Africa’s Continental Free Trade and Sustainable Development: An Economic Assessment

Abstract

The quest for Africa’s development breakthrough appears to be closely related to the African Continental Free Trade Area (AfCFTA). The Economic Commission of Africa believes the move could solve chronic poverty and joblessness prevailing on the continent. However, the benefit of hindsight reveals limits set by the laws of thermodynamics on the extent to which economic activities can be most beneficial to humanity. The motivation to expand trade thrives on energy for extraction, production and consumption, yielding undesirable waste products. The need for sustainable development has responded to the limits imposed by excessive waste, stretching environmental carrying capacity to the breaking point. Thus, to avoid repeating past development errors, Africa’s Continental Free Trade Area needs to ascertain the extent and cost of resultant environmental damage. Clearly, AfCFTA is yet to consider such effects. The COVID-19 pandemic, however, should be a reminder of how devastating a collision between economic activity and the natural environment can be. Existing studies on AfCFTA have so far been restricted to quantifying the effects of tariff reductions, non-tariff barriers and trade facilitation. This study, however, assesses the outcomes of the efforts being made to achieve the goals of AfCFTA, from an environmental economics analytical framework, in line with tenets of sustainable development. It employs data mainly from the World Bank and AfCFTA Secretariat to analyze the welfare effects of AfCFTA through resultant deforestation, solid waste management and climate change adaptation. The study found the resulting environmental damage to be US$ 744.71 billion, far exceeding the projected AfCFTA benefits of US$450 billion to be realized by 2035. Thus, in its current form, AfCFTA will reduce the economic welfare of Africa by at least US$294.71 billion by 2035. While in the formative stages, AfCFTA will be better served if stakeholders can pay attention to the call for a fully operational plan to offset the impending environmental damage, which cannot be taken for granted if Africa wants sustainable development.