Do Africa's regional pacts boost trade?

• Pages: 185-193

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Prompted largely by increasing regionalism worldwide and the ongoing Doha multilateral trade negotiations, there has been a renewed push in Africa over the last several years to broaden and deepen the region's preferential trade arrangements. A new IMF study looks at whether African regional trade arrangements are meeting their goals to expand trade within and outside the region and improve overall economic welfare in Africa.

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Going beyond regional arrangements to boost African trade

Some 30 regional trade arrangements (RTAs) now exist in Africa and each country on average belongs to four.

Many of these arrangements are part of deeper regional integration ambitions, but a new IMF study argues that small market size, poor transport facilities, and high trading costs are impeding the ability of African countries to reap the potential benefits. Authors Sanjeev Gupta and Yongzheng Yang (IMF African Department) recently discussed their findings with Jacqueline Irving of the IMF Survey. They point to the need for more broad-based liberalization and streamlining existing RTAs, while improving the region's infrastructure.

There has been much recent interest in, and debate over, the merits of RTAs. A key aim of this study, Gupta explained, was to look at the existing arrangements in sub-Saharan Africa to see whether they are meeting their goal of increasing intraregional and extraregional trade and whether they are benefiting the region, or, indeed, whether there is a need to rethink their underlying strategies. "This is an area that has not been studied in great detail for Africa," he added, noting that trade policy is an important part of economic policy, especially in terms of its potential to promote and sustain growth.

Have RTAs helped increase intraregional trade? There seems to have been an increase in African intraregional trade over the past 25 years, but it still remains low compared with other regions. Since the mid-1990s, intra-African trade overall has been stable at about 10 percent of total African trade despite intensified efforts to integrate regionally. In contrast, intraregional trade is currently about 70 percent of total trade for Europe and 50-60 percent for parts of Asia. "In other regions, after these sorts of agreements were signed, intraregional...