Free Trade Area Research Articles

Critical factors to consider in the trade–security nexus of the African Continental Free Trade Area: A catalyst for establishing peace

ABSTRACT This study examines the geostrategic importance of the African Continental Free Trade Area (AfCFTA), discusses its potential trade impacts on African states, and considers whether it could support regional peace. Regional integration is crucial for achieving industrialisation, promoting trade across African borders, and preserving regional peace and security. Inextricably linked to regional integration is a security community comprising a distinct group of individuals for whom the likelihood of large-scale conflict or violence has diminished. A comparative analysis was conducted using Africa’s trade patterns, milestones, and achievements during 2015–2017 and 2022–2023. Subsequently, the key causes of insecurity on the African continent were explored, focusing on the Regional Economic Communities and states embroiled in coups during 2020–2023. The findings suggest that African authorities view the AfCFTA positively and believe economic integration may bring about peace. However, African authorities would require a strong continental strategy – supported by robust regional and national programmes – to promote investor confidence and trade, considering Africa’s high levels of intercommunal violence, civil unrest, violent extremism, terrorism, and transnational crime. The AfCFTA delayed trade liberalisation to protect Africa’s less developed economies, resulting in poor working conditions, intellectual capital loss, and decreased tax collection.

Economic Transition Opportunities for Nigeria in joining the African Continental Free Trade Area

This article explores the African Continental Free Trade Area (AfCFTA) and its implications for Nigeria. AfCFTA, established in 2018, aims to create a competitive single African market by eliminating tariffs and barriers, fostering economic growth, job creation, and industrialization. The nature of trade in Continental Africa has been more with the rest of other continents than within Africa. Then comes the question of what is standing on the way of inter and intra Africa trade. With trade we can unlock Africa growth and development and by so doing, we can improve per capita income in the continent and by so doing reduce poverty in Africa. The article discusses the objectives and challenges of AfCFTA, emphasizing the importance of infrastructure, regulatory harmonization, and trade facilitation. For Nigeria, Africa’s largest economy, joining AfCFTA offers expanded market access, job opportunities, and economic diversification. The government’s rationale for participation includes promoting industrialization, increasing export opportunities, and improving trade balance and foreign exchange reserves. The reality is that we all need each other to get the wheel of life going. Keywords: , Globalization, AfCFTA, Regional Trade, Trade balance

The Growth Prospects for Nigeria in Joining the African Continental Free Trade Area

This paper examines the potential benefits and challenges of Nigeria joining the African Continental Free Trade Area (AfCFTA) agreement, which aims to create a single market for goods and services across Africa. Using a computable general equilibrium model, we simulate the effects of trade liberalization under different scenarios of tariff reduction, trade facilitation, and regional integration. We find that Nigeria stands to gain from participating in the AfCFTA, especially if it is accompanied by improvements in infrastructure, customs procedures, and regulatory harmonization. However, we also identify some potential costs and risks, such as trade diversion, revenue loss, and adjustment costs for some sectors and regions. We recommend that Nigeria adopts a proactive and strategic approach to maximize the opportunities and mitigate the challenges of the AfCFTA, such as diversifying its export basket, enhancing its competitiveness, strengthening its domestic policies, and engaging in regional cooperation. Keywords: AfCFTA, Nigeria, trade liberalization, regional integration, computable general equilibrium model

The Transformative Trajectory for Nigeria in the Aftermath of Joining the African Continental Free Trade Agreement.

The African Continental Free Trade Agreement (AfCFTA) is a significant initiative aimed at promoting economic integration among 54 African nations. This article examines the historical context, challenges, and achievements of the AfCFTA, including tariff reductions, trade in goods and services, intellectual property rights, and free movement of persons. It also highlights the challenges faced by African economies, such as low industrialization and limited access to finance. The article proposes strategic solutions, such as infrastructure development and regulatory harmonization, to address these issues. The AfCFTA has created the world's largest free trade area, promoted trade in services, and attracted foreign investment. The article highlights its resilience during the COVID-19 pandemic and acknowledges its transformative potential in shaping Africa's economic future. Future prospects include scope expansion, regional integration, digitalization, and sustainable growth. Keywords: Global trade, AfCFTA, Regional Trade, Trade block

Positioning Nigeria as a First World Economy in the Era of Signing the African Continental Free Trade Area (AFCFTA)

The challenging circumstances of Nigerian businesses within the African continental free trade agreement has not really placed Nigerian economy at the desired global height as expected. The challenges in line with the ex post facto result of our study showed that, Nigerian was prepared to be launched at the global business circle but are still confronted with specific issues due to lack of proper African continental integration. Our report also showed that, Nigerian capital and financial markets are robust to leverage AfCFTA to boost trade and commerce, attract FDI, utilized our abundance natural and human resources and increase exports. It was however, recommended that: A special purpose vehicle should be created to monitor the progress of the AfCFTA strategies in each of the Member countries. Also, Nigerian government should work harmoniously with stakeholders to ensure trade liberalization especially export sector and start up so as to boost local production; trade Concessions should be given to infant industries, and laws should be made to protect SMEs from foreign and giant competitions; ease of doing business policies should be improved to attract foreign direct investment, FPI and capital inflows. Keywords: Globalization, AfCFTA, International trade, Trade balance, Classical & Neoclassical trade theories.

Economic Transition Opportunities for Nigeria in joining the African Continental Free Trade Area.

This article explores the African Continental Free Trade Area (AfCFTA) and its implications for Nigeria. AfCFTA, established in 2018, aims to create a competitive single African market by eliminating tariffs and barriers, fostering economic growth, job creation, and industrialization. The nature of trade in Continental Africa has been more with the rest of other continents than within Africa. Then comes the question of what is standing on the way of inter and intra Africa trade. With trade we can unlock Africa growth and development and by so doing, we can improve per capita income in the continent and by so doing reduce poverty in Africa. The article discusses the objectives and challenges of AfCFTA, emphasizing the importance of infrastructure, regulatory harmonization, and trade facilitation. For Nigeria, Africa's largest economy, joining AfCFTA offers expanded market access, job opportunities, and economic diversification. The government's rationale for participation includes promoting industrialization, increasing export opportunities, and improving trade balance and foreign exchange reserves. The reality is that we all need each other to get the wheel of life going. Keywords: Globalization, AfCFTA, Regional Trade, Trade balance

The Growth Opportunities for Nigeria in Joining the African Continental Free Trade Area.

This Article examines the African Continental Free Trade Area (AfCFTA), focusing on its inception, goals, challenges, and specific implications for Nigeria. Africa, with abundant natural resources and cultural diversity, faces hindrances like poor infrastructure and governance, limiting intra-African trade. Established in 2018, AfCFTA aims to create a competitive single African market by eliminating tariffs and barriers. AfCFTA objectives span tariff elimination, customs harmonization, dispute resolution, and cooperation on technical barriers. Challenges include infrastructure gaps, non-tariff barriers, economic diversity, competition adjustments, informal trade, political instability, capacity constraints, and financing issues. Mitigating these requires strategies like infrastructure development, trade facilitation, capacity building, and harmonizing standards. Nigeria, as Africa's largest economy, could benefit from AfCFTA by accessing cheaper goods. However, implementation faces delays due to unmet trade requirements. The National Action Committee outlines pillars for effective implementation, emphasizing institutional development, export growth, improved trade facilitation, and infrastructure development. Despite Nigeria's delay, the upcoming Guided Trade Initiative in October 2023 is anticipated to accelerate its participation in AfCFTA, fostering economic growth and trade relations within the continent. Keywords: Global trade, globalization, AfCFTA, Trade Block, Commerce.

Towards ICT diffusion and trade liberalisation on inclusive growth in Sub-Saharan Africa

AbstractWhile the debate over the nexus between trade liberalization and inclusive growth is progressively reaching some consensus in emerging and developing economies, the empirical findings are mixed for sub-Saharan African (SSA) countries. Some of the SSA countries experience rapid growth in information and communication technology (ICT) diffusion manifesting in increased green wealth via the invention of new ideas, access to wider markets like the African Continental Free Trade Area (AfCFTA), promoting accountability, social inclusion, and e-governance among others. The present study critically assesses how ICT diffusion modulates trade liberalization on inclusive growth throughout the 2005–2020 periods for 48 SSA countries. This study contributes empirically and methodologically to literature, specifically on the construction of the ICT index, inclusive growth index, and adoption of a better befitting econometric model. The study explores the direct impacts of ICT diffusion and trade liberalization, and their indirect impacts using an interaction term on inclusive growth. Contrary to the prior expectations, trade liberalization does not lead to inclusive growth in the SSA region, but ICT diffusion has a positive and significant impact on inclusive growth. However, the interaction term of ICT and trade liberalization improves inclusive growth. Therefore, the study advocates for policies that would build a knowledge-based human capital, stimulate innovation in socio-economic systems, and develop ICT infrastructure and its penetration among others, with the expectation that as AfCFTA takes effect, ICT diffusion will facilitate intra-regional trade, enhancing inclusive growth in the African region among other sound policy suggestions.

Addressing the Challenges Facing One-Stop Border Posts in Africa: Lessons from Chirundu

As African countries work towards establishing a continental market created under the African Continental Free Trade Area (AfCFTA), emphasis needs to be placed on improving connectivity and regional accessibility. One-Stop Border Posts (OSBPs) are central to enhancing interconnectivity among African countries to facilitate traffic flows along Africa's transport corridors. Under the OSBP concept, all traffic stops once to undertake both exit and entry formalities when crossing into another jurisdiction. Such a framework would help alleviate border congestion and delays that adversely impact transport costs, trade flows, and trade competitiveness. However, OSBPs present their own challenges. Using the Chirundu OSBP between Zambia and Zimbabwe (which was the first of its kind in Sub-Saharan Africa) as a case study, this article examines the challenges, highlights the issues, and suggests ways to address the problems. It reviews the border management and infrastructure challenges affecting operations and success of the Chirundu OSBP and points to implementation lessons that can be drawn to inform other African countries that intend to implement, or are in the process of developing, OSBPs.

Does Competition Spur Innovation in North Africa? Evidence from a Panel ARDL Approach

The launch of the African Continental Free Trade Area at the beginning of 2021 provides new opportunities for North African countries to boost their economies. To conquer this vast market, innovation has become an ineluctable need. Although competition policy may serve as a salient lever for enhancing innovation, it is still not well harnessed by North African economies, even though they have one of the oldest competition law regimes on the African continent. For this purpose, this article attempts to explore the relationship between competition and innovation in four North African countries from 1995 to 2019. The second generation of panel unit root and cointegration tests have been used in our study. Based on the estimations of the panel autoregressive distributed lag model, our findings show that competition positively impacts innovation in the long run. Furthermore, our empirical results demonstrate that innovation is positively affected by economic growth and financial development while negatively affected by human capital and trade openness in the long run. The causality analysis reveals a unidirectional causal relationship running from competition to innovation. JEL Classification C32, C33, K21, O30

Virtual water flows and drivers in the international trade of agricultural products of the regional comprehensive economic partnership.

The regional comprehensive economic partnership (RCEP) is today the largest free trade area in the world. This paper examines agricultural trade in the RCEP from 2010 to 2019 through the perspective of virtual water. And the drivers of the virtual water flow between China and the RCEP are also explored. The results are as follows: the virtual water flow during the study period was 2,576.51 billion m3. From a temporal perspective, the annual virtual water flow over the study period is characterized by a slow rise-significant fall-slow rise. It has the characteristics of concentration in spatial distribution and water resources and product structure. However, the concentration degree showed a downward trend during the study period. Then, we have divided the major trading into four categories based on whether there is a shortage of water on both sides of the trade. In terms of the drivers of virtual water flows between China and the RCEP, we have used the gravity model to arrive at the following findings: crop yields, bilateral economic scale, and agricultural labor resources are the main drivers. Our research results have reference values for adjusting bilateral agricultural trade and water conservation.

The relationship between international trade relations and regional development: a comprehensive analysis and assessment of influencing factors

The evolution of the phenomenon of regionalization in old and new regionalism, regional trade agreements and their features (RTAs) is traced based on the provisions of regional science and trade relations, and it is shown that the emergence of numerous RTAs is one of the most significant trends in the modern development of international trade. Theoretical aspects of the influence of regional trade on regional development are considered, in particular within the growth of GDP. On the example of various regions (in particular, Asia-Pacific region, North American continent, South Africa), it is demonstrated that RTAs, as well as free trade areas (FTA) stimulate economic growth in participating countries through increased trade, economies of scale, knowledge and technology transfer. Moreover, it is concluded that the growing trend of regionalization contributes, on the one hand, to strengthening the processes of globalization, on the other hand, to the isolation of integration groupings from the world market and increasing their independence from external demand, allowing participating countries to resist emerging crises and economic shocks.

Protection against unfair competition—African Regional Intellectual Property Organization member states and South Africa

Abstract This article summarizes the current status of protection against unfair competition in 19 Member States of the African Regional Intellectual Property Organization (ARIPO) as well as South Africa. Since several study countries are Member States to at least one Regional Economic Community (RECs) or customs union, which have introduced regional or sub-regional competition regimes to advance regional integration in this area, the relevant RECs and customs unions are also briefly analysed. This is followed by some reflections on the impact of the African Continental Free Trade Area (AfCFTA) and the AfCFTA’s recently adopted Phase II protocols on Intellectual Property Rights and Competition Policy. The article then examines the different approaches adopted in the study countries to fulfil the obligation to ensure effective protection against unfair competition, as stipulated in Article 10bis(1) of the Paris Convention (PC), and investigates how the concept of ‘honest practices in industrial or commercial matters’ (Article 10bis(2) PC) is interpreted and applied. The article also explores how study countries have implemented the examples of prohibited acts of unfair competition contained in Article 10bis(3) PC, and addresses the question whether additional acts fall within the scope of protection against unfair competition in the study countries. The findings here are presented in such a way that observations from several countries are typically clustered together to exemplify general approaches and categories. The article observes that while countries in the region typically provide some form of legal protection to safeguard fair play in the business sector, study countries represent a variety of legal systems (civil law, common law, a combination of civil law and common law and/or religious law). This influences the way of how they address unfair competition.

Agriculture and AfCFTA: NTM reductions increase intra‐Africa trade

AbstractThe African Continental Free Trade Area (AfCFTA) is expected to provide trade gains for Africa, especially from reducing non‐tariff measures (NTM). Unfortunately, data on NTMs is scarce, both by country and sector. Using three underlying NTM data sets and other data sources, we provide a range of estimates to fill the missing gaps in the existing estimates. Focusing on agriculture, we then use a computable general equilibrium model to estimate the effects of the AfCFTA. Results from all three data sets indicate that NTM reduction leads to much greater intra‐Africa trade gains than tariff reduction alone.

Macro-determinants of current account balance performance in selected African countries

AbstractMost African countries are open to international trade as shown by their signatories to various trade agreements such as the Economic Partnership Agreement (EPA) with the EU, and the Forum on China-Africa Cooperation (FOCAC). However, these countries face persistent current account deficits and institutional underdevelopment. The existing literature investigates the underlying factors at country-specific levels while ignoring the role of institutions. Meanwhile, African countries are also rapidly transitioning towards economic integration with the establishment of the African Continental Free Trade Area Agreement (AFCFTA) to deepen intra-Africa trade. Therefore, for unionized policy proposition, this study controls for the effects of institutions and investigates the macro-determinants of the current account balance (CAB) performance using panel data from 2002 to 2020 for 20 African countries. To account for cross-country correlation and country-level heteroscedasticity, the study employed panel-corrected standard errors (PCSE) and feasible generalized least squares (FGLS) techniques for the governance indicators-related step-wise estimations. The results show that after controlling for the effects of institutions, income, trade openness, the price level, the interplay between manufacturing and financial sector development, and the money supply are the significant macro-determinants of the CAB performance in Africa. Further, the marginal info-graphics show that the predictive effects of value addition and financial development on the CAB increase positively with good governance and that improved governance could reverse any negative effects of trade openness on the CAB performance. Based on the findings, the study recommends inter alia that African countries pursue value-addition-oriented trade, zero Central Bank budgetary financing, and institutional quality improvement to enhance the performance of their CABs.

Do Trade Agreements Enhance Bilateral Trade? Focus on India and Sri Lanka

This article examines bilateral trade relations between the two important countries of South Asia, India and Sri Lanka, in light of the South Asian Free Trade Area (SAFTA) and the India–Sri Lanka Free Trade Agreement (ISFTA). The analysis period spans the years 1995 to 2020. The primary analysis found that bilateral trade has been sluggish and that the SAFTA and ISFTA agreements have had no discernible effect on these two countries’ bilateral trade performance. The causes of lackluster trade performance were investigated using the “revealed comparative advantage” and the “trade complementarity” indices. Clear evidence was found demonstrating that the reason for the bilateral trade’s consistent lackluster performance is due to both countries’ lack of revealed comparative advantage in the majority of product groups, followed by export similarity in the product groups where they do have a comparative advantage. The findings also confirm the suspicion of many observers that they are competitors rather than natural trading partners. Although any substantial future increase in their bilateral trade is improbable and fanciful, the paper reflects on methods of strengthening bilateral trade.

Growth, fiscal and welfare implications of trade liberalization in Africa: A macro‐micro modeling assessment of the Senegalese economy

AbstractThe African Continental Free Trade Area (AfCFTA) has been hailed as a key pillar and catalyst for economic growth, industrialization, and sustainable development in Africa. One of the anticipated benefits is the promise to increase intra‐African trade through the elimination of import duties and other tariffs among countries. However, due to the heterogeneity between the African countries, questions remain as to whether each country will benefit from tariff elimination. This paper aims to evaluate the macroeconomic, fiscal, and welfare consequences of import tax removal in Senegal with the rest of Africa. We link an extended version of the partnership for economic policy (PEP) static computable general equilibrium (CGE) model with a non‐parametric microsimulation approach. We calibrate the model with Senegal's most recent Social Accounting Matrix. The microeconomic model is calibrated using the latest Senegalese household consumption survey. The findings indicate that tariff removal from the rest of Africa has favorable economic, fiscal, and welfare impacts for Senegal. The paper suggests that it will lead to an increase in economic growth and investment. The removal of tariffs is expected to favor urban households over rural ones and leads to a modest decrease in income inequality, accompanied by a 3.36% reduction in the number of poor.

Advancing regional cooperation within AfCFTA through an integrated cross-border e-commerce system

ABSTRACT The digital economy has become an essential factor in economic diversification, yet regional trade blocs lack support for putting in place legal mechanisms to facilitate cross-border e-commerce activities between their member states. This article examines the potential for cross-border e-commerce in the context of the African Continental Free Trade Area (AfCFTA) by identifying opportunities but also critical challenges in its Digital Trade Protocol. It also reviews the laws and regulations governing e-commerce in each signatory to the AfCFTA – including those laws related to e-transactions, data protection and privacy, consumer protection and cybercrime – taking a deep-dive into discussing the legal environment necessary to support cross-border online business activities. Based on this analysis, this article offers important insights and recommendations for policymakers, proposing an integrated cross-border e-commerce system based on a centralised shipping method. Specifically, it recommends harmonising customs procedures, improved infrastructure, and financing mechanisms.

Structure characteristics and formation mechanism of the RCEP manufacturing trade network: An ERGM analysis

The entry into force of the Regional Comprehensive Economic Partnership (RCEP) on January 1st, 2022 marked the official launch of the world’s largest free trade area. The RCEP agreement will gradually release its strengths to the regional trade development and finally become one of the most important economic growth polarities. In this article, the complex network theory was introduced in the analysis of regional trade patterns and the investigation of trade relation-formation mechanisms. Based on the RCEP agreement, we constructed the manufacturing trade networks at both national and industrial levels, meanwhile, we explored the node and network characteristics combining with centrality, density, reciprocity, and distance indicators. Furthermore, by using the significance testing of the three-node motifs, we recognized the main trade patterns of the RCEP manufacturing trade. Finally, we established the exponential random graph model(ERGM) and performed an empirical analysis to conduct the formation mechanisms of the RCEP manufacturing trade networks. The results provided that the integrated trade pattern had a strong positive effect on the relation formation, while the imbalanced trade pattern was not easy to form the trading relationship.

A General Equilibrium Analysis on the Potential Effects of the African Continental Free Trade Area (AFCFTA) on African Economies

This study investigates the potential impact of the African Free Continental Trade Area on welfare, gross domestic product, labor demand, industrial output, and trade. To achieve the objectives, the study uses the Global Trade Analysis Project database 11. The database was used to aggregate Sub-Saharan Africa into five major regions according to geographical location Western, Southern, Northern, Eastern, and Central Africa. Sectors were grouped into agriculture, services, utility and construction, transportation and communication, heavy manufacturing, light, manufacturing, and extraction. The simulation scenario was conducted for three periods; 2025, 2030, and 2035. The result shows that gross domestic product will increase to 8,277,010 trillion by 2030. Western Africa will contribute the highest share followed by Northern, and Southern Africa. Trade result reveals that import and export will increase throughout the simulation periods with the highest potential discovered in southern Africa to be 34.1% for imports and 33.9% for exports in 2035. Labor demand shows an increase in 2025 and 2035 but a decline in 2030 in all sectors except agriculture which shows a resilience demand for labor up to 0.41%. The industrial output shows an increase in all periods with huge potential in the service industry with a 22.8% increase in 2035 followed by transportation with an 18.59% increase in 2035. Welfare also shows an increase through the periods with allocative efficiency producing the highest contribution to welfare with a total of 30% increase in all periods.