Management Question

‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬

Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University

College of Administrative and Financial Sciences

Assignment 2
Introduction to International Business (MGT 321)
Due Date: 02/11/2024 @ 23:59
Course Name: Introduction to International
Business
Course Code: MGT321

Student’s Name:

Semester: First

CRN:11329

Student’s ID Number:

Academic Year:2024-25-1st

For Instructor’s Use only
Instructor’s Name: Dr. Mir Satar
Students’ Grade:
/ 10

Level of Marks: High/Middle/Low

General Instructions – PLEASE READ THEM CAREFULLY
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The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.

Learning Outcomes:
Knowledge:
1.1: Identify and evaluate the significant trade agreements affecting global commerce.
1.2: Discuss the reasons and methods of governments’ intervention in trade.
Skills:
2.1: Analyse the effects of culture, politics and economic systems in the context of
international business

Critical Thinking
Please read Case 9: “Free Trade in Africa” available in your e-book (International
business: Competing in the global marketplace (13th ed.), at page no.639, and answer
the following questions:

Assignment Question(s):
1. Explain why are African countries more likely to trade with Europe and America
than they are with each other?

(Minimum words: 400, Mark:2)

2. What could the impact of CFTA be on Africa? Discuss.
(Minimum words: 400, Mark:2)

3. What will African countries need to do to make the TFTA a success? What are the
likely impediments to doing this?
(Minimum words: 600, Mark:6)

Important Notes:
• This is an individual assignment.
• All references must be cited using APA format. This includes both in-text
citations and the reference list at the end of the document.
• Originality, Similarity and Plagiarism Check: Your work must be original. All
papers will be submitted through SafeAssign software to check for similarity and
plagiarism. Any instance of academic dishonesty will result in a grade of zero for
the assignment. No exceptions and no second chances!

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Answers
1. Answer2. Answer3. Answer-

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Cases

639

Free Trade in Africa
On June 10, 2015, representatives from 26 African
nations signed an agreement pledging to work together to
establish a free trade area that would remove or reduce
many tariffs and eliminate time-consuming customs
procedures between them. Known as the Tripartite Free
Trade Area (TFTA), this common market would encompass more than 630 million people and link together
three existing regional trading blocks in Southern and
Eastern Africa with a combined gross domestic product
of $1.2 trillion and more than $102 billion in trade
between member states.
The existing regional trading blocks are the East African
Community, created in 2000; the Southern African Development Community, created in 1980; and an overlapping
Common Market for Eastern and Southern Africa, which
also took shape in the 1980s. The East Africa Community
has made some progress fostering trade between its member countries, which include Kenya, Tanzania, and Uganda.
Countries in the Southern African Development Community have a common set of external tariffs, and several
member states use the South African rand, the most liquid
and widely traded currency on the continent.
However, the existing patchwork of African trading
blocks—there are some 17 in all, with many countries
being members of more than one—has made it difficult
to realize the gains from trade that could flow from an
expanded single market. An African firm selling goods
on the continent still faces an average tariff of 8.7 percent, compared with a 2.5 percent tariff on goods sold
overseas. Other costs of intra-African trade include
often-lengthy stops at borders for customs inspection,
excessive customs-related bureaucracy and red tape, and
a lack of adequate physical infrastructure, including
roads and railways. As a consequence of such factors, it
can take three weeks for a shipping container to travel
the 700 miles from the Kenyan port of Mombasa to

Shutterstock/Matthias G. Ziegler

Kampala, the capital of Uganda. There are also some
vexing local content requirements. The South African
Development Community, for example, requires that
clothes traded within the region are both manufactured
and sourced there to qualify for lower tariffs. However,
because few textiles are produced in the region, the rules
have stifled trade in garments.
For all these reasons, African countries are more likely
to trade with Europe and America than they are with each
other. Only 19 percent of Africa’s $930 billion in trade is
with other countries on the continent. By comparison,
some 60 percent of Europe’s trade is within its own continent, as is 40 percent of North American trade. Other factors contributing to the lack of intra-African trade include
low industrialization levels, restricted movement of labor,
poor infrastructure, and a high dependence on exporting
unprocessed commodities in many countries.
The thinking behind the TFTA is that harmonizing
rules, reducing tariffs, and streamlining or removing customs procedures will allow African firms to sell more
goods and services to their neighbors, enabling them to
achieve greater economies of scale and lower costs, which
would benefit all parties to the agreement. On the other
hand, such agreements may prove difficult to reach and, if
the past is any guide, even more difficult to implement,
given political realities on the ground. Some observers
think that the TFTA is too ambitious an undertaking and
that focusing effort on improving the three existing regional
groups would yield more gains. It’s easier, they argue, to
reach an agreement between five adjacent member states,
as in the case of the East African Community, than 26 very
different countries scattered over the entire continent.
Despite the skepticism surrounding TFTA, Africa
nations have even bigger ambitions. In 2016, African leaders committed themselves to establishing a Continental
Free Trade Area (CFTA) that encompasses all African
countries. Two years later, in March 2018, 44 of those
nations signed an agreement to create a CFTA. The pact
will eliminate tariffs on 90 percent of products, liberalize
services, and reduce nontariff barriers. A second phase of
negotiations, to begin later this year, will focus on investment, competition, and intellectual property rights. Proponents of the deal believe that it will merge Africa’s
fragmented markets into one large continental market,
ignite industrialization, boost economic growth, and create jobs. However, 11 African nations have yet to sign
onto the deal, including Nigeria and South Africa, the
two largest African economies. While both countries
seem to agree with the pact in principle, they view the pact
as incomplete. They point out that countries have not yet
decided which goods will be excluded from the tariff
reductions. Nor have they finalized key annexes to the

640

Part 7

Cases

text. For example, the chapter on “rules of origin” is
incomplete, raising the possibility that goods from outside Africa could be imported, have African labels placed
on them, and then be traded within the bloc as African
goods. There is also strong opposition to the pact from
labor unions within Nigeria, who have called the trade
deal a “radioactive neoliberal policy initiative.”

Sources
“Intra-African Trade: The Road Less Travelled,” The Economist,
April 17, 2013; Martin Stevis and Patrick McGroarty, “African
Leaders Pledge to Create a Free Trade Zone,” The Wall Street
Journal, June 10, 2015; “Trade Within Africa: Tear Down These
Walls,” The Economist, February 27, 2016; John Aglionby,
“Africa Looks to Boost Growth and Jobs with Free Trade
Area,” Financial Times, December 1, 2016; “Why Africa’s Two
Biggest Economies Did Not Sign Its Landmark Trade Deal,”
The Economist, March 29, 2018.

Case Discussion Questions
1.
2.
3.
4.
5.

Why are African countries more likely to trade with
Europe and America than they are with each other?
What are the likely gains from trade to be had from
TFTA if it is fully implemented as a common
market?
Why do you think free trade areas established so far
in Africa have not lived up to their expectations?
What will African countries need to do to make the
TFTA a success? What are the likely impediments to
doing this?
What could the impact of CFTA be on Africa?

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