Trade and AfCFTA

Zakhele Mthembu BA Law LLB (Wits) is a legal researcher at the Free Market Foundation. 

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This article was first published by Focus on Transport and Logistics in April 2023 (please see hard copy at the bottom)

Trade and AfCFTA

A trade in the commercial sense is a mutually beneficial exchange. With the Africa Continental Free Trade Area (AfCFTA) Agreement having come into operation in 2021, it would be fitting to remind ourselves of the benefits of free and unfettered trade, especially for the African continent and its people.
A trade is an exchange as has been established, yet what would necessitate this exchange? Why would someone want to exchange something with another person? Scarcity is the reason coupled with unlimited wants/preferences. Time is scarce, in that there are a given number of hours in a day, month, year, and a person’s life. Another aspect is that humans have unlimited preferences, from food, clothing, shelter, to leisure.
Let us illustrate this in a hypothetical. Say person A’s most pressing want is food, she wants to be fed so that she has energy. If she takes actions that lead to her obtaining food, like gathering fruits and nuts, it means she is not taking actions that lead to her obtaining shelter, for example.
Preferences are unlimited, only ranking in an ordinal manner, from most pressing to least pressing. So, whilst making food, which is number 1 on her list of preferences as demonstrated by her actions of obtaining food, she is not taking actions that lead to shelter, which may be number 2 on her preference list.
Therefore, A would spend the whole day taking actions that lead to her obtaining food. Remember time is scarce so when it gets dark as an example and she can no longer be outside gathering, she will have no shelter, which, after satisfying the preference of gathering food, may be number 1 on her preference list. Person A would now hypothetically have a lot of food, but no shelter.
Let us then hypothesise that while A was satisfying her preference for food, someone else, Person B, who had a differently structured preference list, was building shelter. To B, shelter may be the most pressing need, and as such, B takes actions that lead to the construction of shelters. Just like A, B has other preferences, yet whilst taking actions to satisfy one, he is logically not satisfying another that is lower on his list of preferences.
Now when it gets dark, A has a lot of food and B may have erected a structure or two. Both still have preferences to satisfy, yet due to the scarcity of time, they cannot satisfy them all, at the same time. How do they solve this problem? By exchanging the products of their actions. Since A wants shelter and has food, she can give B half of her food, for permission to use the shelter with B if it is a single one, or to use another one if there are multiple.
This is why trade happens. A and B get to satisfy two preferences, food and shelter, by simply taking the actions to satisfy one! This basic logic can be applied to even the most complicated economy, to understand the benefits of trade. No one would soundly say that the exchange between A and B is exploitative, if it was, then no party would have made it. Both parties had the option of not trading, and simply enjoying the fruits of their own actions. The fact that they did, means that the act of trading was better for them, than the act of not trading.
Just as trade is clearly beneficial in our hypothetical catallaxy of 2 people, it is also beneficial to a catallaxy with 10, 100, 1000, 100 000, 1 000 000 or 1 000 000 000 people. The African Union understands the benefit of trade to their credit, and this is why the African Continental Free Trade Area was proposed and adopted by member states. Ideally, trade should not be subject to intervention from 3rd parties like States, that are not involved in it. The 90% tariff liberalisation proposed by the AfCFTA agreement should be 100% duty and tariff-free trading among African people.
Let us add C to our hypothetical catallaxy. If C were to charge both B and A, a portion of their shelter and food just for the act of voluntarily trading between one another, this act would be clearly unjust. Yet states are allowed to do it all the time with tariffs and duties. The AfCFTA will help alleviate this injustice but until trade is fully liberalised, the injustice will persist albeit at a lower degree.
Hopefully the implementation of the AfCFTA agreement will see the end of policies that inhibit trade in African nations. If one’s country is signatory to the AfCFTA agreement whilst inhibiting free trade domestically, then it is being hypocritical for all to see. It would clearly see and acquiesce itself to the benefits of free trade at the international level, yet limit it domestically. An unjust contradiction!
Trade is integral to the prosperity of any person or people. It is necessary then that the promotion of the AfCFTA agreement is accompanied by a strong commitment by individual African governments to promote trade domestically and limit intervention in their domestic economies. Whilst pursuing the ideal of the full liberalisation of tariffs in the AfCFTA, achieving true free trade for the African people who desperately need its benefits.

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