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

Author

Listed:
  • Mr. Lisandro Abrego
  • Mr. Mario de Zamaroczy
  • Tunc Gursoy
  • Garth P. Nicholls
  • Hector Perez-Saiz
  • Jose-Nicolas Rosas

Abstract

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.

Suggested Citation

  • Mr. Lisandro Abrego & Mr. Mario de Zamaroczy & Tunc Gursoy & Garth P. Nicholls & Hector Perez-Saiz & Jose-Nicolas Rosas, 2020. "The African Continental Free Trade Area: Potential Economic Impact and Challenges," IMF Staff Discussion Notes 2020/004, International Monetary Fund.
    • Handle: RePEc:imf:imfsdn:2020/004
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    Citations

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    Cited by:

    1. Larissa Batrancea & Malar Mozhi Rathnaswamy & Ioan Batrancea, 2021. "A Panel Data Analysis of Economic Growth Determinants in 34 African Countries," JRFM, MDPI, vol. 14(6), pages 1-15, June.
    2. Sall, Leysa Maty, 2022. "Impact of Tariff and Non-tariff measures removals on structural transformation and poverty in Senegal: the case of AfCFTA," Conference papers 333442, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Kemal Türkcan & Socrates Majune Kraido & Eliud Moyi, 2022. "Export margins and survival: A firm‐level analysis using Kenyan data," South African Journal of Economics, Economic Society of South Africa, vol. 90(2), pages 149-174, June.
    4. Sall, Leysa Maty & Ramos, Maria Priscila, 2020. "AfCFTA: Does it fast-track structural transformation in Senegal?," Conference papers 333184, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Simon Yannick Fouda Ekobena & Adama Ekberg Coulibaly & Mama Keita & Antonio Pedro, 2021. "Potentials of the African Continental Free Trade Area: A combined partial and general equilibrium modeling assessment for Central Africa," African Development Review, African Development Bank, vol. 33(3), pages 452-465, September.

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