The African Continental Free Trade Area (AfCFTA) could boost the continent's revenues by $450 billion if fully implemented, the World Bank said.
According to the report released on Monday (27.07.2020), the pan-African trade pact would significantly boost continental trade, particularly intra-regional manufacturing trade.
"Of the $450 billion in revenue gains from AfCFTA, $292 billion dollars would come from greater trade facilitation: Measures to reduce bureaucracy and simplify customs procedures", says the report called Economic and Distributional Effects of the African Continental Free Trade Area.
The document is designed to guide policymakers as they continue the process of negotiating and implementing the agreement.
The findings suggest that achieving income gains will be particularly important given the economic damage caused by the COVID-19 pandemic, which is expected to cause output losses of up to $79 billion in Africa in 2020.
«The pandemic has already caused major disruptions to trade across the continent, including critical goods such as medical supplies and food,” the survey says.
The results indicate that while Africa has made substantial progress in recent decades in raising living standards and reducing poverty, increased trade can boost reforms that lead to productivity and job creation and thus further reduce poverty.
The World Bank estimates that by 2035, implementation of the trade agreement would also help lift an additional 30 million people out of extreme poverty and 68 million people out of moderate poverty.
The analysis also indicates that by 2035, the volume of total exports would increase by almost 29 percent relative to business as usual.
“Intracontinental exports would increase by more than 81 percent, while exports to non-African countries would increase by 19 percent. This would create new opportunities for African manufacturers and workers,” the report says.
The report notes that these gains would come, in part, from the reduction of tariffs, which remain stubbornly high in many countries in the region.
«Even greater gains would be achieved by reducing trade costs by lowering non-tariff barriers and improving hard and soft infrastructure at borders – so-called trade facilitation measures."the report says.
“These measures would cut red tape, reduce compliance costs for traders and ultimately facilitate the integration of African companies into global supply chains. These reforms would be difficult, but the rewards would be substantial,” he notes.
The World Bank says that in the few sectors where AfCFTA implementation results in job losses, Governments will need to be prepared to support workers with appropriate safety networks and policies to empower them.
“Policymakers will also need to prepare for the distributional impacts of the AfCFTA, across sectors and countries, on skilled and unskilled workers, and on female and male workers. Doing so will enable them to design policies to increase the readiness of their workforce to take advantage of new opportunities,” the report says.
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