Statistiques des recettes publiques en Afrique 2019

Chapter 3. Special feature: The African Continental Free Trade Area Agreement and its impact on public revenues

Background and objectives of the AfCFTA

Fragmentation is a key constraint to Africa’s economic development, with many small states that offer neither large enough internal markets nor the physical or institutional infrastructure to foster industrialisation and development. The African Continental Free Trade Area Agreement (AfCFTA), which was concluded on 21 March 2018 in Kigali, Rwanda and came into force on 30 May 2019, aims to correct this situation.

Article 3 of the AfCFTA provides that the general objectives of the Agreement are to create a single market for goods and services facilitated by movement of persons to deepen economic integration of the African continent in accordance with the Pan-African vision of “an integrated, prosperous and peaceful Africa” enshrined in Agenda 2063. The AfCFTA will deliver an integrated continental market of 1.3 billion consumers (expected to increase to 1.7 billion by 2030) with aggregate GDP of USD 3.4 trillion.

The AfCFTA is intended to serve as a foundation for the establishment of a continental customs union, which will facilitate movement of capital and natural persons and will facilitate investment. This will build on regional economic communities (RECs) and existing Member States’ initiatives and contribute to sustainable and inclusive socio-economic development, gender equality and structural transformation. The Agreement will help enhance competitiveness and promote industrial development, regional value chains, agriculture and food security. It is also hoped that the AfCFTA will resolve the challenges of multiple and overlapping membership of RECs and expedite the process of regional and continental integration.

The specific objectives of the AfCFTA as outlined in Article 4 of the Agreement are to:

progressively eliminate tariffs and non-tariff barriers to trade in goods

progressively liberalise trade in services

co-operate on investment, intellectual property rights and competition policy

co-operate on all trade-related areas

co-operate on customs matters and the implementation of trade facilitation measures

establish a mechanism for the settlement of disputes concerning their rights and obligations

establish an institutional framework for the implementation and administration of the AfCFTA.

The modalities for liberalisation of trade in goods under the AfCFTA are designed to ensure that it is commercially viable. With respect to trade in goods, AfCFTA State Parties aim to liberalise 90% of trade over a period of 10 years (13 years for least developed countries [LDCs]). Countries are allowed to exclude 7% of total tariff lines for sensitive products and 3% of total tariff lines for products they wish to exclude completely. However, they are required to ensure that excluded products shall not exceed 10% of total import value from other State Parties. Final schedules of tariff concessions are to be submitted by January 2020 in anticipation for the start of trading date, which has been set for July 2020.

Considering the different level of economic development across African countries, which may affect their ability to adjust to tariff liberalisation under the AfCFTA, the Agreement provides a number of flexibilities. Articles 5 (c) and (d) include two key principles: that of variable geometry and that of flexibility and special and differential treatment. For example, the modalities for tariff liberalisation under the AfCFTA provide for a transition period of five years, which is available for countries that require this flexibility before the liberalisation of sensitive products.

The principle of special and differential treatment is reflected in the Protocol on Trade in Goods through Article 6, which states that “State Parties shall provide flexibilities to other State Parties at different levels of economic development or that have individual specificities as recognised by other State Parties. These flexibilities shall include, among others, special consideration and an additional transition period in the implementation of this Agreement, on a case by case basis.” A number of options are being considered to help countries absorb shocks associated with the new trading arrangements. One is the Adjustment Facility to be put in place by Afreximbank and another is the AfCFTA Adjustment Facility.

In addition, in exceptional circumstances, State Parties have the possibility to request a waiver of obligations in line with Article 15 of the Agreement. In the case of trade in goods, State Parties are also availed of flexibilities through the Protocol on Trade in Goods. They can request a modification of their schedules of tariff concessions (Article 11 of the Protocol on Trade in Goods) and resort to trade remedies, including global and preferential safeguard measures (Articles 18 and 19 of the Protocol on Trade in Goods).

With respect to trade in services, Article 9 of the Protocol on Trade in Services affords State Parties the right to regulate subject to certain requirements, such as the need to ensure transparency and remain impartial. As concerns liberalisation in trade in services, AfCFTA State Parties will undertake specific commitments in five priority sectors to begin with: business services, communication services, financial services, transport and tourism. Schedules of Specific Commitments for Trade in Services are to be submitted by January 2020. In the meantime, Member States are required to finalise work on Regulatory Cooperation Frameworks by June 2020 and to conclude work on the remaining services sector by December 2020.

Countries involved and current status

The AfCFTA aims to create a Pan-African continental market. Since the adoption of Decision Assembly/AU/Dec.394 (XVIII) of January 2012 to fast-track the establishment of the Continental Free Trade Area and the launch of negotiations in 2015, all African Union member states have been participating in AfCFTA negotiations. After 10 rounds of negotiations, 27 countries have ratified and deposited their instruments of ratification at the time of writing. Eritrea is the only country to have not yet signed the Agreement.

The AfCFTA establishes a legal framework that provides traders with the legal predictability needed to trade in full confidence in the newly established market. The package of AfCFTA legal instruments concluded in Rwanda in 2018 includes the Agreement Establishing the African Continental Free Trade Area, the Protocol on Trade in Goods, the Protocol on Trade in Services and the Protocol on Rules and Procedures on the Settlement of Disputes.

Article 23 of the AfCFTA provides that the Agreement shall enter into force 30 days after the deposit of the 22nd instrument of ratification. On 29 April 2019, the Gambia became the 22nd country to deposit its instrument of ratification. The AfCFTA Agreement came into force on 30 May 2019. On 7 July 2019, the operational phase of the AfCFTA was launched during the 12th Extraordinary Summit of AU Heads of State and Government in Niamey, Niger. At the same Summit, 1 July 2020 was set as the start date for trading under the AfCFTA.

One of the main features of the AfCFTA is that it is intended to be more than a traditional free trade agreement (FTA). Phase 2 of the AfCFTA negotiations, which is scheduled to conclude by June 2021, will cover the following key issues: investment, competition policy and intellectual property. In addition, the AfCFTA will be supported by a number of key operational instruments, including the Non-Tariff Barriers Monitoring, Reporting and Elimination Mechanism; the African Trade Observatory and the Pan-African Payments and Settlement System.

Implications for existing trade agreements

With the entry into force of the AfCFTA, one of the key issues is the legal relationship and hierarchy of norms between the new trade law regime at the continental level and the existing regimes at the level of RECs. Will existing RECs trade regimes disappear or will they coexist with the new continental regime? The issue is important because some RECs have already achieved the status of customs union.

At the moment, Article 5 (b) of the AfCFTA recognises that REC Free Trade Areas are building blocks for the AfCFTA, whilst Para (f) of the same deals with “preservations of the Acquis”. In addition, Article 19 (2) of the Agreement provides that “State Parties that are members of other RECs, regional trading arrangements and customs unions, which have attained among themselves higher levels of regional integration than under the AfCFTA, shall maintain such higher level among themselves.”

A reading of these two provisions suggests the following: firstly, FTAs, customs unions or common markets at the REC level that are more ambitious than the AfCFTA with respect to trade in goods (both in terms of rules of origin and in terms of the modalities of tariff liberalisation) will remain in place. Secondly, beyond trade in goods, the situation of trade in services, investment, intellectual property rights and competition law is less clear. This is because few REC FTAs currently cover these areas.

This issue is also relevant for Agreements concluded between African countries and third parties. These include the Economic Partnership Agreements (EPAs) between some African countries and the European Union and preferential arrangements between third countries and groups of African countries, such as the African Growth Opportunity Act between the United States of America and 39 African countries as of January 2019. Article 18 (2) of the Agreement provides that the AfCFTA “shall not nullify, modify or revoke rights and obligations under pre-existing trade agreements that the State Parties have with Third Parties.” In other words, existing trade agreements such as EPAs will not be affected. However, Article 18 (1) enjoins AfCFTA State Parties to accord to each other, on a reciprocal basis, preferences that are “no less favourable than those given to Third Parties”.

It is important to ensure that the AfCFTA does not suffer the fate of previous African trade laws, which have led to the widespread view among scholars that African trade agreements are best understood as flexible legal regimes, particularly given their commitment to variable geometry and multiple memberships. In this regard, whilst work is underway to devise a framework of co-operation with RECs for a smooth implementation of the AfCFTA, it is important to construct an “AfCFTA acquis” that will gradually take precedence over “RECs aquis” in order to ensure the emergence of a coherent African community law. This process should be made easier by the fact that, with very limited exceptions, the majority of REC Trade Agreements do not currently include trade in services, investment, intellectual property rights and competition policy.

Africa’s trade performance

Africa’s trade performance was significantly below potential over the period between 2011 and 2017. Since 2011, African trade has accounted for approximately only 3% of global trade in goods. Over this period, African exports and imports remained stable at around USD 564.8 billion, with imports marginally exceeding exports. In 2017, 15.5% of Africa’s total trade took place within the region, marginally down from 15.9% in 2011 (African Union, 2019_[1] ).

Primary goods accounted for some 62.2% of Africa’s exports in 2017. These include mineral fuels, mineral oils, and products of their distillation; bituminous substances; mineral waxes; natural or cultured pearls; precious or semi-precious stones; precious metals and metal clad. Imports are dominated by nuclear reactors, boilers, machinery, mechanical appliances, mineral fuels, mineral oils, bituminous substances, mineral waxes, electrical machinery, equipment; vehicles other than railway or tramway rolling-stock; and parts. These goods represent approximately 50% of total imports.

African trade patterns show enormous potential for transformation and diversification into manufacturing and value addition, including agroindustry, in order to overcome a dependence on commodities and to increase Africa’s resilience. Removing trade barriers in the framework of AfCFTA will increase intra-African trade, which is much lower than trade within the European Union, for example, where economies are more diversified and integrated, and where intra-regional trade accounts for 67% of total trade. These barriers include tariffs, which will be discussed in the following section, as well as non-tariff barriers. Today, the latter are considered a much larger impediment to trade between countries in Africa than tariffs.

The main players in intra-African trade in 2017 were South Africa and the Democratic Republic of the Congo, which accounted respectively for 34.7% of intra-African exports and 13.0% of intra-African imports and 8.3% of intra-African imports and 8.1% of intra-African exports. The four largest African importers (South Africa, Egypt, Algeria and Morocco) together accounted for 48.2% of total imports and the four largest exporters (South Africa, Nigeria, Guinea and Algeria) accounted for 49.6% of total exports.

For the period 2011-17, China remained by far Africa’s largest trading partner, accounting for 23.1% of exports and 16.5% of imports in 2017. The largest destination markets for Africa’s goods after China were the United States (accounting for 7.3%) and France (6.5%) in 2017.

Trade taxes among countries participating in Revenue Statistics in Africa

As Article 4 of the AfCFTA states, tariffs (otherwise known as taxes on trade) will be progressively eliminated on goods traded within Africa. This will have a significant impact on the level and structure of tax revenues in Africa. The nature and extent of this impact will depend on numerous factors related both to the design of the AfCFTA and to the particular context of the countries it covers. These aspects include the importance of trade taxes in a country’s current tax mix, the inclusion or otherwise of sensitive goods, and the proportion of a country’s trade that is carried out within and outside Africa.

Revenue Statistics in Africa provides harmonised data on trade tax revenues according to three categories discussed in greater detail in the Interpretative Guide: 5123 (Customs and import duties), 5124 (Taxes on exports) and 5127 (Other taxes on international trade and transactions). As will be discussed in this section, Revenue Statistics in Africa data reveals trends in revenues from trade taxes in absolute terms, as a proportion of total tax revenues and as a percentage of GDP.

As is discussed in greater detail below, the AfCFTA is expected to offset declines in public revenues from the removal of tariffs by stimulating economic growth in the region, thereby generating gains in revenues from existing taxes on consumption and income. While deeper analysis of these dynamic effects in existing customs unions in Africa is beyond the scope of this chapter, the harmonised data provided by Revenue Statistics in Africa on revenues from taxes on income or profits and on goods and services is valuable evidence in this regard.

The three categories of trade tax identified above might not cover all the revenue generated by trade in certain countries covered by this publication. For example, as discussed in Chapter Chapter 2, member states of the Southern African Customs Union (SACU) pool revenue from customs duties on goods imported into the common customs area and excise taxes between five countries. This is then distributed according to a revenue-sharing formula between Botswana, Eswatini, Lesotho, Namibia, and South Africa; the income from the revenue-sharing formula is reported as non-tax revenue. Although this revenue is discussed in this analysis because it is partly derived from trade, it is not analogous to trade taxes.

It is important to bear in mind that a significant proportion of intra-African trade is informal. As a result, it is not included in the data reported here and will not be directly affected by the removal of tariff barriers. The dynamics of informal trade once AfCFTA is implemented are difficult to predict: while the elimination of non-tariff barriers will lead to an increase in informal trade, a reduction of formal barriers to trade could encourage formalisation.

Revenue from trade taxes as proportion of total taxes

Trade taxes are an important part of most African countries’ revenue mix, averaging 11.8% of total tax revenues across the 26 countries in 2017. They accounted for more than 20% of total tax revenues in four of the 26 countries covered by this report: Côte d’Ivoire (26.8%), Mauritania (26.7%), Uganda (23.3%) and Togo (22.2%). In a further 12 countries, they accounted for between 10% and 20% of total tax revenues.

Three SACU countries are among the ten that generate less than 10% of total tax revenues from trade taxes. Of these, Botswana’s receipts from the SACU revenue-sharing formula were equivalent to 79.5% of total tax revenues in 2017 while Eswatini’s were equivalent to 92.7%. When the three SACU countries are excluded, the regional average of trade taxes as a proportion of total taxes rises to 13.1%.

Revenue from trade taxes declined as a proportion of total tax revenue in 19 of the 23 non-SACU countries covered by this report between 2008 and 2017 (Figure 3.1). The largest falls were in the Seychelles (13.2 percentage points [p.p.]), the Democratic Republic of the Congo (8.5 p.p.) and Uganda (5.5 p.p.). Revenue from trade taxes increased as a proportion of total taxes in Mauritania (by 5.6 p.p.), Equatorial Guinea (3.8 p.p.) and Mali (1.0 p.p.). Data was not available for Nigeria in 2008 but between 2010 and 2017, revenues from trade taxes increased by 1.3 p.p.

Figure 3.1. Trade taxes by country, 2008 and 2017

Note: Figure does not include the three SACU countries: Botswana, Eswatini and South Africa. For Nigeria, the 2010 figure is used instead of 2008 due to data availability issues.

Source: Authors’ calculations based on data from (OCDE/ATAF/CUA, 2019_[1] ), “Revenue Statistics in Africa: Comparative tables”, OECD Tax Statistics (database), http://dx.doi.org/10.1787/be755711-en

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Among the 19 countries with data on trade tax revenues for the period from 2000 to 2017, only 2 (Côte d’Ivoire and Mauritius) registered an increase in the proportion of revenues generated by trade taxes over this period. The largest declines took place in Cabo Verde (16.4 percentage points), the Democratic Republic of the Congo (15.6 percentage points), Niger (14.4 percentage points), Madagascar (12.9 percentage points) and Morocco (10.2 percentage points).

Revenue Statistics in Africa demonstrates the impact of a number of trade agreements implemented since the late 1990s. For example, the East African Community (EAC) established a customs union in 2005. Between that year and 2017, revenues from trade taxes as a percentage of total taxes declined by 6.3 p.p. in Rwanda (which joined in 2009), 2.5 p.p. in Kenya and 1.6 p.p. in Uganda. Their tax-to-GDP ratio grew over the same period, meaning that these countries were able to compensate for this decline in revenues from trade taxes with revenues from other sources.

In all three countries, taxes on income and profits were the principal driver of an offsetting rise in revenues from other tax types; revenues from these taxes increased both as a proportion of total tax revenues and as a percentage of GDP. However, revenue from taxes on goods and services declined as a share of total tax revenues in all three countries over the same period while decreasing as a percentage of GDP in Kenya and increasing as a percentage of GDP in Rwanda and Uganda.

The Agadir Agreement – a free-trade agreement between Egypt, Jordan, Morocco and Tunisia – came into force in 2007. Trade taxes as a proportion of total taxes fell by 4.5 p.p. between 2007 and 2017 in Morocco, by 1.7 p.p. in Egypt and 1.6 p.p. in Tunisia. Again, these three countries were able to offset the declines through revenues from other categories of tax and their tax-to-GDP ratio increased over this period.

Revenue Statistics in Africa also includes data from six of the eight countries participating in the West African Economic and Monetary Union, which removed tariffs on intra-regional trade in 1996. Data from that year are not available for most of these countries but a decline in revenues from trade taxes as a proportion of total revenues is nonetheless visible between 2000 and 2017. In all six countries, the tax-to-GDP ratio in 2017 was higher than in 2000.

Over this period, the share of revenue from trade taxes declined by 14.4 p.p. in Niger, 2.6 p.p. in Senegal, 1.2 p.p. in Mali, 0.7 p.p. in Togo and 0.3 p.p. in Burkina Faso. As noted above, revenues from trade taxes increased as a proportion of total taxes in Côte d’Ivoire. In three countries (Mali, Niger and Senegal) taxes on income and profits increased their share of total tax revenues while being less reliant on taxes on goods and services. In the other three countries, the reverse was observed.

Overall, the share of tax revenues generated by trade taxes has declined across a majority of the 26 countries, indicating that the region is less reliant on trade taxes than previously and thus reducing the AfCFTA’s potential impact on tax revenues. However, revenue from trade taxes remains an important source of revenues across a majority of these countries.

Certain countries might be particularly vulnerable to a decline in revenue from trade taxes resulting from the AfCFTA. In 2017, 9 of the 13 countries whose revenues from trade taxes as a proportion of total taxes exceeded the regional average had tax-to-GDP ratios that were below the overall Africa (26) average of 17.2%. Ten LDCs participate in Revenue Statistics in Africa; all of these generated more than 11% of their revenues from trade taxes in 2017. Although not an LDC, Côte d’Ivoire is also considered vulnerable because more than a third of its imports come from within Africa.

Revenue from trade taxes as percentage of GDP

Total revenues from trade were equivalent to 2.1% of GDP in 2017 on average across the 23 non-SACU countries participating in the report. Over the past decade, revenues from trade taxes have declined only slightly as a percentage of GDP: in 2008, they were equivalent to 2.2% of GDP on average (not including Nigeria, for which data in 2003 was not available). Including the SACU countries, trade tax revenues were equivalent to 1.9% of GDP on average in 2017 and 2.0% of GDP in 2008.

Revenue from trade taxes as a percentage of GDP ranged widely in 2017 (Figure 3.2). They equated to more than 4.0% of GDP in Mauritania (5.0%), Côte d’Ivoire (4.8%), Togo (4.7%) and Cabo Verde (4.0%) and less than 1% of GDP in the Democratic Republic of the Congo, Equatorial Guinea, Mauritius, Morocco, Nigeria and Tunisia.

Revenues from trade taxes declined as a proportion of GDP between 2008 and 2017 in 13 of the non-SACU countries, while they increased in 9 over the same period. The largest declines occurred in the Seychelles (2.8 p.p.), Morocco (1.1 p.p.) and the Democratic Republic of the Congo (1.0 p.p.), while Mauritania and Togo recorded the largest increases (of 2.3 p.p and 1.1 p.p., respectively). Revenues from trade taxes as a percentage of GDP were unchanged in Rwanda.

Figure 3.2. Trade taxes by country, 2008 and 2017

Note: Figure does not include the three SACU countries: Botswana, Eswatini and South Africa.

For Nigeria, 2010 data are used instead of 2008 due to data availability issues.

Source: Authors’ calculations based on data from (OCDE/ATAF/CUA, 2019_[1] ), “Revenue Statistics in Africa: Comparative tables”, OECD Tax Statistics (database), http://dx.doi.org/10.1787/be755711-en

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AfCFTA’s impact on public revenues

As progress towards the AfCFTA continues, estimating the potential revenue reductions associated with the new arrangement is a matter of critical importance. Several recent studies have sought to quantify these “transition costs” in their analysis of the welfare gains and losses associated with different variants of the AfCFTA using general equilibrium models. Although methodologies and estimates differ among these studies, certain conclusions emerge.

Revenue losses associated with the elimination of taxes on trade within Africa are predicted to be small across the region as a whole and are expected to be offset in the longer term by the increase in tax revenues generated by the economic growth by AfCFTA. However, the studies also note that the transitional revenue losses may be significant for some countries, depending on their current tax levels and revenue mix.

According to (Saygili, Peters and Knebel, 2018_[2] ), revenues from trade tariffs will experience a decline of 9.1% from their current level under a full free-trade scenario, whereby tariffs are fully eliminated on all trade within Africa. For the 26 counties covered in this report, this would reduce average revenues from trade taxes from 2.1% of GDP in 2017 to 1.9% of GDP. In a scenario where tariffs are retained on products that generate the highest tariff revenues, the revenue loss falls to 7.2%.

Although (Saygili, Peters and Knebel, 2018_[2] ) predict AfCFTA will increase regional GDP (by 1.0% in the first scenario and 0.7% in the second), it recognises that the AfCFTA will not benefit all countries equally. The study identifies “significant tariff revenue losses and possible uneven distribution of other costs and benefits” as principal challenges and argues that “countries with large productive capacities in manufacturing may experience significant economic growth and welfare gains while small economies and LDCs may face substantial fiscal revenue losses and threats to local industries.”

(Abrego et al., 2019_[3] ) find that revenue losses associated with the AfCFTA’s elimination of tariffs on intra-regional trade will be small in the long run, equating to 0.03% of GDP. However, looking at the short-term revenue impact, (IMF, 2019_[4] ) calculates that the revenue loss associated with the removal of tariffs (and a shrinking of the base for value-added tax) would amount to between 0.3% and 0.8% of GDP overall. However, the decline might amount to between 3% and 5% of GDP for some countries.

A decline in tax revenues equivalent to 5% of GDP shared across all countries participating in Revenue Statistics in Africa would reduce the Africa (26) tax-to-GDP ratio by 29%, to 12.2%. Although only a small number of countries are expected to suffer losses of this magnitude, previous analysis has shown that the countries affected to this extent might be those that can least afford it. Countries that are most reliant on revenues from trade taxes are often LDCs and are also those with tax-to-GDP ratios below the Africa (26) average.

(African Development Bank, 2019_[5] ) simulates the impact of different AfCFTA implementation scenarios on government revenues. As with the other studies, it finds that the revenue loss generated by removing tariffs on intra-African trade is small in aggregate but would be significant for certain countries. The study notes that revenues from tariffs finance more than 20% of current spending in eight African countries and finds that the largest revenue losses associated with a complete elimination of tariffs on regional trade would be experienced in Burkina Faso (44%), Zimbabwe (36%), Malawi (22%) and Ghana (21%). It also finds that revenue losses might be offset by revenue gains from an increase in trade with partners outside Africa facilitated by the removal of non-tariff barriers.

Looking ahead

The AfCFTA represents a major step forward in overcoming two key constraints on Africa’s development: the fragmentation of markets and the low levels of intra-regional trade. By facilitating trade in goods and services through the elimination of tariffs and non-tariff barriers, it is expected to significantly increase GDP and boost employment while also affording flexibility for countries that are less well-placed to take advantage of the AfCFTA. The new trade regime will build on existing regional agreements but will also ensure co-ordination between them to ensure that the vision of an integrated African market materialises.

Although the elimination of trade tariffs may reduce tax revenues across the region in the short term, this decline is expected to be offset in the longer term by increased revenues from other categories of tax as a result of growth in countries’ economies generated by closer integration. As data from Revenue Statistics in Africa shows, the region has been progressively less reliant on revenues from trade taxes, in part because of various trade agreements that have been established since the 1990s. On average across the 26 countries, revenues from trade taxes accounted for 11.8% of total tax revenues and were equivalent to 1.9% of GDP in 2017, down from 13.9% and 2.0% respectively in 2008.

Despite this lesser reliance, revenues from trade taxes remain an important source of public income for most African countries, especially among countries at lower income levels. The share of trade taxes to total tax revenues exceeds the regional average in all ten LDCs covered by this report, indicating that they are particularly vulnerable to the elimination of tariffs. The flexibilities envisaged under the AfCFTA, such as a longer transitional period for sensitive products, exclusion lists and adjustment facilities, are likely to be of critical importance, especially in a context where countries are under pressure to achieve the Sustainable Development Goals. AfCFTA State Parties also have an opportunity to implement tax reforms that will support their adjustment to the new trading system.

Revenue Statistics in Africa will provide a key source of data with which to monitor and analyse the impact of the AfCFTA on public revenues for a growing number of countries over the short and longer term. Using harmonised statistics on specific tax categories on a country-by-country basis, it will track revenues from trade taxes and identify the extent to which revenues from other taxes are offsetting the expected decline in revenues from trade taxes. As such, Revenue Statistics in Africa is a critical mechanism by which policy makers can ensure that regional integration benefits all African countries.

As the multilateral trading system continues to explore ways to reinvent itself, Africa is showing the way, setting up the largest free trade area since the establishment of the WTO. The initiative merits international support and the policy space needed to succeed. After all, the success of the AfCFTA, which is a stepping stone towards the African Economic Community as envisaged by the Abuja Treaty of 1991, will be beneficial not just for Africa but for all trading partners and for the multilateral trading system itself.

References

Abrego, L. et al. (2019), “The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model”, Working Paper, No. 19/124, IMF, https://www.imf.org/en/Publications/WP/Issues/2019/06/07/The-African-Continental-Free-Trade-Agreement-Welfare-Gains-Estimates-from-a-General-46881 (accessed on 5 September 2019).

African Development Bank (2019), African Economic Outlook 2019, African Development Bank, https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/2019AEO/AEO_2019-EN.pdf (accessed on 5 September 2019).

IMF (2019), Regional Economic Outlook Sub-Saharan Africa: Recovery amid elevated uncertainty, International Monetary Fund, Washington, DC, https://www.imf.org/en/Publications/REO/SSA/Issues/2019/04/01/sreo0419 (accessed on 5 September 2019).

OECD/ATAF/AUC (2019), “Revenue Statistics in Africa: Comparative tables”, OECD Tax Statistics (database), http://dx.doi.org/10.1787/be755711-en.

Saygili, M., R. Peters and C. Knebel (2018), “African Continental Free Trade Area: Challenges and Opportunities of Tariff Reductions”, UNCTAD Research Paper, No. 15, UNCTAD, Geneva, https://unctad.org/en/PublicationsLibrary/ser-rp-2017d15_en.pdf (accessed on 5 September 2019).