WASHINGTON, United States, Jul 28 – The African Continental Free Trade Area (AfCFTA) represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion, a new World Bank report has found.
If implemented fully, the trade pact could boost regional income by 7 percent or $450 billion, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035.
The report suggests that achieving these gains will be particularly important given the economic damage caused by the COVID-19 (coronavirus) pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020. The pandemic has already caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.
Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures.
Tariff liberalization accompanied by a reduction in non-tariff barriers—such as quotas and rules of origin—would boost income by 2.4 percent, or about $153 billion. The remainder—$292 billion—would come from trade-facilitation measures that reduce red tape, lower compliance costs for businesses engaged in trade, and make it easier for African businesses to integrate into global supply chains.
Successful implementation of AfCFTA would help cushion the negative effects of COVID-19 on economic growth by supporting regional trade and value chains through the reduction of trade costs. In the longer term, AfCFTA would provide a path for integration and growth-enhancing reforms for African countries.
By replacing the patchwork of regional agreements, streamlining border procedures, and prioritizing trade reforms, AfCFTA could help African countries increase their resiliency in the face of future economic shocks.
“The African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans,” said Albert Zeufack, the World Bank’s Chief Economist for Africa.
“The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers –women and men, skilled and unskilled—across all countries and sectors, ensuring the agreement’s full benefit.”