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AEC 2012 - Deepening Regional Integration in Africa a Computable General Equilibrium Assessment of the Establishment of a Continental Free Trade Area followed by a Continental Customs Union

10-Oct-2012

In January 2012, the 18th African Union (AU) Summit of African Heads of States and Governments was held in Addis Ababa. At this occasion, a major decision was taken with the adoption of the AU Action Plan for “Boosting Intra-African Trade and the Establishment of a Continental Free Trade Area (CFTA)”. This attests of a strong desire to deepen regional integration in Africa. Moreover, the AU Member States expressed the wish to see the share of intra-African trade doubling within the next 10 years.

While a tentative date of 2017 has been agreed for the formation of a CFTA, the Abuja Treaty, signed in 1993, specifically states the requirement for establishing a continent-wide Customs Union by 2019.

This paper first reviews the main trade-related constraints faced by Africa today. Then, it explores in what extent the formation of a CFTA followed by a Continental Customs Union (CCU) would help Africa to overcome these limitations and to fulfill AU Member States’ objective in terms of intra-African trade stimulation.

The analysis is conducted using the MIRAGE Computable General Equilibrium model. Our findings show that, although a CFTA would significantly contribute to increasing trade and its sophistication within the African continent, the removal of strictly tariff barriers would not be sufficient to double the share of intra-African trade at the horizon 2022. This goal could only be achieved if complementary non-tariff measures aiming at easing trade, such as, decreasing the length of customs procedures and port handling, are adopted. While the formation of a CCU would not result in any additional increase of the share of intra-African trade, as compared to a CFTA, it would, however, significantly promote African exports to third countries.

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