The African Continental Free Trade Area (AfCFTA) Agreement was negotiated at the continental level. However, much of its implementation and gains will be at country level. Trading under the deal is set to begin 1 July 2020 with the first installment of tariff dismantlement. Now the real test is how quickly and effectively the agreement's state parties (as the signatories that have ratified the Agreement are known) can implement it.
The AfCFTA provides a framework and a tool for boosting intra-African trade and industrialization on the continent. It is well known that intra-African trade generates greater levels of industrial and value-added goods than trade with other regions, which is typically dominated by lower-value commodities. Some 70% of exports outside the continent are resource extractives while less than 40% within are extractives, as indicated in Figure 1.
Figure 1. Intra-African exports vs. Africa's exports outside the continent, 2014-2016 average Exports within Africa Extractive 40% Exports to outside Africa Extractive 70% Source: UN Economic Commission for Africa. Note: Table made from pie chart. Figure 2. Change in intra-African exports by main sectors, as compared to the baseline without AfCFTA in place - 2040 - $ billion (various scenarios) Industry 36,1 41,1 43,3 Energy and mining 4,5 8,8 9,0 Agriculture and food 9,5 12,5 16,8 Source: UN Economic Commission for Africa. Note: Table made from bar graph. The United Nations Economic Commission for Africa (ECA) projects that the value of intra-African exports will increase between 15% (or $50 billion) and nearly 25% (or $69.1 billion) in 2040, relative to the baseline without the AfCFTA in place. Most interestingly, as demonstrated in Figure 2, intra-African exports were found to increase the most for industrial products, with gains ranging between around 25% (or $36.1 billion) and almost 30% (or $43.3 billion). All African countries are expected to benefit from increased valueadded exports under the agreement. In fact, least developed countries (LDCs) in Africa are estimated to have the greatest boost to industrial exports. This highlights that the AfCFTA offers a tool for boosting intra-African trade in a way that also contributes to diversification and inclusivity.
Still, these gains will not be automatic. Like any other trade agreement, state parties will undoubtedly experience short-term adjustment costs. All countries will face direct implementation costs associated with...