Cape-to-Cairo 'Made in Africa' bloc to boost trade

Thu Jun 16, 2011 8:11am GMT

By Ed Cropley

JOHANNESBURG (Reuters) - A planned Cape-to-Cairo free trade zone encompassing 26 countries, 525 million people and $1 trillion in output could spur major investment in Africa, but only if politicians stick to their open market promises.

Talks on the so-called African Grand Free Trade Area, which will stretch from Libya to Kenya to South Africa, were launched this week at a meeting of three smaller regional blocs that will effectively be merging into one.

African leaders declared that the Free Trade Area (FTA) would be in place in three years -- an ambitious but not unreasonable goal given that two of the blocs, the Common Market for East and Southern Africa (COMESA) and the East African Community (EAC), already have tariff- and quota-free trade.

Meanwhile the third, the Southern Africa Development Community (SADC), only has levies on 15 percent of goods and should be scrapping those by January.

However, for a grand bloc to work properly, and attract foreign companies and boost Africa's woefully low levels of regional trade, governments will have to agree liberal "rules of origin" that define whether a motorbike or shirt, say, is or is not 'Made in Africa'.

If the definitions are made too tight in order to protect domestic producers such as South Africa's ailing textile sector, the expanded zone will appear a lot less attractive to a Honda or Nike, whose goods may fall outside the tariff-free limits.

Conversely, if the rules are loose, allowing for a minimum of local content or labour, the FTA only increases the logic for outside firms looking to get into a region with some of the world's high rates of population and economic growth.

"It very much depends on the rules of origin," said Mark Pearson of Trademark Southern Africa, a UK-funded agency helping African trade ministries.   Continued...

<p>Mozambique's President Armando Emilio Guebuza talks during the Southern African Development Community (SADC) Summit in Mozambique's capital Maputo, November 5, 2009. Regional leaders held a summit in Mozambique on Thursday hoping to prevent the collapse of Zimbabwe's unity government, threatened by the most severe political standoff since it was formed in February. REUTERS/Grant Lee Neuenburg (ZIMBABWE POLITICS)</p>
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