African companies prefer trading with non-African countries, ignoring local FTAs

African exports to other continents surpass the continent’s intercontinental trade, the United Nations Conference on Trade and Development (UNCTAD) has found, with Africans preferring import tariffs provided by the United States, European Union, Canada, and Japan (the “Quad nations”).

Despite growing calls for increased intraregional trade, companies in Africa are taking advantage of preferential trade deals with the other continents and ignoring local free trade accords. African traders are taking advantage of favorable import tariffs provided by the so-called “Quad nations” under different preferential trade agreements (PTAs), which has led to significant exports to these quad nations.

A research, conducted by the UN Conference on Trade and Development (UNCTAD) and the Common Market for Eastern and Southern Africa (Comesa), has also revealed that enterprises are not fully utilizing comparable advantages under local regional economic communities.

Because of this, commerce between the regional blocs has trailed substantially behind transactions with the Quad nations. For instance, exports to the US, EU, Japan, and Canada in 2018 were worth $25.6 billion, compared to $9.3 billion in trade amongst Comesa member states.

UNCTAD claims that the “complex and strict” laws of the origin, which hinder local enterprises from benefiting from the trade favors stipulated by regional treaties, are the main cause of this. Rules of origin are the standards that decide whether products coming from a certain nation are eligible for an import duty exemption or will be subject to a lower tax rate under a specific trade agreement.