Ensuring that jobs and businesses can adapt to increased market pressures should be a top priority for the signatories to the agreement, given the significant political consequences of inaction in this area. The incident of the border closure in Nigeria also shows that specific institutional arrangements will be needed to effectively resolve future trade disputes. These short-term but significant transition costs will continue to be a challenge for African leaders in the future. The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world in terms of the number of participating countries. The pact connects 1.3 billion people in 55 countries with a combined gross domestic product (GDP) worth $3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, but achieving its full potential will depend on the implementation of important policy reforms and trade facilitation measures. Accompanying measures and flexibilities should be considered in order to fairly distribute costs and benefits, reduce adaptation costs and fully exploit the long-term benefits of the CFTA. Leaders across the continent are largely optimistic about the AfCFTA. In OBG`s latest SURVEY of OBG CEOs, which surveyed 787 senior executives in eight African markets in 2018, 72% felt that the AfCFTA would have a positive or very positive impact on intra-regional trade levels. Together, these developments offer significant economic opportunities for regional and international companies and investors.
The AfCFTA is clearly focused on improving women`s lives. There is a danger that some of the economic gains women are making through trade will be wiped out by the COVID-19 crisis. According to the Economic Commission for Africa, women account for about 70 per cent of informal cross-border traders in Africa. Through this work, women can be vulnerable to harassment, violence, confiscation of property and even imprisonment. Tariff reductions under the AfCFTA will allow informal traders to operate through formal channels, resulting in better protection. In addition, a growing manufacturing sector would offer new employment opportunities, especially for women. While the trade deal began in the midst of a global pandemic associated with a global recession, it is still unclear how the reduction in tariffs on goods and services will affect Nigerian households and businesses. However, a 2020 article by Nassim Oulmane, Mustapha Sadni Jallab and Patrice Rélouendé Zidouemba argues that the AfCFTA`s promotion of intra-African trade could actually mitigate the rapid decline in GDP caused by covid-19 and subsequent policies of social distancing and border closures. Countries that ratify the agreement can trade with each other on the basis of their tariff concessions and proposed rules of origin. Currently, around 90% of the rules of origin are in force, while the rest is expected before the end of July 2021. Supporters of the free trade agreement expect the AfCFTA to reduce poverty, increase business competitiveness and boost intra-African trade and investment.
Based on a recent survey of 1,804 Nigerian manufacturing companies, 6 out of 10 companies expect the AfCFTA to lead to lower material and labour costs, increase production capacity, expand market and consumer size, and lower prices. Overall, Nigerian small and medium-sized enterprises are optimistic about the opportunities created by the AfCFTA, albeit with mixed feelings based on concerns about increased foreign competition and dumping of low-quality products. Related Content Focus on Africa The African Continental Free Trade Area and trade facilitation measures could significantly mitigate the economic impact of COVID-19 in Africa Nassim Oulmane, Mustapha Sadni Jallab and Patrice Rélouendé Zidouemba Friday, May 22, 2020 Report on the greening of the AfCFTA: It`s not too late Colette van der Ven and Landry Signed Thursday, 16. September, 2021 2021 Sep 20 Past Event Green Trade under the AfCFTA: The Role of the AU-EU Partnership 9:30 am – 11:00 am EDT online only Although the full implementation of the agreement is expected to take several years, the AfCFTA could be an important milestone in the continent`s history and potentially lay the foundation for a fully integrated African economy in the long term. As an African initiative led by African states and institutions, the agreement is an economic turning point and marks the continent`s most ambitious integration initiative to date. Nevertheless, significant efforts will be required by the signatories to ensure that the benefits of the agreement are fully exploited. At present, the level of intraregional trade is significantly lower than in other regions of the world. Intra-African exports amounted to only 16.6% in 2017, compared to 68% in Europe, 59% in Asia and 55% in the Americas, underscoring the considerable distance the continent must travel before it can become an integrated economic entity. While most of the potential benefits of trade liberalization occur in the long run, short-term structural changes entail adjustment costs through the offshoring of labour, capital and other factors of production.
Meanwhile, only three countries – Ghana, South Africa and Egypt – had put in place the necessary customs infrastructure for trade by the start of free trade last January. Second, the African Free Trade Area represents a decisive step towards the continent`s long-cherished aspirations for regional integration. Guillermo Arenas is an economist in the World Bank`s Trade and Regional Integration Unit (ETIRI). His area of expertise covers various aspects of international economics and law and order, including trade policy, export competitiveness and impact assessment. A unified market of 1.2 billion people with a combined GDP of $3 trillion is potentially a solid foundation for industrialization. Currently, intra-African exports account for about 17% of total continental exports. Increasing this share is expected to increase value added, contribute to job creation and income growth. Third, the emergence of free trade raises hopes for Africa`s recovery from the pandemic. The Secretary General of the Accra-based AfCFTA Secretariat, Wamkele Mene, has stressed over the past 100 days – and before that – that the effective implementation of the trade compact is the stimulus Africa needs after the pandemic. • The agreement must address the challenges of implementation in order to realize its many benefits.
Yulia Vnukova advises in the Trade and Regional Integration Unit (ETIRI) of the World Bank. Based on more than a decade of experience, Yulia`s current work focuses on trade policy and regional integration, with a focus on macroeconomic and microeconomic analysis of trade, trade and sectoral competitiveness, global value chains and private sector development in emerging markets in Europe, Asia and Africa. Maria Filipa Seara e Pereira advises in the World Bank`s Regional Trade Integration Unit (ETIRI). She works mainly on international trade and development topics, particularly in the areas of modelling, trade policy, distributive effects of trade and global value chains. Launched on 1 January, the AfCFTA is a game changer. Currently, Africa accounts for only 2% of world trade. And only 17% of African exports are intracontinental, compared to 59% for Asia and 68% for Europe. The potential for transformation throughout Africa is therefore considerable. The pact will create the largest free trade area in the world in terms of the number of participating countries. The pact connects 1.3 billion people in 55 countries with a combined gross domestic product (GDP) worth $3.4 trillion and comes at a time when much of the world is turning away from cooperation and free trade. The scope of the AfCFTA is vast. The agreement will reduce tariffs between member countries and cover policy areas such as trade facilitation and services, as well as regulatory measures such as hygiene standards and technical barriers to trade.
Full implementation of the AfCFTA would reshape the region`s markets and economies and boost production in services, manufacturing and natural resources. In our analysis, we benchmark a business model based on countries` macroeconomic performance in 2014 and then simulate the potential impact on macroeconomic indicators associated with trade liberalization in the African region. .