Modeling the Impact of Non-Tariff Barriers in Services on Intra-African Trade: GTAP Model

Abstract

This paper examines the effects of African Continental Free Trade Agreement (AfCFTA) on intra-African trade in the medium- and long-term, focusing on trade in services. It assesses the impacts of a 50\% reduction of non-tariff barriers in four services sectors on bilateral trade in services between ECOWAS (Economic Organization of West African States) and SADC (Southern African Development Community) areas. Using the GTAP model and ad valorem equivalents of services restrictions, we find that services liberalization stimulates GDP and household income in both trading blocks. Bilateral trade in financial, transport, professional, and telecommunication services increases between the two trading blocks and the effects are significant in the long run. SADC member countries export more financial services as a result of ECOWAS macroeconomic and financial integration. ECOWAS benefits from the quality of SADC infrastructures to rise its exports of transport and telecommunication services. South Africa is the biggest exporter in the SADC region and Ghana and Nigeria share the top position in ECOWAS area. Liberalization has beneficial effects on trade only if it is combined with supporting policies aimed at stimulating domestic competition in services sectors.