The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model

By Lisandro Abrego, Maria Alejandra Amado, Tunc Gursoy, Garth P. Nicholls, Hector Perez-Saiz

June 7, 2019

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Lisandro Abrego, Maria Alejandra Amado, Tunc Gursoy, Garth P. Nicholls, and Hector Perez-Saiz. The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model, (USA: International Monetary Fund, 2019) accessed December 25, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In March 2018, representatives of member countries of the African Union signed the African Continental Free Trade Area (AfCFTA) agreement. This agreement provides a framework for trade liberalization in goods and services and is expected to eventually cover all African countries. Using a multi-country, multi-sector general equilibrium model based on Costinot and Rodriguez-Clare (2014), we estimate the welfare effects of the AfCFTA for 45 countries in Africa. Three different model specifications—comprising both perfect competition and monopolistic competition—are used. Simulations include full elimination of import tariffs and partial but substantial reduction in non-tariff barriers (NTBs). Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures.

Subject: Imports, Income, International trade, National accounts, Tariffs, Taxes, Trade balance, Trade barriers

Keywords: AfCFTA, AfCFTA trade liberalization agenda, Africa, Asia and Pacific, Equilibrium trade model, General equilibrium, Global, Iceberg trade costs, Imports, Income, Perfect competition, Southern Africa, Tariffs, Trade balance, Trade barriers, Trade elasticity, Trade openness, Utility function, Welfare, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/124
Stock No:

WPIEA2019124
ISBN:

9781498314398
ISSN:

1018-5941

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