AfCFTA could harm non-competitive industries

The African Continental Free Trade Agreement (AfCFTA), which Namibia signed and ratified on 2 July 2018 and 1 February 2019 respectively, could promote the dumping of goods in the local market. However, Namibia can suggest measures for protection.

According to the AfCFTA national implementation strategy, trade liberalization entails the removal of tariff and non-tariff barriers to trade. This reduces the cost of trade, with the potential to enhance trade.

However, trade liberalization also removes protection for some import-competing domestic industries, particularly if they are not competitive. This can result in some reallocation of factors of production, which can have diverse impacts on individual economies and different groups. In particular, countries with limited small manufacturing bases are more likely to face some adjustment risks than relatively more diversified economies.

In some instances, Namibia imposes restrictions on the importation of certain goods (quotas) for a specific period because there is sufficient supply in the domestic market to protect local industries.

Responding to queries sent by MarketWatch on how the Ministry of Industrialisation and Trade intends on striking a balance between promoting free trade without making local industries worse off, the ministry’s spokesperson Elijah Mukubonda said: “Article 11 of the World Trade Organisation (WTO) prohibits quantitative restrictions, however, there are provisions that protect members from import surges. Dumping may incur between trading partners. Trade agreements are normally negotiated to take into account the possible occurrences of dumping. In accordance to the African Continental Free Trade Area, Article 17 of the AfCFTA protocol on Trade in goods, provides amongst others measures that can be instituted when dumping transpires. Therefore, Namibia may suggest an anti-dumping measure where there is a sudden surge in imports of a product at the disadvantage of the country.

Furthermore, Namibia within the configuration of the Southern African Customs Union (SACU) will identify products that will form part of the exclusion lists, an ongoing process.

Those products will not be subjected to tariff reduction commitments and therefore will not be exposed to competition from the AfCFTA state parties.”

Benefits

The African Continental Free Trade Agreement establishes the world’s largest free trade area by the number of countries, with more than 1.3 billion people and a combined gross domestic product (GDP) valued at more than US$ 3.4 trillion.

As Namibia is a small open economy, AfCFTA provides an expanded market for its goods and services. It builds on the progress achieved through Namibian participation in regional integration initiatives, mainly the Southern African Development Community (SADC) and the Southern African Customs Union (SACU), as key stepping stones to continental economic integration. AfCFTA can be an important platform for Namibian economic diversification, export expansion and competitiveness towards sustainable growth, creation of sustainable jobs and reduction of poverty, the national strategy report reads.

Figures

According to the Namibia Statistics Agency (NSA), Namibia’s import bill stood at N$8.9 billion in April, a decline when compared to N$12.5 billion recorded in March. Year to date, Namibia’s import bill averaged N$10.2 billion.

On the other hand, Namibia’s export earnings stood at N$7.6 billion, compared to N$10.2 billion recorded in March 2023. The value of exports in April 2022 stood at N$6.7 billion. Year to date, Namibia’s export earnings averaged N$8.4 billion.

Looking at trade by economic regions, SACU was the most dominant export destination for Namibia’s goods during the month under review with a 37.4% share of total exports. OECD and the EU followed in the second and third positions with 24.9% and 21.5% of Namibia’s total exports, respectively. SADC (excluding SACU) and COMESA markets took the fourth and fifth positions absorbing 18.5% and 16.8 percent of Namibia’s total exports, respectively.

During April 2023, SACU took the first position as the largest source of imports for Namibia, contributing 47.3% and supplied Namibia mainly with Motor vehicles for the transportation of goods, alcoholic beverages, and maize. BRIC was in the second position with a share of 19.8% of all goods imported providing the country mostly with Iron and steel bars, petroleum oils and motor vehicles for the transportation of goods. OECD and the EU ranked in third and fourth positions accounting for 18.0% and 9.4% shares of total imports. OECD and the EU supplied the country mostly with wheat and meslin, petroleum oils and motor vehicles for the transportation of [email protected]