The African Continental Free Trade Area: Potential Economic Impact and Challenges

By Lisandro Abrego, Mario de Zamaroczy, Tunc Gursoy, Garth P. Nicholls, Hector Perez-Saiz, Jose-Nicolas Rosas

May 13, 2020

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Lisandro Abrego, Mario de Zamaroczy, Tunc Gursoy, Garth P. Nicholls, Hector Perez-Saiz, and Jose-Nicolas Rosas. The African Continental Free Trade Area: Potential Economic Impact and Challenges, (USA: International Monetary Fund, 2020) accessed September 19, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

Political momentum towards Africa-wide free trade has been intensifying. In March 2018, over 40 countries signed the African Continental Free Trade Area (AfCFTA) agreement. Once fully implemented, the AfCFTA is expected to cover all 55 African countries, with a combined GDP of about US$2.2 trillion. This SDN takes stock of recent trade developments in Sub-Saharan Africa and assesses the potential benefits and costs of the AfCFTA, as well as challenges to its successful implementation. In addition to increased trade flows both in existing and new products, the AfCFTA has the potential to generate substantial economic benefits for African countries. These benefits include higher income arising from increased efficiency and productivity from improved resource allocation, higher cross-border investment flows, and technology transfers. Besides lowering import tariffs, to ensure these benefits, African countries will need reduce other trade barriers by making more efficient their customs procedures, reducing their wide infrastructure gaps, and improving their business climates. At the same time, policy measures should be taken to mitigate the differential impact of trade liberalization on certain groups as resources are reallocated in the economy and activities migrate to locations with comparatively lower costs.

Subject: Employment, International trade, Labor, Revenue administration, Tariffs, Taxes, Trade barriers, Trade facilitation, Trade liberalization

Keywords: AfCFTA, AfCFTA agenda, AfCFTA agreement, AfCFTA benefit, AfCFTA secretariat, AfCFTA study, AfCFTA welfare, Africa, CGE trade model, Employment, General equilibrium, Global, Inequality, Net effect, North Africa, Preferential trade arrangement, Reform strategy, SDN, Southern Africa, Structural reforms, Sub-Saharan Africa, Tariffs, Trade barriers, Trade creation, Trade diversion, Trade facilitation, Trade growth, Trade liberalization, Trade openness, Welfare

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Staff Discussion Notes No. 2020/004
Stock No:

SDNEA2020004
ISBN:

9781513542379
ISSN:

2617-6750

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