A free trade area with unlimited liquidity
Since the launch of the Tripartite Free Trade Area in June this year, a voluminous body of scholarly work has been generated by many tertiary institutions and by international bodies like the UN Conference on Trade and Development.
It is noteworthy that much of the research is dedicated to analysing impediments to the intended free trade area and several reports delve deep into the many hurdles that must be overcome. It is equally noteworthy that not a single piece of serious research pays any attention the the announced Continental Free Trade Agreement.
The Tripartite Free Trade Area is the collaborative outcome of negotiations for which the basis was laid in 2008 when the members of three regional bodies, the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC), agreed in principle to start a negotiation process with the ultimate aim to unite the three regions into a single common market.
Considering that it took seven years from the time the go-ahead was given to start the negotiations, to the time that a sufficient number of member states signed the Tripartite FTA, it is not unreasonable to suggest a similar length of time before any significant convergence starts to appear in the legislation and the regulations that will eventually control the trade between the many jurisdictions in the three regional blocks.
The authoritative Tralac Trade Law Centre based in South Africa has been compiling an impressive research resource for many years and was one of the first academic trade centres to list the numerous legal and political hurdles that must be overcome. Its website also provides the most up-to-date analysis of the progress in the first phase of negotiations which started after the FTA was announced.
Suffice to say that indeed, the obstacles are many and severe. Shortly after the launch in June it was apparent that the intention is noble but the means are limited.
The investments required to bring the infrastructure in the member states up to standard, are mind boggling, in fact so staggering that I have become numb to figures like $100 billion or even $10 trillion. I suppose I am still suffering from some form of aftershock, much like American policymakers and analysts after the 2008 crisis, when it became fashionable to talk of a trillion here and a trillion there.
These galactic amounts have forced me to reconsider my whole approach to regional development. Granted, the legal obstructions are serious and pervasive but at least it is widely recognised that harmonisation across all member states is required to make the FTA work. So, in the meantime legal experts have started working on this, and I suppose eventually, say twenty years from now, there will be sufficient legal convergence, to really talk about trade enablers.
But it is when I look at the capital we shall need, that I develop cold feet. The recent investment conference in Addis Ababa alluded to this reality when funding arrangements running into the hundreds of billions of dollars were discussed. Truly, these amounts are so big, it is difficult to get one’s mind around them. It is even more inconceivable how we are ever to going to be able to repay these loans despite the intended and anticipated explosion in trade.
But I believe the sheer size of the problems present many, as yet unrecognised, opportunities, one of which is the establishment of an independent currency, that is legal tender nowhere, but is allowed to act as the trade backbone for transactions, by all member states. There are so many facets to setting up and managing a currency like this, it will keep our best minds occupied for many years, but it will also solve many of the financial hurdles, especially forex constraints which we have not yet thought about.
Against the background of BRICS currencies all yearning to break the dollar yoke, an intra-African currency that is aligned with all BRICS currencies, will help considerably to increase liquidity. And since it will not belong to any individual state, it will be impossible to manipulate.
The FTA members can also learn much from the decade-long history of the Euro noting what must be avoided and what must be pursued. With a trade currency in place, many other opportunities arise for instance clearing houses and currency exchanges for local currencies, but also for the world’s major trade currencies. And since this will be only a transactional currency, there is no need to worry about counterfeiting because there will not be any actual paper money, it will all be digital.