https://doi.org/10.1007/s10887-006-9009-4. It was created by the African Continental Free Trade Agreement among 54 of the 55 African Union nations. This means that of all total trade on the African continent, only 15% is between African countries. Increased investment in intra-African trade would produce a positive catalytic effect to Africa’s growth story. The Africa Nexus: Intra-Trade and Investment as drivers of African Development. This means that of all total trade on the African continent, only 15% is between African countries. “What You Export Matters.” Journal of Economic Growth12 (1): 1–25. Unfortunately, the African Continental Free Trade Agreement (ACFTA) did not kick off on 1 July as originally scheduled, due to the coronavirus crisis, but … This study contributes to the literature by examining a gravity model for panel data from 1995 to 2014 for 53 African countries. ECA’s modeling projects that by 2040, the AfCFTA will increase intra-African trade in agricultural products by between 20 and 30 percent, with the highest gains in sugar, vegetables, fruit, nuts, beverages, and dairy products.5 The agreement is expected to expand access to markets at the regional and international levels, thus generating state revenue, increasing farmer income, and expanding both farmer and country capacity to invest in modernizing the agricultural sector through processing and mechanization. If successfully implemented, the agreement will create a single African market of over a billion consumers with a total GDP of over $3 trillion. Intra-African trade stands at around 13% compared to approximately 60%, 40 %, 30% intra-regional trade that has been achieved by Europe, North America and ASEAN respectively. “Doubling Productivity and Incomes of Smallholder Farmers in Africa.” AGRA: Growing Africa’s Agriculture. Alternatively, the share of intra-African trade would increase by nearly 40 percent to over 50 percent, depending on the ambition of the liberalization, between the start of the implementation of the reform (2020) and 2040.2. Johannesburg, Wednesday 09 th September 2020 – Brand South Africa today hosted an Africa nexus research reference group webinar with key objectives to determine insights and perspectives on how the African Continental Free Trade (AcFTA) could enable … However, quality improvement of the export basket has been sluggish elsewhere, with some reversals, and there is considerable cross-country heterogeneity within regions. Nairobi, Kenya, 8 October 2019 – A senior Economic Commission for Africa (ECA) expert says boosting intra-Africa agricultural trade is crucial to spur economies on the continent and ensure there is food security across nations. the indicative date of 2017. “An Empirical assessment of the African Continental Free Trade Area Modalities on Goods.” UNECA. The scale of AfCFTA’s potential impact makes it vital to understand the main drivers of the agreement and the best methods to harness its opportunities and overcome its risks and challenges. Similarly, Brexit, Britain’s exit from the European Union, would rather strengthen Africa’s trade ties with Europe that weaken it. The report also cited low manufacturing and processing capacity as a major limiting factor for trade among African countries. Intra-African trade is the average export and import activities among African countries. Unfortunately, the African Continental Free Trade Agreement (ACFTA) did … Figure 6.1 shows that, except for Rwanda, Senegal, and Sudan, African economies did not diversify their exports. 2015. Additionally, building productive capacities through re-skilling programs will be crucial to ensuring that displaced workers and vulnerable persons are able to participate in welfare-enhancing African countries must develop effective policies and strategies for exports, and identify new opportunities for diversification, industrialization, and value chain development. Get global development updates from Brookings. Nonetheless, Africa’s trade and regional integration face several obstacles. “From 2007 to 2015, the continent’s light manufactured goods imports tripled to reach US $260 billion. It is broadly recognized that, while globalization and trade produced the impressive economic expansion of the past three decades, the gains have not been fairly distributed. At the regional level, Southern African economies have, on average, the most sophisticated exports. Intra-Africa trade has been historically low. Uniting 54 countries in the African Union, The African Continental Free Trade Agreement (AfCFTA) will create the largest free trade area in the world since the World Trade Organization formed in 1994. Within Asia, several countries, namely Korea, China, Vietnam, and Thailand, have converged toward the world’s quality frontier largely as a result of integration in regional and global value chains (see Figure 6.3). “An Empirical assessment of AfCFTA Modalities on Goods.” UNECA. ECA’s report on Bringing the AfCFTA About highlights that the AfCFTA potentially embodies a “win-win” approach such that all countries across Africa and vulnerable communities within these countries receive benefits from the agreement. Get the best of world News delivered to your inbox daily . 2017. The quality growth has been especially substantial in manufacturing, although the quality of commodities has also increased due to the development of vertically integrated industries. Product sophistication refers to the share of value addition in a product, or product upgrading. Exports from Central and Northern Africa became increasingly more concentrated, and even countries with diversified exports like Morocco and South Africa lost ground. Intra-African trade. United Nations Economic Commission for Africa. Women constitute 70 per cent of Africa’s informal cross-border traders, and according to a 2019 study by UN Women titled Opportunities for Women Entrepreneurs in the Context of the AfCFTA , African women traders often confront corruption, insecurity and sexual harassment. 2012. Greater intra-African trade is likely to have a more direct impact on poverty by creating opportunities for the poor who both produce and trade the basic foodstuffs that dominate intra-regional trade. The transition phase to the Continental Free Trade Area alone could generate welfare gains of $16.1 billion and boost intra-African trade by 33 per cent. Last week, 44 African nations came together and signed the Continental Free Trade Agreement (CFTA). IATF is the key event boosting trade in Africa. United Nations Economic Commission for Africa. 2018. AfCFTA will be a game changer for stimulating intra-African trade. No other event brings together more professionals under one roof. Intra-African trade values (in terms of both imports and exports) of the 20 products with the highest preference margins were relatively low, with the exception of tobacco products, beer and spirits, knit T-shirts, wine and women’s suits and pants, reflecting in part the difficulty of sourcing these products from within Africa. The AfCFTA will improve export sophistication across the continent by enabling more countries to integrate regional and global value chains and consequently increase the quality of exports. The AfCFTA is complemented by other continental initiatives, including the Protocol on Free Movement of Persons, Right to Residence and Right to Establishment, and the Single African Air Transport Market (SAATM). If only . While intra-Africa trade in agriculture has been growing over the years, the levels remain significantly below the potential. Africa’s prospects for greater regional trade are also highlighted by its consumer market of nearly one billion people, the rising number of affluent consumers and the increasing mobility of investment capital,” the AEO says. Dec 11, 2020. The share of intra-African exports as a percentage of total African exports has increased from about 10 percent in 1995 to around 17 percent in 2017, but it remains low compared to levels in Europe (69 percent), Asia (59 percent), and North America (31 percent). Transportation and communication infrastructure for intra-African trade is less developed than those that connect Africa to the rest of the world, the report says. Intra-African trade in manufacturing declined from 18% in 2005 to about 15% between 2010 and 2015. However, the reduction in government revenues, from tariffs, would be made up with an increase in income tax and value added tax. The African Continental Free Trade Area (AfCFTA) is a free trade area which, as of 2018, includes 28 countries. It is projected, through the sole removal of tariffs on goods, to increase the value of intra-African trade by between 15 percent (or $50 billion) and 25 percent (or $70 billion), depending on liberalization efforts, in 2040, compared to a situation with no AfCFTA in place. While today African countries are now independent, the colonial legacy lingers in the transport infrastructure. To the best of our knowledge there are no studies exploring the intra‐African trade–youth unemployment nexus in Africa. Other questions to be explored include: Citing data produced by its economists and peer institutions, the report said trade among African countries expanded from 10% in 2000 to about 16% in 2014, reflecting the continent’s recent economic upturns. Over the past three decades, exports from East Asia have increased in both diversity and quality. The AfCFTA as a result should stimulate demand for intra-African food imports, supporting a predominantly women-led sector. But the relatively high share of manufacturing goods in intra-African trade suggests that enhanced intra-regional trade is key to unlocking the industrial potential of the continent. On the diversity criteria, African exports have generally lagged behind, and there is no evidence of quality convergence. “Industrializing through Trade: Economic Report on Africa 2015.” UNECA. Share on Facebook. Most of Africa’s primary exports undergo little processing before they are re-exported, the report argues, citing  cocoa beans from Côte d’Ivoire and Ghana and crude oil and petroleum products from Nigeria as examples. This is an important reason to expect that trade will be a key driver of growth in Africa. AfCFTA will be a game changer for stimulating intra-African trade. In these countries, knowledge transfers to other export sectors can unlock the potential of established or emerging industries. This is not an opportunity to be missed and 2019 will be a defining year. “Exports and Export Diversification in Sub-Saharan Africa: A Strategy for Post-Crisis Growth.” Brookings Institution. Trade diversification of exports is important as it allows countries to build resilience to movements in demand, due to economic downturns in importing countries but also price dips. Analysis by the African Export-Import Bank (Afreximbank) shows that one of the reasons why intra-African trade is at 16% of total African trade, on average, is the lack of access to trade … Songwe, Vera, and Deborah Winkler. The AfCFTA can play a game-changing role in Africa’s economic diversification and inclusion. According to modeling results by the Economic Commission for Africa (ECA),1 the AfCFTA is projected to increase the value of intra- African exports. AfCFTA will be a game changer for stimulating intra-African trade. Dec 11, 2020. According to the African Development Bank, trade between African countries has the greatest potential for building sustainable economic development and regional integration. The Action Plan for Boosting Intra-Africa Trade, as endorsed by the AU Summit, contains seven major clusters, the implementation of whose programmes and activities is aimed at addressing the key constraints and challenges of intra-African trade and at significantly enhancing the size and benefits of the trade for the attainment of sustainable economic growth and development. The AfCFTA will make vast improvements in catching intra-African trade up with the numbers of the rest of the world. We investigate both the aggregate and gender‐specific impacts. In 2015, African countries spent about $63 billion on food imports,4 largely from outside the continent. The signing of the AfCFTA in Kigali comes at a time when the benefits of trade are actively contested, and global powers that traditionally promoted trade as a crucial driver of growth are now calling into question its very tenets. 2018. In the case of commodity exporting countries it supports a shift from an over dependence on commodities to higher-value added products and services.3 Economic diversification allows for more inclusion of small and mediumsized enterprises and helps encourage innovation as more markets open. It is promising that African countries are already strategizing on how to benefit from the agreement and developing clear plans of action to take advantage of national, regional, and global markets in the AfCFTA context. August 23, 2017. https://agra.org/doubling-productivity-and-incomes-of-smallholder-farmers-in-africa/. Movement from political will to policy action as far as improving regional cooperation is ongoing but remains slow to materialize. The recent United National Conference on Trade and Developments report shows that Intra-African exports were 16.6% of total exports in 2017 and … In March 2018, African countries signed a landmark trade agreement, the African Continental Free Trade Area Agreement (AfCFTA), which commits countries to remove tariffs on 90 percent of goods, progressively liberalize trade in services, and address a host of other non-tariff barrier. Although global poverty has fallen, prosperity has not been fully shared. Currently, continental exports across Africa clock in at about 19% of total exports, comparatively lower to intra-Asian and intra-Europe exports which make up around 60% of their total exports. The real test of the AfCFTA, however, will be how quickly African countries can accelerate export diversification and product sophistication and make trade more inclusive. Africa’s GDP and its internal trade expanded fourfold over the past two decades, according to the report, which suggests that that intra-African trade is more resilient than exchanges with other regions of the world, largely because manufactured goods are less susceptible to price shocks which affect primary products that constitute over 50% of trade between the continent and other countries. Against this backdrop, the AfCFTA is expected to enable countries to break into new African markets as they both diversify by export destination and type of goods produced. Guidance for the Brookings community and the public on our response to the coronavirus (COVID-19) », Learn more from Brookings scholars about the global response to coronavirus (COVID-19) ». The AfCFTA offers particular potential for agricultural products. According to the African Development Bank (ADB), intra-Africa exports amount to only 16.6% of total trade. This apprehension is not without cause. trade flows in Africa becomes significantly important due to the very low levels of intra-African trade. It also endorsed an Action Plan for Boosting Intra-Africa Trade (BIAT). Diversification should also lead to increased sophistication of export products. The implementation of the treaty was originally supposed to occur on July 1, 2020, but was postponed due to COVID-19 restrictions. Africa’s GDP and its internal trade expanded fourfold over the past two decades, according to the report, which suggests that that intra-African trade is more resilient than exchanges with other regions of the world, largely because manufactured goods are less susceptible to price shocks which affect primary products that constitute over 50% of trade between the continent and other countries. Stress and mental health check for leaders . Why airfares have doubled in Nigeria but remain stable in African peers . Non-Tariff Barriers – and how to break them down . While intra-Africa trade in agriculture has been growing over the years, the levels remain significantly below the potential. Subscribe. The African Development Bank invites you to a virtual panel discussion themed Intra-Africa Trade in the Age of COVID-19 – Issues, Challenges and Way Forward as part of the wider Cultivate Africa dialogue. In contrast, most East Asian economies were able to diversify exports at a rapid pace and converge to the levels of China and Korea (Figure 6.2). Moreover, detailed Intra and Extra African Union trade statistics are needed to evaluate the effectiveness of the measures taken by African leaders to boost Intra African trade, which have a high impact for the economic development of the continent. Sorry, your blog cannot share posts by email. This 4-page infographic provides a visualisation of intra-Africa trade in 2017. Similarly, countries with more advanced manufacturing sectors hold a potential for growth if they can access the larger African market. 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