Trade Integration in Africa: Unleashing the Continent\’s Potential in a Changing World – IMF

With 1.3 billion people and a combined GDP of $3 trillion, the African Continental Free Trade Area is the largest free trade area in the world. It offers a unique opportunity to use expanding trade to boost growth and living standards across the continent, says IMF.

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Since the 1960s, several initiatives have been undertaken to enhance trade integration in Africa.

However, substantial tariff and non-tariff barriers remain in place. In recent years, African leaders have shown a renewed push for regional integration by signing the agreement on the African Continental Free Trade Area (AfCFTA).

The AfCFTA has the potential to transform regional trade and thereby lift growth and support livelihoods across the continent. This paper lays out the benefits that successful AfCFTA implementation could unlock for Africa in terms of income, jobs, and other benefits.

It is based on an empirical analysis of the obstacles to trade in goods and services and regional value chain integration along with a discussion of how regional trade integration and supporting policies could help African countries cope with ongoing global and domestic trends.

The empirical analysis investigates the role of trade policy and the broader trade-enabling environment in determining the bilateral goods trade flows and country-level trade in services. It sheds light on how the implementation of AfCFTA and supporting policies could boost trade and income as well as help African countries integrate into regional value chains.

The findings suggest that plausible reductions in tariffs and nontariff barriers under AfCFTA, along with improvements in the broader trade-enabling environment (trade infrastructure, financial development, and domestic security), would substantially boost intra-African trade in goods and services, and support integration into regional value chains.

Furthermore, regional trade integration could be an important element of a strategy for African countries to cope with rapid population growth, climate change, and emerging geopolitical fragmentation.

Read the detail here: bit.ly/3LTOnHX.

Credit: International Monetary Fund.