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The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model

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  • Mr. Lisandro Abrego
  • Maria Alejandra Amado
  • Tunc Gursoy
  • Garth P. Nicholls
  • Hector Perez-Saiz

Abstract

In March 2018, representatives of member countries of the African Union signed the African Continental Free Trade Area (AfCFTA) agreement. This agreement provides a framework for trade liberalization in goods and services and is expected to eventually cover all African countries. Using a multi-country, multi-sector general equilibrium model based on Costinot and Rodriguez-Clare (2014), we estimate the welfare effects of the AfCFTA for 45 countries in Africa. Three different model specifications—comprising both perfect competition and monopolistic competition—are used. Simulations include full elimination of import tariffs and partial but substantial reduction in non-tariff barriers (NTBs). Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures.

Suggested Citation

  • Mr. Lisandro Abrego & Maria Alejandra Amado & Tunc Gursoy & Garth P. Nicholls & Hector Perez-Saiz, 2019. "The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model," IMF Working Papers 2019/124, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2019/124
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    Cited by:

    1. Das, Gouranga G. & Maswana, Jean-Claude & Hirano, Yumeka, 2023. "Germs, Globalization, and Trade Spillovers: How could COVID-19 affect African Economies and AfCFTA," GLO Discussion Paper Series 1251, Global Labor Organization (GLO).
    2. Tröster, Bernhard & Janechová, Eva, 2021. "The long journey towards Pan-African integration: The African Continental Free Trade Area and its challenges," Briefing Papers 31, Austrian Foundation for Development Research (ÖFSE).
    3. Anirudh Shingal & Maximiliano Mendez‐Parra, 2024. "African continental free trade area and greenfield investment: Likely effect and transmission channels," The World Economy, Wiley Blackwell, vol. 47(8), pages 3364-3393, August.
    4. 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.
    5. Lukman OYELAMI & Amara ZONGO, 2022. "Modeling the Impact of Non-Tariff Barriers in Services on Intra-African Trade: Global Trade Analysis Project Model," Bordeaux Economics Working Papers 2022-08, Bordeaux School of Economics (BSE).
    6. Ilaria Fusacchia & Jean Balié & Luca Salvatici, 2022. "The AfCFTA impact on agricultural and food trade: a value added perspective," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(1), pages 237-284.
    7. Phouphet Kyophilavong & Kazunobu Hayakawa, 2024. "Impacts of Trade Liberalization in the Least Developed Countries: Evidence From Lao PDR," The Developing Economies, Institute of Developing Economies, vol. 62(1), pages 45-67, March.
    8. Anirudh Shingal & Maximiliano Mendez-Parra, 2020. "African greenfield investment and the likely effect of the African Continental Free Trade Area," Indian Council for Research on International Economic Relations (ICRIER) Working Paper 387, Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India.
    9. Ferrari, Emanuele & Boysen, Ole & Nechifor, Victor & Simola, Antti & Boulanger, Pierre H, 2021. "The food security dimension of the African Continental Free Trade Area (AfCFTA)," Conference papers 330218, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Ole Boysen, 2024. "The AfCFTA tariff offers: Current state and first revelations about members' stances towards openness and protectionism," The World Economy, Wiley Blackwell, vol. 47(8), pages 3339-3363, August.
    11. 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.
    12. Jonathan D. Quartey, 2021. "Addressing the Missing Link for Sustainable African Continental Free Trade: Lessons from Ghana’s Manufacturing Industry," Asian Development Policy Review, Asian Economic and Social Society, vol. 9(1), pages 1-23, March.
    13. Christian Pinshi, 2020. "Zone de libre-échange continentale : Quelles implications pour les banques centrales Africaines ?," Working Papers hal-02867354, HAL.
    14. Biyik, Onur, 2021. "Japan-AfCFTA Integration Through Economic Impacts of Alternative EPA Scenarios: Examination of the GTAP 10A MRIO Database," Conference papers 333265, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    15. Pousseni Bakouan & Mahamadou Diarra & Idrissa M. Ouedraogo, 2024. "How Can Tariff Elimination and Trade Facilitation Affect East African Economies?," Foreign Trade Review, , vol. 59(1), pages 117-145, February.
    16. Leudjou, Roland, 2021. "Assessing the impacts of eliminating Non-Tariff Barriers in the framework of the African Continental Free Trade Area on Cameroons economy," Conference papers 330231, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    17. Stender, Frederik & Vogel, Tim, 2021. "Murky trade waters: Regional tariff commitments and non-tariff measures in Africa," IDOS Discussion Papers 13/2021, German Institute of Development and Sustainability (IDOS).
    18. Marie M. Stack & Emmanuel B. Amissah & Martin Bliss, 2024. "African economic integration and trade," The World Economy, Wiley Blackwell, vol. 47(5), pages 2122-2146, May.
    19. Simola, Antti & Ferrari, Emanuele & Boysen, Ole & Boulanger, Pierre & Nechifor, Victor, 2021. "Food Security in Africa after the African Continental Free Trade Agreement – a Computable General Equilibrium Analysis," 2021 Conference, August 17-31, 2021, Virtual 315891, International Association of Agricultural Economists.
    20. Gabriel Mhonyera & Daniel Francois Meyer, 2023. "The Impact of AfCFTA on Welfare and Trade: Nigeria and South Africa in Light of Core Export Competences," Sustainability, MDPI, vol. 15(6), pages 1-16, March.
    21. Naudé, Wim, 2020. "Industrialization under Medieval Conditions? Global Development after COVID-19," GLO Discussion Paper Series 704, Global Labor Organization (GLO).
    22. PINSHI, Christian P., 2019. "African Continental Free Trade Area : What Implications for African Central Banks?," MPRA Paper 101069, University Library of Munich, Germany.
    23. Kohnert, Dirk, 2019. "Ethische Probleme der regionalen Integration Afrikas," AfricArxiv m2vbq, Center for Open Science.
    24. Koffi Dumor & Li Yao & Jean-Paul Ainam & Edem Koffi Amouzou & Williams Ayivi, 2021. "Quantitative Dynamics Effects of Belt and Road Economies Trade Using Structural Gravity and Neural Networks," SAGE Open, , vol. 11(3), pages 21582440211, July.

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