New Trade Union Creates New Opportunities

Oct 29th, 2008 11:14 AM UTC
By Beth Adler

I’m a new addition to the policy team here at ONE and will be sharing the latest happenings from the world of trade, agriculture, and economic development with you. To start, I came across some exciting news about trade in Africa. Last week 26 African countries agreed to establish an African Trade Union – a free trade union that will assist in eradicating poverty in the region.

The Union is a merger between three of Africa’s trading blocs – the Common Market for Eastern and Southern Africa (COMESA), South African Development Community (SADC), and the East African Community (EAC). The union incorporates a significant portion of eastern and southern Africa; it includes 530 million people and has an estimated GDP of over $620 million.

This free trade union will provide the participating countries with easier access to new markets within Africa. Rather than paying taxes like tariffs on the goods countries export, or limiting the amount of goods they export because of quotas, countries within the union will be able to freely exchange goods with each other. The new, larger union will also give the member countries greater leverage in trade discussions with developed countries.

The opportunity for these African states to gain greater access to African markets, and to collaborate on infrastructure development like transport and communication systems – while advocating for Africa in the global market – are important steps towards eradicating poverty. As Ugandan President Yoweri Museveni commented at a meeting of the heads of state who chair the three merging trade blocs, “Bigger markets are a strategic instrument of liberating people from poverty.”

The union is intended to simplify trade arrangements in Africa, but as you can imagine, creating a trade union among 26 diverse countries comes with potential challenges. Specifically, merging could be difficult for member countries that lack economic or political stability or don’t have complimentary economic policies. In addition, it will be difficult to integrate economies of different sizes and levels of development. For example, the process of integration could be a greater burden for countries with smaller economies, like Rwanda, than larger ones. Also, the union could initially benefit big manufacturing companies rather than small businesses in member states.

Considering the complicated nature of the merger, just establishing a time-line for the integration of the three trading blocs will be decided within one year.

ONE released a press statement on the African Trade Union calling it a building block for more robust economic growth and poverty eradication in the region. You can see other related stories from Reuters here.

-Beth Adler

TAGS: Policy News, Trade