Corridors of prosperity
Andrew Robinson and Malcolm Hartwell, of Norton-Rose Fulbright, discuss whether, for trans-border transport corridors to work effectively, there needs to be uninterrupted movement of goods along road and rail routes, with a single legal regime governing their carriage
We hear much about transport corridors in Africa and how building and refurbishing roads and rail systems will help to focus infrastructure investment and create significant economic impact. Trans-border economic avenues will be designed to link landlocked African states to the coast, and ports to inland markets.
Talk of such corridors breathes life into plans to establish single-gauge railway systems, road and rail concessions, bridges that carry freight and people, road-to-rail distribution networks and so on. Such are the pressures of over-use (especially roads) and at times a brutal climate, that the benefits of building adequate and reliable infrastructures are quickly diminished by the difficulties of maintaining them.
Operating and funding structures and systems though private concessions and public/private partnerships has been severely hamstrung through waning desire for Africa’s commodities. Without a secure supply of freight, operating railways, for example, becomes near impossible. That said, there still appears to be considerable interest and finance – with strings of one sort or another – available for transport infrastructure development.
For corridors to work effectively there needs to be an open border policy for the uninterrupted movement of goods along road and rail routes, with a single legal regime governing their carriage. Such regimes are not uncommon – the international movement of goods by road and rail in Europe is governed by two long-established international conventions – the Contract for the International Carriage of Goods by Road (CMR) and the Contract of International Carriage of Goods by Rail (CIM) – which could fairly easily be adopted in Africa.
A glimmer of light is the African Continental Free Trade Area Agreement (AfCFTA), which has come into force with 22 ratifications. Nigeria is the only significant economy not yet committed to joining, but it is anticipated that the country will eventually do so.
AfCFTA seeks to create the world’s largest free trade area by allowing for the free movement of goods and people between member states. It does not replace existing regional free trade agreements and is designed to transform the economies of African states.
Trade patterns of African countries are currently dominated by resource exports to the developed and developing world, combined with imports of manufactured goods. Intra-continental trade is limited – either because African economies are underdeveloped, or because tariff barriers are in place.
A continent-wide free trade area will give countries specialising in particular goods a comparative advantage. Removing trade barriers on imports will reduce import costs, in turn lowering consumer prices and providing a larger variety of African products in a unified market. Manufacturers and traders stand to benefit from increased demand from lower prices.
Unfortunately, concerns over state sovereignty have always resulted in constrained access to neighbouring markets. Many economies are dominated by a single product or resource, and lowering tariff barriers on those entities have a significant negative short-term impact on revenue flow. As many of those countries do not have spare financial capacity to absorb the short-term loss of tariffs, they may not be in a position to lower those tariffs in the hope of achieving greater long-term economic success.
Other constraints on the free movement of goods – such as differing legal systems, carriage regimes and liability regimes – that may apply from country to country are more of an administrative problem, which can be resolved. The real barrier, which will require massive political will and perhaps some outlying countries to prove its success, relates to the short-term loss of revenue that is caused by dropping trade barriers.