## sdnea2020004

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---

### Overview and context
- AfCFTA launch and scale:
  - In May 2019, African leaders launched the African Continental Free Trade Area (AfCFTA).
  - Once fully implemented, the AfCFTA is expected to cover all 55 African countries, with an estimated combined GDP of US$2.5 trillion and a population of over 1.2 billion.
  - By the end of January 2020, 54 (of 55) AU member countries had signed the AfCFTA agreement; as of late January 2020, 29 countries had ratified and deposited the instrument with the AUC.
- Current trade context:
  - In 2017, 17 percent of Africa’s total trade was conducted within the continent (up from 9 percent in 2000).
  - Exports to the rest of the world were dominated by primary products (~60 percent of total exports).
  - Intraregional trade during 2000–17 was dominated by food and manufactured goods.
  - Africa comprises 16 percent of the world’s population but only 5 percent of its income.

### Key empirical findings: income, welfare, and trade
- Aggregate welfare and income effects:
  - Previous studies estimate long-term income gains of up to 5 percent from AfCFTA-related reductions in trade barriers.
  - The note’s own static welfare estimates show gains of up to 2.1 percent for the continent (model is static and may understate dynamic gains).
  - The bulk of income and welfare gains come from reduced non-tariff barriers (NTBs); gains from import tariff elimination alone are small.
- Abrego and others (2019) scenario results (welfare increases, percent):
  - Tariff Elimination: SSA 0.07; Africa 0.05; Rest of the world 0.00; World 0.00.
  - NTB Reduction (35 percent): SSA 2.1; Africa 1.7; Rest of the world 0.00; World 0.03.
  - Tariff Elimination and NTB Reduction: SSA 2.6; Africa 2.1; Rest of the world 0.00; World 0.04.
- Trade volumes:
  - Intra-African trade is estimated to expand by more than 80 percent, adding about US$60 billion to African exports.
  - Continent’s total trade grows by 8 percent (modest because initial intraregional trade levels are modest).

### Non-tariff barriers (NTBs), trade impediments, and infrastructure gaps
- NTB characterization:
  - NTBs classified into: (1) non-tariff trade measures (NTMs); (2) infrastructure gaps; (3) other trade-related transaction costs.
  - Technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS) are the two most prevalent NTMs.
  - Table 2 (Africa totals, 2018) sample counts: SPS 587; TBT 306; ADP 86; CV 80; SG 155; SSG 0; QR 82; TRQ 62.
- Measured trade-logistics and infrastructure indicators (selected values preserved):
  - Container port traffic per capita (WDI): Africa 0.09; Sub-Saharan Africa 0.07; Advanced Economies 0.75.
  - Air transport passengers, per capita (WDI): Africa 0.23; Sub-Saharan Africa 0.25; Advanced Economies 2.61.
  - Quality of port infrastructure (1=low to 7=high) (WDI): Africa 3.64; Sub-Saharan Africa 3.64; Advanced Economies 5.35.
  - Liner shipping connectivity index (max=100) (WDI): Africa 14.38; Sub-Saharan Africa 12.72; Advanced Economies 50.64.
  - Infrastructure efficiency score (1=low to 5=high) (LPI): Africa 2.32; Sub-Saharan Africa 2.34; Advanced Economies 3.75.
  - Time to export (days) (DB): Africa 29.3; Sub-Saharan Africa 30.9; Advanced Economies 10.2.
  - Time to import (days) (DB): Africa 36.4; Sub-Saharan Africa 38.5; Advanced Economies 9.3.
  - Cost to export (USD per container) (DB): Africa 2,149; Sub-Saharan Africa 2,302; Advanced Economies 1,054.
  - Cost to import (USD per container) (DB): Africa 2,819; Sub-Saharan Africa 3,056; Advanced Economies 1,102.
- Logistics improvement potential:
  - IMF Regional Economic Outlook (IMF 2019) estimate: raising African trade logistics quality to the global level could increase intraregional trade by over 12 percent.

### AfCFTA design, scope, and implementation features
- Strategic and operational objectives:
  - Eight strategic objectives include creating a single market for goods and services, contributing to the movement of capital and people, creating a continental customs union, expanding intra-African trade, resolving overlapping REA memberships, promoting sustainable and inclusive development, boosting industrial development, and enhancing competitiveness.
  - Seven operational objectives include progressively eliminating tariffs and NTBs on goods, liberalizing services, cooperating on investment/IPR/competition, trade facilitation, dispute settlement, and creating an institutional framework.
- Tariff and services liberalization specifics:
  - Agreement path: elimination of tariffs on 90 percent of tariff lines; longer implementation periods allowed for 7 percent of tariff lines; countries may maintain tariffs on 3 percent of tariff lines provided the value of trade under these does not exceed 10 percent of total trade with Africa.
  - Services liberalization via request-and-offer approach; seven priority sectors: logistics and transport; financial services; tourism; professional services; energy services; construction; communications.
- NTB mechanism:
  - Annex 5 envisages institutional structures for NTB elimination, categorization of NTBs, reporting and monitoring, facilitation of resolution, and signatory obligations to publish NTB reduction plans.
- Implementation phases and timelines:
  - Phase I (went into effect at the end of May 2019): framework for liberalization of trade in goods and services and dispute settlement.
  - Phase II: competition policy, investment, and intellectual property rights (negotiations scheduled to begin soon with expected conclusion date end of 2020; may be delayed due to Covid-19).
  - Protocol on free movement of people and BIAT action plan proffered; freedom of movement protocol seeks visa-free entry across Africa.
  - No defined dates for continental customs union or transition to a continental single market.

### Heterogeneity, institutional context, and trade patterns
- Cross-country heterogeneity:
  - Seven countries with populations less than 1.5 million; three with over 100 million.
  - Income group distribution: 27 low-income countries (44.6 percent of continent population); 18 lower-middle-income (45.9 percent); 8 upper-middle-income (9.5 percent); 1 high-income (0.01 percent).
  - Trade openness varies widely (gross exports and imports range from 38 percent to 140 percent of GDP).
  - Fifteen landlocked countries account for ~17 percent of population and 7 percent of GDP.
- Existing REAs:
  - Existing intra-African trade arrangements expanded intraregional trade but underperformed due to low implementation, overlapping memberships, weak institutional frameworks, infrastructure bottlenecks, and limited complementary domestic reforms.
  - Article 19 permits REAs to maintain deeper integration; Article 3 aims to resolve multiple and overlapping memberships but no specific protocol exists on AfCFTA-REA relations.

### Distributional, employment, and firm-level evidence
- Distributional effects:
  - Empirical findings are heterogeneous: Chauvin, Ramos, and Porto (2016) find benefits vary across households and countries; IMF (2019) finds inequality decreases in poor agricultural exporters and increases in manufacturing exporters due to a higher skill premium.
  - Perez-Saiz (2019) (elimination of import tariffs + 35 percent NTB reduction): average change in the skill premium in SSA close to 1 percent (significant dispersion; smaller countries tend to experience larger changes).
- Employment and labor market:
  - Key labor statistics: labor force participation in SSA ~70 percent; continental rate <50 percent due to low female participation in northern Africa; informality 86 percent of employment (ILO 2018).
  - Traditional CGE models often assume full employment; transitional unemployment risks exist given labor market frictions.
  - UNCTAD (2018) CGE with variable employment estimates a long-term employment increase of 1.2 percent (does not capture transitional dynamics).
- Firm-level findings (preserved regression results and magnitudes):
  - Exporter wage premium: exporting firms pay salaries almost 18 percent higher than non-exporters (Duda-Nyczak and Viegelahn 2018).
  - Probit on probability of exportation (selected coefficients, standard errors in parentheses):
    - Reduct 5 percentile 0.506*** (0.167)
    - LatePeriod x Reduct 5 percentile 0.933*** (0.196)
    - Firm age 0.00688*** (0.000995)
    - Small size -0.275*** (0.0839)
    - Foreign firm 0.316*** (0.0386)
    - Observations: 17,569 (column 1), 16,926 (columns 2–5); Year FE: YES; Country FE: YES.
  - Employment Growth and Exporting Firms (selected coefficients):
    - Exporter -1.222*** (0.423) on Employment Growth (column 1).
    - Exporter 1.786** (0.877) on Labor Productivity Growth (column 2).
    - Observations Employment Growth 18,204; R squared 0.048.
  - Interpretation: exporting firms show higher productivity and wages but lower employment growth, suggesting export-driven reallocation may not absorb unskilled trade-displaced labor.
  - Export survival: uncertainty about time to clear imported inputs reduces survival of new exporters beyond first year.

### Fiscal revenue effects
- Channels of fiscal impact:
  1. Direct reduction in tariff revenue from removal of tariffs on intra-continental imports.
  2. Trade diversion reducing revenues.
  3. Higher GDP raising revenue.
  4. Higher consumption raising revenue.
- Estimated magnitudes:
  - Most CGE-based studies estimate tariff-removal tax revenue losses ranging from 0.03 percent to 0.22 percent of GDP (or about US$1 billion to US$7 billion) for the continent.
  - When tariff and NTB reductions are considered jointly, general equilibrium analysis shows tax revenue increases for virtually all countries (tariff-removal losses more than offset by higher consumption and income) — though income gains may take time to materialize.
- Short-term caveat:
  - Initial tariff revenue losses likely modest due to low applied intraregional tariffs and modest intraregional trade; however, revenue mobilization reforms may be needed as income gains materialize slowly.

### Policy recommendations to maximize benefits and mitigate costs
- Priorities (immediate and strategic):
  - Prioritize strategic reduction of NTBs, focusing first on customs and administrative entry procedures, technical barriers to trade, and sanitary and phytosanitary measures.
  - Improve trade logistics and close infrastructure gaps, particularly ports and road networks.
  - Scale up continental infrastructure initiatives, strengthen rural-urban links, and develop trade corridors with a continental perspective.
- Labor market and social policies:
  - Increase formal labor market flexibility to limit negative employment effects.
  - Strengthen broader and more efficient social safety nets to address adverse income distribution effects.
  - Implement training and retraining programs to adapt worker skills to new needs.
  - Facilitate increased labor mobility through implementation of the freedom of movement protocol.
- Revenue and public finance measures:
  - Improve revenue mobilization: eliminate base-narrowing exemptions, revise investment codes, remove tax distortions, adopt automated systems, introduce simplified regimes for small businesses, and leverage digitalization (e-filing, e-payment).
  - Mobilize higher revenues to finance infrastructure improvements and to upgrade social safety nets; consider user fees and public-private partnerships.
- Institutional implementation and governance:
  - Ensure an institutionally strong and effective AfCFTA secretariat with legal authority, monitoring capacity, and technical-assistance capabilities.
  - Uphold agreement provisions to build credibility and reduce trade policy uncertainty.
  - Address REA absorption/roles, clarify secretariat legal personality, and manage political-economy trade-offs without eroding economic benefits.
- Measures to promote inclusive gains:
  - Improve product-market functioning, guard against industry concentration, enhance competition policy and bankruptcy frameworks.
  - Promote access to finance, better-functioning financial markets, and long-term financing for firms.
  - Adopt a transformation strategy to promote productivity, innovation, and movement up global value chains.

### Overall assessment and implementation emphasis
- Net benefits vs. costs:
  - Gains from import tariff reductions alone are likely small; substantial reductions in NTBs could yield significant welfare gains.
  - AfCFTA could support increased productivity, investment, income, and poverty reduction if accompanied by complementary reforms.
  - The note’s view: benefits of the AfCFTA would outweigh the costs, provided policymakers implement complementary measures to strengthen social protection, increase labor market flexibility, and mobilize domestic revenues.
- Implementation cautions:
  - Address infrastructure deficits and NTBs strategically; manage political-economy constraints; ensure phased implementation and strong governance to realize and sustain gains.

*Source: EXECUTIVE SUMMARY and chapters/appendices, sdnea2020004*

### EXECUTIVE SUMMARY __________________________________________________________________________ 7

### EXECUTIVE SUMMARY

### Overview and context
- In May 2019, African leaders launched the African Continental Free Trade Area (AfCFTA).
- Once fully implemented, the AfCFTA is expected to cover all 55 African countries, with an estimated combined GDP of US$2.5 trillion and a population of over 1.2 billion.
- The AfCFTA provides a framework for trade liberalization of goods and services and, in terms of population, will be the largest free trade area in the world.
- The Staff Discussion Note assesses effects of the AfCFTA on: (1) income, welfare, and trade flows; (2) income distribution and employment; and (3) tax revenues, and discusses policy reforms needed to maximize benefits.

### Key empirical findings: income, welfare, and trade
- Previous studies estimate long-term income gains of up to 5 percent from AfCFTA-related reductions in trade barriers.
- The note’s own welfare estimates show gains of up to 2.1 percent for the continent (model is static and may understate dynamic gains from investment, innovation, and knowledge diffusion).
- The bulk of income and welfare gains come from reduced non-tariff barriers (NTBs), since intraregional import tariffs are already low.
- Largest proportional welfare gains accrue to smaller countries with open economies and to countries starting from higher trade barriers; these countries also benefit from positive terms-of-trade changes.
- Intraregional trade is estimated to expand by more than 80 percent, adding about US$60 billion to African exports.
- Trade diversion (adverse effects on trade with nonmember countries) is estimated to be relatively limited.

### Trade patterns and constraints (contextual details)
- In 2017, 17 percent of Africa’s total trade was conducted within the continent, up from 9 percent in 2000; by comparison, intraregional trade in regions such as Europe and Asia is over 50 percent.
- Intra-African trade during 2000–17 was dominated by food and manufactured goods.
- Exports to the rest of the world were dominated by primary products, which accounted for about 60 percent of total exports.
- Chemicals, other manufactured goods, machinery, and transportation equipment represented close to 70 percent of total imports.
- Africa lacks a continent-wide trading hub comparable to hubs in Asia, Europe, or North America; South Africa functions somewhat as a hub for southern Africa.

### Heterogeneity and institutional context
- Africa shows wide heterogeneity: seven countries with populations less than 1.5 million; three with over 100 million.
- Africa comprises 16 percent of the world’s population but only 5 percent of its income.
- Half of Africa’s countries (27), with 44.6 percent of the continent’s total population, are categorized as low-income countries; the remainder are 18 lower-middle-income (45.9 percent of the population), 8 upper-middle-income (9.5 percent of the population), and 1 high-income country (0.01 percent of the population).
- Trade openness varies widely, with gross exports and imports ranging from 38 percent to 140 percent of GDP.
- Fifteen African countries, with about 17 percent of the total African population and 7 percent of GDP, are landlocked.
- Existing intra-African trade arrangements have expanded intraregional trade but have underperformed relative to expectations owing to: low implementation, overlapping memberships, weak institutional frameworks, infrastructure bottlenecks, and limited complementary domestic reforms.

### Potential transitional costs and distributional effects
- Potential transitional costs include:
  - Tax revenue losses from lower import tariffs.
  - Higher income inequality.
  - Higher unemployment, especially if trade liberalization is not accompanied by labor market reforms and greater worker mobility.
- For the continent as a whole, tariff revenue losses from elimination of import tariffs are estimated to be modest due to:
  - Low effectively applied intraregional import tariffs.
  - Modest intraregional trade levels.
  - Small reduction in imports from the rest of the world.
- Any initial tariff revenue losses are likely to be offset eventually by higher tax revenue from increased consumption and income, contingent on countries pursuing the necessary steps to lower NTBs.

### Policy recommendations to maximize benefits and mitigate costs
- Prioritize strategic reduction of NTBs, focusing first on those imposing the highest trade costs:
  - Customs and administrative entry procedures.
  - Technical barriers to trade.
  - Sanitary and phytosanitary measures.
- Improve trade logistics and close infrastructure gaps, particularly ports and road networks, to realize welfare gains.
- Labor market and social policies to limit adjustment costs:
  - Increase formal labor market flexibility to limit negative employment effects.
  - Strengthen broader and more efficient social safety nets to address adverse income distribution effects.
  - Implement training and retraining programs to adapt worker skills to new needs.
  - Facilitate increased labor mobility through implementation of the freedom of movement protocol.
- Revenue and public finance measures:
  - Improve revenue mobilization, recognizing income gains and associated tax revenues may take time to materialize and may not offset tariff revenue losses in the short term.
  - Mobilize higher revenues to finance infrastructure improvements and to upgrade social safety nets needed to mitigate transitional costs.
- Institutional implementation:
  - Uphold agreement provisions and ensure an institutionally strong and effective AfCFTA secretariat with capacity to implement trade rules in line with the text to build credibility and reduce trade policy uncertainty.

### Overall assessment
- Gains from import tariff reductions alone are likely to be small, but substantial reductions in NTBs could yield significant welfare gains.
- The AfCFTA is expected to support increased productivity, investment, income, and poverty reduction if accompanied by complementary reforms.
- The note’s view: benefits of the AfCFTA would outweigh the costs, provided policymakers implement complementary measures to strengthen social protection, increase labor market flexibility, and mobilize domestic revenues.

*Source: EXECUTIVE SUMMARY, sdnea2020004*

### 11. While intra-African trade agreements have gradually facilitated a large reduction in

### 11. While intra-African trade agreements have gradually facilitated a large reduction in tariffs on goods (Table 1)

### Non-tariff barriers (NTBs) and trade impediments
- NTBs remain high for most African countries and are classified into three broad categories:
  - (1) non-tariff trade measures (NTMs);
  - (2) infrastructure gaps;
  - (3) other trade-related transaction costs.
- Technical and sanitary/phytosanitary barriers are the two most prevalent NTMs in Africa (Table 2).
- Large infrastructure gaps and significant trade-related transaction costs present barriers to trade in Africa (Table 3).
- Unilateral trade liberalization contributed to a significant reduction in tariffs imposed on non-African countries, which fell from 21.7 percent in 1997 to 11.8 percent in 2016.
- Improving ground transportation is especially critical to encourage intraregional trade, given the geography of the continent (World Bank 2009).

### Trade logistics and potential gains
- The IMF Regional Economic Outlook (IMF 2019) estimates that a rise in the quality of African trade logistics to the global level could reduce the cost of cross-border movement of goods significantly and increase intraregional trade by over 12 percent.
- Enabling business environment, access to credit, and adequate human capital are critical to support intraregional trade (IMF 2019).
- Regional financial infrastructure that could facilitate intraregional trade includes:
  - harmonizing regional payment systems to facilitate cross-border payments;
  - creating swap arrangements across central banks and a multicurrency clearing center to reduce risks from trading in different national currencies;
  - better coordinating the supervision of pan-African banks.

### Key measured indicators (selected values preserved as presented)
- Simple Average Applied Effective Tariffs, 2016 (Percent) — Selected entries:
  - Africa: Effectively Applied (AHS) 5.0; Most Favoured Nation (MFN) 11.8; 12.5
  - AU-recognized REAs (examples): AMU AHS 5.0 MFN 8.9 14.0; COMESA AHS 5.0 MFN 8.9 11.0; EAC AHS 0.0 MFN 11.6 12.8; SADC AHS 4.0 MFN 7.7 9.2
  - Comparators: LAC ... 9.9 10.5; ASEAN 1.0 5.0 6.3; MERCOSUR 0.0 11.1 12.1
- Table 3: Infrastructure gaps and trade-related transaction costs in Africa, 2012–16 (selected entries)
  - Container port traffic per capita (WDI): Africa 0.09; Sub-Saharan Africa 0.07; Advanced Economies 0.75
  - Air transport passengers, per capita (WDI): Africa 0.23; Sub-Saharan Africa 0.25; Advanced Economies 2.61
  - Quality of port infrastructure (1=low to 7=high) (WDI): Africa 3.64; Sub-Saharan Africa 3.64; Advanced Economies 5.35
  - Liner shipping connectivity index (max=100) (WDI): Africa 14.38; Sub-Saharan Africa 12.72; Advanced Economies 50.64
  - Infrastructure efficiency score (1=low to 5=high) (LPI): Africa 2.32; Sub-Saharan Africa 2.34; Advanced Economies 3.75
  - Time to export (days) (DB): Africa 29.3; Sub-Saharan Africa 30.9; Advanced Economies 10.2
  - Time to import (days) (DB): Africa 36.4; Sub-Saharan Africa 38.5; Advanced Economies 9.3
  - Cost to export (USD per container) (DB): Africa 2,149; Sub-Saharan Africa 2,302; Advanced Economies 1,054
  - Cost to import (USD per container) (DB): Africa 2,819; Sub-Saharan Africa 3,056; Advanced Economies 1,102

### Prevalence of NTMs (Table 2, number of measures in place) — selected country counts (preserved exactly as presented)
- Africa totals (2018): SPS 587; TBT 306; ADP 86; CV 80; SG 155; SSG 0; QR 82; TRQ 62; XS  (entry shows aggregated counts across categories as presented)

(See Table 2 for country-level breakdown; technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS) are among the largest counts.)

### Figure 2 note
- Intra-African Non-Tariff Trade Barriers for Selected Countries, 2016 are expressed as ad valorem equivalent percent and compared across regions (data labels use ISO country codes).

### Continental initiatives and timelines
- The Presidential Infrastructure Champion Initiative was launched in 2011 and the Program for Infrastructure Development in Africa was adopted in 2012.
- Some continental initiatives have been launched to address infrastructure gaps, but they will take time to produce effects.

---

### III. The African Continental Free Trade Area (AfCFTA)

### Scope, size, and expected economic potential
- By the end of January 2020, 54 (of 55) member countries of the African Union (AU) had signed the AfCFTA agreement.
- Once fully implemented, the AfCFTA is expected to cover all 55 African countries, with an estimated combined GDP of US$2.5 trillion and a population of over 1.2 billion.
- In terms of population, it will be the largest free trade area in the world.
- The AfCFTA has the potential to raise Africa’s low productivity and promote higher investment, thereby helping increase income levels and reduce poverty.

### Institutional lineage and strategic objectives
- The AfCFTA builds on negotiations of the Tripartite Free Trade Area (TFTA), composed of SADC, COMESA, and the EAC.
- The AfCFTA has eight strategic objectives:
  - (1) creating a single market for goods and services, facilitated by the movement of people;
  - (2) contributing to the movement of capital and people and facilitating investment;
  - (3) creating a continental customs union;
  - (4) expanding intra-African trade;
  - (5) resolving the challenges of overlapping memberships in REAs;
  - (6) promoting sustainable and inclusive economic development;
  - (7) boosting industrial development;
  - (8) enhancing competitiveness.
- The REAs are expected to contribute to the AfCFTA’s institutional structure and, in the long run, trade functions may be consolidated at the continental level.

### Operational objectives and institutional features (Box 1)
- Seven operational objectives of the AfCFTA agreement:
  - (1) eliminate tariffs and non-tariff barriers to trade in goods progressively;
  - (2) liberalize trade in services progressively;
  - (3) cooperate in matters of investment, intellectual property rights, and competition policy;
  - (4) cooperate in all trade-related areas;
  - (5) cooperate in customs matters and the implementation of trade facilitation measures;
  - (6) establish a mechanism for the settlement of disputes concerning members’ rights and obligations;
  - (7) establish and maintain an institutional framework for the implementation and administration of the AfCFTA.
- Institutional framework (Article 9) foresees creation of:
  - an assembly;
  - a council of ministers;
  - a committee of trade ministers;
  - an autonomous secretariat (the only organ given legal personality, operationally autonomous but financed by the African Union’s budget). The council of ministers determines roles and responsibilities of the secretariat.

### Tariff and services liberalization specifics
- The agreement sets the path for elimination of tariffs on 90 percent of tariff lines.
- Countries can implement tariff reductions over a longer period for 7 percent of tariff lines.
- Countries can maintain existing tariffs for the remaining 3 percent of tariff lines, provided that the value of trade under these does not exceed 10 percent of the total trade with Africa.
- For services, member countries agreed to propose liberalization through a request-and-offer approach, based on seven identified priority sectors:
  - logistics and transport;
  - financial services;
  - tourism;
  - professional services;
  - energy services;
  - construction;
  - communications.
- The mechanism for reducing NTBs is laid out in Annex 5 of the agreement. It envisages:
  - creation of institutional structures for elimination of NTBs;
  - general categorization of NTBs;
  - reporting and monitoring tools;
  - facilitation of resolution of identified NTBs;
  - signatories are obligated to publish their NTB reduction plans.
- Broad categories of NTBs under the agreement include: trade and restrictive practices tolerated by governments, customs and administrative entry procedures, technical barriers to trade, sanitary and phytosanitary measures, and other barriers (including transportation).

### Complementary protocols and implementation phases
- A protocol on free movement of people and an action plan for boosting intra-African trade (BIAT) have been proffered. The protocol seeks to extend visa-free entry to all African countries.
- The agreement will be implemented in two phases:
  - Phase I (went into effect at the end of May 2019) provides a framework for liberalization of trade in goods and services and a mechanism for dispute settlement.
  - Phase II will cover competition policy, investment, and intellectual property rights. Negotiations for Phase II were scheduled to begin soon, with an expected conclusion date at the end of 2020; this may be delayed due to the Covid-19 pandemic.
- The next milestones: creation of a continental customs union and ultimate transition to a continental single market. Dates for these milestones are undefined.
- Procedural notes:
  - Phase I going into effect followed receipt of the 22nd ratification instrument by the chairman of the African Union Commission (AUC).
  - As of late January 2020, 29 countries had ratified the agreement and deposited the instrument with the AUC.

---

### B. Potential challenges and implementation considerations

### Major challenges identified
- Clarifying process of absorbing existing REAs into the AfCFTA and their subsequent role:
  - Article 19 permits REAs to maintain integration arrangements deeper than AfCFTA, but Article 3 includes an objective to resolve multiple and overlapping memberships. No specific protocol exists on relations between AfCFTA and existing REAs.
  - Status questions remain for other regional trade agreements not recognized as AfCFTA building blocks (e.g., Indian Ocean Commission, Southern African Customs Union, Mano River Union).
- Implementing a rules-based system will depend on a strong secretariat:
  - The scope and meaning of the legal personality of the secretariat needs clarification.
  - The secretariat should have legal authority to conduct monitoring and oversight and the capacity to provide technical assistance and practical guidance.
- Managing political economy aspects without compromising economic benefits:
  - Trade agreement negotiations are typically more protracted with more countries and between poorer and less open countries (Moser and Rose 2012).
  - Addressing legitimate concerns of interest groups is important for political viability; some trade-offs may be necessary, but economic benefits should not be compromised.
- Resisting inward-looking protection:
  - The AfCFTA should not be used to shield domestic markets from global competition.
  - The AfCFTA provides leverage to negotiate with overseas REAs and should be complemented by a gradual reduction in most-favored-nation tariffs to expand Africa’s global trade share and promote income convergence.

---

### IV. Assessing potential benefits and costs (overview)
- Welfare effects of preferential trade arrangements are theoretically ambiguous:
  - Trade creation increases welfare; trade diversion reduces welfare.
  - Effects depend on whether trade diversion or trade creation dominates.
  - Terms-of-trade effects and other distortions further complicate assessment.
- Empirical general-equilibrium studies typically find preferential trade arrangements have a positive effect on welfare, with gain sizes depending largely on initial conditions (for example, level of trade barriers and extent of trade liberalization).

*Source: sdnea2020004 - 11. While intra-African trade agreements have gradually facilitated a large reduction in tariffs on goods (chapter content from the provided IMF PDF).*

### 21. Empirical studies find that the AfCFTA would increase overall income and welfare for

### 21. Empirical studies find that the AfCFTA would increase overall income and welfare for 

### Welfare and income effects
- Empirical literature based on multi-sector, multi-country CGE trade models finds income and welfare gains for the majority of African countries; magnitudes vary by model specification.
- Some studies (Chauvin, Ramos, and Porto 2016) find income gains of up to 5 percent.
- Virtually all studies find relatively small gains from elimination of import tariffs and significantly larger gains from reduction of NTBs, reflecting that intraregional tariffs in Africa are low while NTBs are large.
- Abrego and others (2019) — baseline simulations (perfect competition, with a 35 percent reduction in NTBs) — report:
  - Overall welfare gain of 2.6 percent for sub-Saharan Africa (SSA).
  - Overall welfare gain of 2.1 percent for the continent as a whole.
- Abrego and others (2019) model features:
  - International prices are endogenous (terms-of-trade changes affect welfare and distribution of gains).
  - Similar continental welfare gains under imperfect competition (scale effects not very strong).
  - Model is static and does not include capital accumulation, innovation, knowledge diffusion, or intermediate inputs, likely understating benefits from trade-barrier reduction.
- Table (Abrego and others 2019) — welfare increases (percent) by scenario:
  - Tariff Elimination: Welfare increase in SSA 0.07; Welfare increase in Africa 0.05; Welfare increase in the rest of the world 0.00; Welfare increase world 0.00.
  - NTB Reduction (35 percent): Welfare increase in SSA 2.1; Welfare increase in Africa 1.7; Welfare increase in the rest of the world 0.00; Welfare increase world 0.03.
  - Tariff Elimination and NTB Reduction: Welfare increase in SSA 2.6; Welfare increase in Africa 2.1; Welfare increase in the rest of the world 0.00; Welfare increase world 0.04.
- Sectoral drivers: tradeable sectors, particularly manufacturing (accounts for over 60 percent of welfare gains) and agriculture (16 percent), drive estimated welfare changes for most countries; manufacturing sectors expanding most in small economies include electricity generation, machinery, chemicals, and textiles.

### Trade volume effects
- Abrego and others (2019) estimate:
  - Intra-African trade growth of more than 80 percent owing to the AfCFTA, representing an increase of about US$60 billion in African exports.
  - Continent’s total trade grows only by 8 percent because initial intraregional trade levels are modest.
- Significant variation across countries: those with initially higher trade barriers show stronger trade growth.
- Firm-level econometric analysis shows reduction in trade barriers positively affects firms’ decisions to export.

### Distributional effects and inequality
- Trade can affect income distribution among factors of production; empirical consensus is that skill-rewarding technical change, not trade, is the main driver of rising wage inequality in many countries.
- Trade liberalization’s contribution to inequality is context specific (depends on nature of policy changes, trade patterns, mobility of workers and capital).
- Studies on AfCFTA and inequality are inconclusive and heterogeneous:
  - Chauvin, Ramos, and Porto (2016) find AfCFTA benefits richer households in some countries and poorer households in others; rural households may gain more than urban in some countries.
  - IMF Regional Economic Outlook (2019) simulations: income inequality decreases in poor countries that export agricultural goods and increases in countries that export manufacturing goods because of a higher skill premium; medium-term effects tend to be muted.
- Reasons why inequality may not rise rapidly after AfCFTA:
  - Existing intraregional tariffs are already low and would be removed gradually.
  - NTB removal would also likely be gradual.
- Capital–skilled labor complementarity channel:
  - Perez-Saiz (2019), assuming elimination of import tariffs and a 35 percent reduction in NTBs, finds the change in the skill premium in SSA would be on average close to 1 percent (with significant dispersion; smaller countries tend to experience larger changes).
  - Firm-level evidence of an “exporter wage premium”: exporting firms pay higher wages than other firms; little evidence of a positive wage premium for importing firms.

### Employment effects
- Labor market features relevant for AfCFTA impacts:
  - High labor force participation in sub-Saharan Africa: rate of almost 70 percent.
  - For the entire African continent, female labor participation in northern Africa reduces the continental rate to less than 50 percent.
  - Unemployment rates for workers with advanced education are particularly high.
  - Informality: 86 percent of employment on the continent is informal (ILO 2018).
  - Formal labor-market indicators show relatively high unionization and collective bargaining prevalence; formal markets may lack flexibility.
- Traditional trade models assume frictionless labor markets and full employment, implying no effect of trade on overall employment.
- Empirical findings:
  - Rapid trade liberalization can lead to transitional unemployment; short- and medium-term increases in imports have been associated with rises in unemployment.
  - Frictions impeding worker movement across industries, firms, or locations are crucial to understanding unemployment effects.
  - Trade-induced labor reallocation mostly occurs at the intra-industry level (from less to more productive firms) rather than across industries.
- Existing AfCFTA studies:
  - Most general equilibrium models assume full employment and perfect labor mobility.
  - UNCTAD (2018) uses a CGE model allowing changes in overall employment and estimates a long-term increase in employment of 1.2 percent; the model does not capture transitional dynamics.
- Caveats:
  - Transitional dynamics could feature transitional unemployment given labor market characteristics; firm-level evidence suggests export expansion may be less conducive to employment growth than other activities because exporting firms tend to employ more skilled workers.

### Fiscal revenue impact
- AfCFTA affects tax revenues through four channels:
  1. Direct reduction in tariff revenue from removal of tariffs on intra-continental imports.
  2. Trade diversion owing to lower tariffs reduces revenues.
  3. Higher GDP (efficiency gains) leads to more revenue.
  4. Higher consumption (from increased imports and income) raises revenue.
- Most CGE-based studies estimate tariff-removal tax revenue losses ranging from 0.03 percent to 0.22 percent of GDP (or about US$1 billion to US$7 billion) for the continent.
- When both tariff and NTB reductions are considered in general equilibrium analysis, tax revenue increases for virtually all countries: modest tariff-removal losses are more than offset by increases from higher consumption and income (Abrego and others 2019).
- Revenue increases tend to be proportional to welfare gains and vary across countries.
- Short-term caveat: income gains may take time to materialize, so revenue increases may not compensate for tariff removal losses in the short term; adequate revenue mobilization reforms may still be needed.

### Policy implications and options to maximize benefits / mitigate challenges
- Two urgent areas to tackle to tap AfCFTA benefits:
  - Reduce the infrastructure deficit (notably in roads and ports), building on ongoing efforts.
  - Reduce critical NTBs (customs and administrative requirements) that directly affect the capacity to move traded merchandise within and outside borders.
- Implementation risks and necessary reforms:
  - AfCFTA implementation could raise income inequality and cause transitional unemployment; a broad-based reform agenda is needed to reap benefits and mitigate costs.
  - Given gradual removal of tariffs and NTBs, authorities should have time to monitor unfolding effects and take corrective actions, but proactive policies (including labor market and revenue-mobilization reforms) will be important.

*Source: THE AFRICAN CONTINENTAL FREE TRADE AREA, INTERNATIONAL MONETARY FUND (chapter content provided).*

### 38. Reducing Africa’s large infrastructure deficit in roads and ports can increase

### 38. Reducing Africa’s large infrastructure deficit in roads and ports can increase

### Infrastructure: roads and ports
- African countries need to extend their road network—while upgrading existing roads—to improve access to African and global markets.
- Strategy priorities:
  - Scale up existing continental infrastructure initiatives.
  - Strengthen rural-urban links.
  - Develop trade corridors.
  - Incorporate a continental perspective.
- Importance for landlocked countries:
  - Reducing trade costs in landlocked countries by eliminating bottlenecks in reaching transit ports.
- Port development:
  - Improve ports and their efficiency as part of a coordinated African transportation strategy to ensure efficient use of resources and reduce costs and time at customs.
- Role of private sector and public investment:
  - Strengthen regulatory frameworks and institutional capacity to attract private sector participation in construction, operation, and maintenance of transportation infrastructure.
  - Continue efficient public investment in areas unlikely to receive private financing (for example, rural roads and rural telecommunications), along with improvement of public investment management.
- Road density statistics:
  - "3.4 km per 1,000 inhabitants" road density in sub-Saharan Africa is less than half of the global average.
  - Paved road density is "0.7 km per 1,000 inhabitants", which is one-fifth of the global average (Gwilliam 2011).

### Trade facilitation and customs modernization
- Priority reforms to reduce onerous customs procedures and boost efficiency:
  - Ensure all customs locations have information technology systems that support core processes and are adequately used by traders and officials.
  - Adopt and enforce effective governance policies for customs and other border agencies.
  - Enhance customs control of preferential origin rules to prevent revenue losses and build trust among trading countries.
  - Introduce modern risk-analysis techniques and appropriate equipment for nonintrusive inspections and faster turnaround in laboratory sample testing.
  - Deepen modernization efforts with a focus on reducing costs and delays faced by international traders.
- Institutional and capacity-building actions:
  - Press forward with modernization processes, intensify training, and implement quality-based management.
  - Increase professionalization of customs agencies.

### Governance of the AfCFTA
- Ensure a strong governance framework for the AfCFTA to reduce uncertainty over trading rules and market access.
- A resolute implementation of AfCFTA provisions could improve the business environment and unlock private sector decisions to expand and start new businesses.

### Mitigating adverse distributional and employment effects (policy package)
- Four mutually reinforcing initiatives to promote inclusive growth as AfCFTA raises income:
  1. Improve the functioning of product markets.
  2. Improve the flexibility of the labor market.
  3. Enhance social protection programs.
  4. Encourage investment and innovation within a well-defined transformation strategy.
- Product market reforms:
  - Guard against industry concentration and market power that can block price reductions or the introduction of greater variety.
  - Enhance competition and introduce a fair trading and competition commission to limit monopolistic practices.
  - Reform rules on firms’ entry and exit, including modernizing bankruptcy rules.
- Labor market flexibility:
  - Address distortions in labor costs and ease restrictions on labor reallocation across sectors, firms, occupations, and regions.
  - Emphasize education, training, and retraining.
  - Promote freedom of movement of labor and remove barriers to workers’ mobility.
- Social protection and active labor-market measures:
  - Broaden and strengthen social safety nets to provide targeted assistance to those adversely affected by trade liberalization.
  - Implement targeted training programs and other active labor-market programs to cushion short-term adjustment and prevent negative long-term effects.
- Transformation strategy based on investment and innovation:
  - Promote productivity growth and moving up the global value chain through greater innovation and investment (both foreign and domestic).
  - Support expansion of employment opportunities and firms’ ability to seize new opportunities under AfCFTA.
  - Support efficient implementation by ratifying the freedom of movement protocol of the AfCFTA and improving development and trade financing.
- Financial market improvements:
  - Better-functioning financial markets that make it easier to secure loans based on credit histories.
  - Improve firms’ access to long-term competitive financing to expand production and facilitate more extensive trade.
  - Expand access to financial services to the wider population to increase efficiency and enhance gains from trade.

### Managing potential adverse fiscal revenue impacts
- Revenue mobilization guidance:
  - Guided by country-specific reform strategies.
  - Measures include eliminating base-narrowing exemptions, revising investment codes, and removing tax distortions.
  - Invest in effective and modern tax policy and administration, including taxpayer segmentation.
  - Continuous improvements in functioning of these systems are needed, especially through strengthening capacity and coverage.
- Other revenue-boosting measures:
  - Introduce a simplified tax regime for small businesses to reach sectors difficult to tax.
  - Change the value-added tax (VAT) threshold to better target high-value businesses.
  - Invest in (or expand) digitalization and pursue reforms in information and communication technologies to reduce compliance costs and simplify registration, filing (through e-filing), payment (through e-payment), audit, collection enforcement, and appeals.
  - Develop (or leverage) existing platforms to combine domestic revenue and customs operations and simplify customs clearance operations.
  - Adopt automated systems across tax and customs administrations to boost revenue.
- Financing needs for AfCFTA implementation:
  - Additional public resources required to finance investment to fill the continent’s infrastructure gap and to strengthen social protection frameworks.
  - Fiscal space could come from revenue mobilization or reprioritization of expenditures.
  - Other financing modes, such as user fees or public-private partnerships, could contribute to fiscal space while mitigating fiscal risks.
- Political economy and implementation:
  - Revenue-enhancing efforts require sustained political commitment, transparency, and outreach to mobilize support and improve tax compliance.

### Conclusion: expected gains, priorities, and complementary reforms
- AfCFTA potential:
  - The AfCFTA could have a transformative impact on African economies and aims at deepening economic integration on the continent.
  - Various models show potential income and welfare gains are significant—most would derive from NTB reductions.
  - Lowering NTBs beyond levels typically assumed in the literature can significantly increase the size of gains.
  - Implementation could unleash economic restructuring, offering opportunities for deeper backward integration in global value chains and expand trade, employment, and income for African workers.
- Priorities to realize gains:
  - Substantially and strategically reduce NTBs, targeting inefficient customs and entry requirement procedures and technical barriers to trade first.
  - Reduce the infrastructure deficit and improve the low quality of trade logistics to deepen continental free trade and integration.
  - Overcome political economy issues in distribution of gains, setting up of the AfCFTA secretariat, and management of special interest groups within and across countries.
- Complementary reforms to address potential costs:
  - Address potential adverse impacts on income distribution and employment and potential short-term net fiscal revenue losses through:
    - Country-specific policies to manage income inequality (noting that AfCFTA-induced inequality may not rise rapidly given already low intraregional tariffs and proposed gradual removal of NTBs).
    - Policies aimed at increasing labor market flexibility and social protection to address transitional unemployment; consider more gradual liberalization in vulnerable sectors.
    - Expectation that net revenue losses from tariff removal are likely to be small and that the combination of tariff removal and NTB reduction would increase domestic consumption and income and result in higher net revenues in virtually all countries, although these gains may take time to materialize.
- Implementation emphasis:
  - Adopt policy reforms to mitigate costs while supporting sustainable and inclusive growth, which is fundamental to AfCFTA’s success.

*Source: The African Continental Free Trade Area, International Monetary Fund (sdnea2020004)*

### 2012. Assessing Regional Integration in Africa V: Towards an African Continental Free Trade

### 2012. Assessing Regional Integration in Africa V: Towards an African Continental Free Trade Area

### Selected African Country Indicators, 2016 (Appendix I)
- Data units and sources:
  - (Billions of US dollars, unless indicated otherwise).
  - Sources: World Integrated Trade Solutions; and IMF, World Economic Outlook database, April 2018.
  - Note: a-2015; b-2014; c-2013; d-2012; e-2007; f-2006. Bns = billions; PPP = purchasing power parity.
- Key country-level figures (selected entries preserved exactly as in source):
  - Egypt: GDP PPP (US$bns) 1,132.1; Openness (Percent of GDP, goods/services) 31; Population (Millions of persons) 90.2; Income Group Lower middle; Average Applied Import Tariffs 6.6; Effective Non-Trade Measures (NTM) 14.6; Trade within Africa as a ratio of total trade ...
  - Nigeria: GDP PPP (US$bns) 1,090.1; Openness 21; Population 183.6; Income Group Lower middle; Average Applied Import Tariffs 11.3; Effective NTM 15.0; Trade within Africa as a ratio of total trade 8.9
  - South Africa: GDP PPP (US$bns) 742.2; Openness 61; Population 55.6; Income Group Upper middle; Average Applied Import Tariffs 4.5; Effective NTM 2.7; Trade within Africa as a ratio of total trade 19.0
  - Ethiopia: GDP PPP (US$bns) 177.4; Openness 36; Population 91.2; Income Group Low; Average Applied Import Tariffs 12.1 a; Effective NTM 2.5; Trade within Africa as a ratio of total trade 7.2
  - Côte d'Ivoire: GDP PPP (US$bns) 88.3; Openness 62; Population 24.3; Income Group Lower middle; Average Applied Import Tariffs 10.6 a; Effective NTM 14.3; Trade within Africa as a ratio of total trade 25.1
  - Zambia: GDP PPP (US$bns) 65.3; Openness 73; Population 16.7; Income Group Lower middle; Average Applied Import Tariffs 4.0 a; Effective NTM 2.5; Trade within Africa as a ratio of total trade 41.4
  - Democratic Republic of the Congo: GDP PPP (US$bns) 65.0; Openness 56; Population 84.1; Income Group Low; Average Applied Import Tariffs 10.2 b; Effective NTM 9.5; Trade within Africa as a ratio of total trade 32.3
  - Total Africa: GDP PPP (US$bns) 6,057.8; Population 1,170.4
  - Proportion of world (percent): 4.8; 16.1
  - Median: 30.5; 63.8; 11.9; 9.6; 9.5; 17.5
- Notes on data gaps:
  - No data are available for the Republic of Saharawi, a full member of the African Union, which also signed the AfCFTA agreement.

### List of Signatory Countries to the AfCFTA (Appendix II)
- Sources cited in the appendix: African Union webpage; Tralac webpage.
- Presentation in source: two columns indicating "Signed Treaty" and "Ratified Treaty*" with dates where applicable (Date on which the AfCFTA instrument of ratification was deposited with the African Union Commission chairperson).
- Selected entries preserved exactly as shown:
  - Algeria: Signed Treaty √; Ratified Treaty *
  - Angola: Signed Treaty √
  - Benin: Signed Treaty √
  - Burkina Faso: Signed Treaty √; Ratified Treaty * 5/29/2019
  - Cameroon: Signed Treaty √; Ratified Treaty * 10/31/2019
  - Chad: Signed Treaty √; Ratified Treaty * 7/1/2018
  - Congo, Republic of: Signed Treaty √; Ratified Treaty * 2/10/2019
  - Côte d'Ivoire: Signed Treaty √; Ratified Treaty * 12/16/2018
  - Djibouti: Signed Treaty √; Ratified Treaty * 2/1/2019
  - Egypt: Signed Treaty √; Ratified Treaty * 4/8/2019
  - Equatorial Guinea: Signed Treaty √; Ratified Treaty * 7/7/2019
  - Eswatini, Kingdom of: Signed Treaty √; Ratified Treaty * 7/1/2018
  - Ethiopia: Signed Treaty √; Ratified Treaty * 4/10/2019
  - Gabon: Signed Treaty √; Ratified Treaty * 7/7/2019
  - Ghana: Signed Treaty √; Ratified Treaty * 5/10/2018
  - Guinea: Signed Treaty √; Ratified Treaty * 7/1/2018
  - Kenya: Signed Treaty √; Ratified Treaty * 5/10/2018
  - Mali: Signed Treaty √; Ratified Treaty * 2/1/2019
  - Mauritania: Signed Treaty √; Ratified Treaty * 2/11/2019
  - Mauritius: Signed Treaty √; Ratified Treaty * 10/8/2019
  - Morocco: Signed Treaty √
  - Namibia: Signed Treaty √; Ratified Treaty * Feb' 2019
  - Niger: Signed Treaty √; Ratified Treaty * 6/8/2018
  - Rwanda: Signed Treaty √; Ratified Treaty * 5/26/2018
  - São Tomé and Príncipe, Democratic Republic of: Signed Treaty √; Ratified Treaty * 6/27/2019
  - Senegal: Signed Treaty √; Ratified Treaty * Apr '19
  - Sierra Leone: Signed Treaty √; Ratified Treaty * 4/29/2019
  - South Africa: Signed Treaty √; Ratified Treaty * 2/10/2019
  - The Gambia: Signed Treaty √; Ratified Treaty * 4/16/2019
  - Togo: Signed Treaty √; Ratified Treaty * 4/1/2019
  - Uganda: Signed Treaty √; Ratified Treaty * 11/28/2018
  - Zimbabwe: Signed Treaty √; Ratified Treaty * 5/24/2019
  - Total: 54 signed; 29 ratified (presented in table as "Total 54 29")

### Firm-Level Evidence of Labor Reallocation in Africa (Appendix III)
- Main empirical findings summarized in the source:
  - Firm characteristics driving the decision to export:
    - Firm age, firm size (using various size indicators), and firm origin (foreign versus domestic) are key factors that explain the decision to export.
    - Regression evidence (probit) indicates that reductions in import tariffs faced by firms increase the probability of a firm exporting; interaction terms show higher likelihood of exporting in countries where tariffs have been reduced the most.
  - Exporter wage premium:
    - Detailed firm-level and employee-level data show that African firms that export pay salaries that are almost 18 percent higher than firms that do not export (Duda-Nyczak and Viegelahn 2018).
    - The exporter wage premium has also been found in other studies on Africa (Van Biesebroeck 2005).
    - There is little evidence that importing firms pay a positive wage premium.
  - Employment and productivity dynamics:
    - Evidence suggests exporting firms reduce employment growth by 1.2 percent, compared with similar firms that do not export.
    - Exporting firms tend to show higher labor productivity.
    - Interpretation offered: exporting firms tend to be larger, more productive, employ more skilled workers, and pay higher wages; thus exporting firms may not absorb unskilled trade-displaced labor and may not contribute to unskilled-labor employment growth.
  - Additional evidence on export survival:
    - Using a related database, Vijil, Wagner, and Woldemichael (2019) find that uncertainty about the time required to clear imported inputs affects survival rates for new exporters, reducing the number of firms that continue to serve the foreign market beyond their first year.

- Key regression results preserved exactly from Table A1 (Probit on probability of exportation):
  - Reduct 5 percentile 0.506*** (standard error (0.167))
  - LatePeriod x Reduct 5 percentile 0.933*** (0.196)
  - Reduct 10 percentile 0.916*** (0.236)
  - LatePeriod x Reduct 10 percentile 0.443*** (0.146)
  - Reduct 15 percentile 1.154*** (0.186)
  - LatePeriod x Reduct 15 percentile 0.352*** (0.117)
  - Reduct 20 percentile -0.785*** (0.106)
  - LatePeriod x Reduct 20 percentile 0.110 (0.0857)
  - Firm age 0.00688*** (0.000995)
  - Small size -0.275*** (0.0839)
  - Medium size firm -0.239*** (0.0568)
  - Number workers (log) 0.200*** (0.0254)
  - Sales (log) 0.0640*** (0.00752)
  - Foreign firm 0.316*** (0.0386)
  - Constant -2.295*** (0.170)
  - Observations: 17,569 (column 1), 16,926 (columns 2–5)
  - Year fixed effects: YES; Country fixed effects: YES
  - Note: Robust standard errors are in parentheses. *** p<0.01, ** p<0.05, * p<0.1.

- Key regression results preserved exactly from Table A2 (Employment Growth and Exporting Firms):
  - Dependent variables and notable coefficients:
    - Employment Growth (column 1):
      - Exporter -1.222*** (0.423)
      - Firm age -0.0862* (0.0504)
      - Small size firm 3.764*** (0.955)
      - Medium size firm 2.284*** (0.678)
      - Large size firm 4.038** (1.894)
      - Number of workers (log) 3.311*** (0.317)
      - Sales (log) -0.718*** (0.0980)
      - Foreign firm -0.810* (0.450)
      - Labor productivity 4.75e-06* (2.46e-06)
      - Constant 8.264*** (2.212)
      - Observations 18,204; R squared 0.048
    - Labor Productivity Growth (column 2):
      - Exporter 1.786** (0.877)
      - Firm age 0.00450 (0.0225)
      - Medium size firm 2.171** (0.969)
      - Number of workers (log) -4.162*** (0.592)
      - Sales (log) 2.285*** (0.219)
      - Foreign firm 2.383*** (0.900)
      - Labor productivity -2.70e-05*** (7.24e-06)
      - Constant 30.94*** (3.465)
      - Observations 16,501; R squared 0.112
    - Sales Growth (column 3):
      - Exporter 0.788 (0.853)
      - Firm age -0.177*** (0.0218)
      - Medium size firm 1.420 (0.929)
      - Number of workers (log) -1.856*** (0.557)
      - Sales (log) 1.859*** (0.208)
      - Foreign firm 1.213 (0.852)
      - Labor productivity -2.70e-05*** (6.63e-06)
      - Constant 42.07*** (3.484)
      - Observations 16,914; R squared 0.137
  - Year fixed effects: YES; Country fixed effects: YES
  - Note: Robust standard errors are in parentheses. *** p<0.01, ** p<0.05, * p<0.1.

### Policy-relevant implications highlighted in the source text
- Tariff reductions are associated with an increased probability of firm exportation (interaction terms significant in probit results).
- Exporting is associated with higher wages for exporters (almost 18 percent higher salaries), implying distributional implications of trade liberalization.
- Exporting firms exhibit higher labor productivity but lower employment growth (exporter coefficient on employment growth -1.222***), suggesting that trade-induced reallocation may not generate employment for unskilled workers at exporting firms.
- Trade facilitation and reduction of uncertainty in input clearance may be important for export survival of new exporters (as uncertainty reduces survival beyond the first year).

*Source: 2012. Assessing Regional Integration in Africa V: Towards an African Continental Free Trade Area (Appendices I–III).*

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_Source: https://www.imf.org/-/media/files/publications/sdn/2020/english/sdnea2020004.pdf_