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China Champions Free Trade Despite Rocky Relationship with the US

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by Oyinlola Isiaka on July 10, 2018

On Thursday, China achieved a strategic opening of free trade zone built in East Africa. Despite China’s rocky trading relations with the United States, it has scheduled the construction of the largest free trade zone in Africa. Djibouti, located in the Horn of Africa, opened up the first phase of its Chinese-built International Trade Free Zone. The project also indicates the latest action for Beijing’s strategy to redevelop ancient trading routes that were once centered on itself.

It is estimated that the project will cost $3.5 billion and will cover about 4,800 hectacres of land. This zone will permit users to operate without the need to pay income, property, value-added or dividend taxes. The project will also be a joint operation of the Djibouti Ports and Free Zones Authority and China’s Merchants Holdings Company. The opening of the free trade zone occurred simultaneously with Djibouti’s hosting of the Africa-China Economic Forum. This forum was attended by many leaders of the region such as Paul Kagame, the Presidnet of Rwanda and the Ethiopian Prime Minister, Abiy Ahmed.

This project is not only an opportunity for China. Through this free trade zone, Djibouti is positioning itself strategically as the trade hub in the Horn of Africa region. Especially, since, about 95 percent of imports of neighboring nations like Ethiopia rely on Djibouti. Djibouti’s location is an added advantage. As the country is just ahead of the Suez Canal, a gateway for trade between the eastern and western markets. This means that it is a presence in proximity to one of the busiest trading routes, thus offering commercial shipping. Additionally, the zone provides opportunities for employment.

According to Djibouti President Ismail Omar Guelleh at the inauguration ceremony, the new trade area has been described as a “zone of hope for thousands of young jobseekers.” With a young population of 865,000 Djibouti has an opportunity for economic growth.

Other regions are also engaging in increased free trade. Earlier this month, South Africa signed on to the African Union’s free trade agreement. This trade agreement pushes for continent-wide borderless trade. This agreement has been signed by 49 out of 55 AU members. However, Africa’s largest economy, Nigeria, is yet to commit. But, there still seems to be a bright future for free trade in Africa.

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