## Can Regional Integration Accelerate Development in Africa? CGE Model Simulations of the Impact of the SADC FTA on the Republic of Madagascar

_IMF Working Papers, March 1, 2007_

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## Bibliographic details
- Authors: Jean-Jacques Hallaert
- Published: March 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451866308.001

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### Summary
- Madagascar plans to start phasing out its customs tariffs on imports from the Southern African Development Community in 2007.
- The paper uses a CGE model to evaluate the impact of the SADC FTA on the Madagascar economy.
- Main conclusion: the SADC FTA would have only a limited impact on Madagascar's real GDP because the liberalization affects only a small share of its total imports.
- The textile and clothing sector would benefit from changes in Madagascar's trade and production pattern.
- Removing rigidities in the labor and capital market would increase the gains, but they would remain limited.
- Gains from the SADC FTA become substantial only when the regional liberalization is accompanied by a multilateral liberalization.

### Key Findings and Results
- Limited impact on real GDP due to the small share of total imports affected by SADC FTA liberalization.
- Structural shifts in trade and production:
  - Beneficiaries: textile and clothing sector.
- Role of factor market reforms:
  - Removing labor and capital market rigidities increases gains, but gains remain limited under regional liberalization alone.
- Interaction with broader liberalization:
  - Substantial gains occur only when regional liberalization is accompanied by multilateral liberalization.

### Policy Implications
- Regional trade agreements with limited import coverage may yield modest aggregate GDP gains.
- Targeted reforms to factor markets (labor and capital) can amplify benefits from trade agreements, though may not be sufficient alone.
- Complementing regional integration with multilateral liberalization can produce substantially larger gains for Madagascar.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/can-regional-integration-accelerate-development-in-africa-cge-model-simulations-of-the-20540_