African leaders on Wednesday signed what is being called the largest free trade agreement since the creation of the World Trade Organization.
The deal creates a continental market of 1.2 billion people , with a combined gross domestic product of more than $3.4 trillion. A major goal is to boost intra-African trade and rely less on the volatility of commodity prices that affect many exports.
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AFP reported that the signing of the agreement establishing a free trade area is seen as vital to the continent’s economic development, according to the head of the African Union.
“The agreement establishing the CfTA was signed by 44 countries,” said Moussa Faki Mahamat, chairperson of the AU commission.
“Our peoples, our business community and our youth in particular cannot wait any longer to see the lifting of the barriers that divide our continent , hinder its economic takeoff and perpetuate misery, even though Africa is abundantly endowed with wealth, ” Mahamat said.
He urged strong follow -up to “ confound those who , outside Africa, continue to think, with barely concealed condescension, that our decisions will never materialize.”
Concerns remain, the president of Nigeria, one of Africa’ s largest economies, skipped the summit amid trade unions’ objections .
And while Africa’ s largest economies are expected to benefit most from the deal , some of them worry that more people from poorer countries will migrate their way.
But some of the continent ’ s strongest and fastest -growing economies, including Ghana and Ethiopia, signed the deal .
Great day for mother Africa – moving forward to a more perfect Union pic.twitter.com/rFIpeBRk8P
— Ade Ayeyemi (@AAyeyemi) March 21, 2018
According to a study published by the United Nations last month, the deal will lead to long-term welfare gains of approximately $16.1 billion, after a calculated $4.1 billion in tariff revenue losses. But, the report did warn that benefits and costs might not be distributed evenly across the African continent.
What is A Free Trade Zone
A Free Trade Zone (FTZ) is an area in a country where goods may be traded without any barriers imposed by customs authorities.
It could also refer to a specially designated area where normal trade barriers like quotas and tariffs are removed in order to attract new businesses and foreign investments.
Similarly, Free Trade Zones have been defined as a geographic area where goods may be landed, handled, manufactured or reconfigured and re-exported without the intervention of the customs authorities.
The main idea behind the creation of Free Trade Zones is to facilitate cross-border trade by removing obstacles imposed by customs regulations.
