establish a conducive environment for peace and security, both fundamental for the successful development of economic integration.
Most of the countries included in the TFTA have been growing rapidly over the past few years and, if this trend continues, the region could eradicate poverty by 2063. This objective is in line with the 50 year long Agenda 2063 endorsed in January 2015 by the African Union Assembly whose aim is to achieve an “integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena.” By 2050, the region could reach a combined GDP of $29 trillion, equal to the current combined GDP of the European Union and the United States.

Nevertheless, the TFTA presents many challenges. Positive results will only be achieved if financial services are available for the development of large infrastructure projects that connect the continent and promote the free circulation of goods and people. Transport infrastructure will definitely be crucial for the success of the TFTA. To begin with, many of the economies represented in the TFTA are still dependent on their agriculture sectors. This sector will not increase productivity if remote areas are not connected to markets. This conundrum must be solved before concentrating on efficiently.

According to the theory of comparative advantage developed by David Ricardo in 1817, potential gains from trade for individuals, firms, or nations arise from differences in their factor endowments or technological progress. In an economic model, an agent has a comparative advantage over another in producing a particular good if he can produce that good at a lower relative opportunity cost. This explains why countries engage in international trade even when one of the countries is more efficient in producing every single good in the economy. This, universally regarded as one of the most powerful economic theories, and responsible for much of the current international trade is still less applicable to countries where agriculture is dominant. In this case it is not immediately apparent which country will have comparative advantage and in which products. Besides, free trade will inevitably negatively impact some sectors of the economy while others will benefit. If the TFTA is to succeed it needs to develop mechanisms to compensate those who lose.

Currently, most of the countries inside the TFTA are exchanging more goods with Asia or the European Union than with their African neighbors. As many examples of previous economic blocs around the world demonstrate, regional integration is far from a panacea and, to change trade patterns, countries will need more than signed agreements.