* African leaders meet to discuss key details of free-trade
bloc
* Potential for Africa's $3.4 trillion economy is massive
* Hurdles remain, such as corruption and poor infrastructure
By Boureima Balima
NIAMEY, July 7 (Reuters) - African leaders met on Sunday to
launch a continental free-trade zone that if successful would
unite 1.3 billion people, create a $3.4 trillion economic bloc
and usher in a new era of development.
After four years of talks, an agreement to form a 55-nation
trade bloc was reached in March, paving the way for Sunday's
African Union summit in Niger where attendees will unveil which
nation will host the trade zone's headquarters, when trading
will start and discuss how exactly it will work. It is hoped that the African Continental Free Trade Area
(AfCFTA) - the largest since the creation of the World Trade
Organization in 1994 - will help unlock Africa's long-stymied
economic potential by boosting intra-regional trade,
strengthening supply chains and spreading expertise.
"The eyes of the world are turned to Africa," Egyptian
President and African Union Chairman Abdel Fattah al-Sisi said
at the summit's opening ceremony.
AfCFTA "will reinforce our negotiating position on the
international stage. It will represent an important step."
Africa has much catching up to do: its intra-regional trade
accounted for just 17% of exports in 2017 versus 59% in Asia and
69% in Europe, and Africa has missed out on the economic booms
that other trade blocs have experienced in recent decades.
Economists say significant challenges remain, including poor
road and rail links, large areas of unrest, excessive border
bureaucracy and petty corruption that have held back growth and
integration.
Members have committed to eliminate tariffs on most goods,
which will increase trade in the region by 15-25% in the medium
term, but this would double if these other issues were dealt
with, according to International Monetary Fund (IMF) estimates.
The IMF in a May report described a free-trade zone as a
potential "economic game changer" of the kind that has boosted
growth in Europe and North America, but it added a note of
caution.
"Reducing tariffs alone is not sufficient," it said.
DIVERGENT INTERESTS
Africa already has an alphabet soup of competing and
overlapping trade zones - ECOWAS in the west, EAC in the east,
SADC in the south and COMESA in the east and south.
But only the EAC, driven mainly by Kenya, has made
significant progress towards a common market in goods and
services.
These regional economic communities (REC) will continue to
trade among themselves as they do now. The role of AfCFTA is to
liberalise trade among those member states that are not
currently in the same REC, said Trudi Hartzenberg, director at
Tralac, a South Africa-based trade law organisation.
The zone's potential clout received a boost on Tuesday when
Nigeria, the largest economy in Africa, agreed to sign the
agreement at the summit. Benin has also since agreed to join.
Fifty-four of the continent's 55 states have signed up, but only
25 have ratified. One obstacle in negotiations will be the countries'
conflicting motives.
For undiversified but relatively developed economies like
Nigeria, which relies heavily on oil exports, the benefits of
membership will likely be smaller than others, said John
Ashbourne, senior emerging markets economist at Capital
Economics.
Nigerian officials have expressed concern that the country
could be flooded with low-priced goods, confounding efforts to
encourage moribund local manufacturing and expand farming.
In contrast, South Africa's manufacturers, which are among
the most developed in Africa, could quickly expand outside their
usual export markets and into West and North Africa, giving them
an advantage over manufacturers from other countries, Ashbourne
said.
The presidents of both countries are attending the summit.
The vast difference in countries' economic heft is another
complicating factor in negotiations. Nigeria, Egypt and South
Africa account for over 50% of Africa's cumulative GDP, while
its six sovereign island nations represent about 1%.
"It will be important to address those disparities to ensure
that special and differential treatments for the least developed
countries are adopted and successfully implemented," said Landry
Signe, a fellow at the Brookings Institution's Africa Growth
Initiative.
Regulations governing rules of origin, removal of non-tariff
barriers and the development of a payments and settlements
system are expected to be unveiled at the summit.