intra-African Trade Research Articles

The Impact of Institutional Quality on Intra-African Trade: Evidence from sub-Saharan African Countries

This paper examines the effects of governance quality on intra-African trade in primary and manufactured goods. We use a gravity model with panel data from 1996 to 2019 in 48 sub-Saharan African countries and the World Bank’s World Governance Indicators (WGI). Our results suggest that average institutional quality has significantly positive effects on exports of manufactured and primary products with more pronounced impacts in the manufacturing sector. The analysis of the disaggregated indices shows positive and significant effects of all six indices on exports of manufactured and primary goods. Furthermore, we find that better institutions have a stronger impact on the probability of trade in manufacturing goods. Several sensitivity tests confirm the robustness of our results. To establish a promising African continental free trade area (AfCFTA), sub-Saharan African countries need to devise a strong institutional framework to facilitate transparency and security to boost intra-African trade.

African continental free trade area: Is there a trade potential for Côte d’Ivoire?

Many studies present the African Continental Free Trade Area (AfCFTA) as one of Africa’s most new trade issues. Previous assessments show that this AfCFTA will catalyze Intra African trade. The cum...

Overcoming the Challenges in Documentary Procedures and Transparency in the Implementation of Effective Rules of Origin for the African Continental Free Trade Area

The United Nations Conference on Trade and Development (‘UNCTAD’) recently published a report on Economic Development in Africa. The purpose of this article is to consider the part of the report titled ‘Made in Africa: Rules of Origin for Enhanced intra-African Trade’, one of the main findings and make policy recommendations thereof. Preferential rules of origin are applied to goods by members of a contractual or autonomous trade regime in order to determine whether or not they qualify for preferential treatment and therefore beyond the scope of application of the general MFN principle. The ultimate test of effectiveness of rules of origin, therefore, depends on the so-called preference margin. The preference margin is the difference between the applicable most favoured nation tariff and the preferential tariff and the costs of compliance with the rules of origin that apply in terms of the specific free trade or preferential trade agreement area. However, Africa faces unique challenges in this regard. These are geographical, political and technological in nature. This article aims to contribute to the discussion of how, through creative and innovative use of rules of origin, Africa may begin to overcome these challenges to the implementation of the African Continental Free Trade Area (AfCFTA). Rules of Origin, AfCFTA, Africa, Development, Regional Value Chains

The African Continental Free Trade Area Agreement: Aiding Intra-African trade towards deeper continental integration

The signing of the African Continental Free Trade Area Agreement (AfCFTA) reflected many years of hard work by the continent’s forefathers who include Kwame Nkrumah of Ghana, Julius Nyerere of Tanzania, Jomo Kenyatta of Kenya, Kenneth Kaunda of Zambia, Patrice Lumumba of Congo, Robert Mugabe of Zimbabwe and Frantz Fanon of Algeria, but to mention a few. The AfCFTA also depicts the novel work of the Organisation of African Unity (OAU), and later the African Union (AU), towards shaping a vision of continental integration, embedded in the vision of the African Economic Community (AEC), a by-product of the Abuja Treaty. Vision 2030 and the long-term continental vision of Agenda 2063: ‘The Africa We Want’ are also designed to contribute towards deeper and successful continental integration. However, by now the excitement over the AfCFTA signing has subsided. For each member state, the reality of being an AfCFTA party has started to sink in. Some member states have expressed concern and fear over problems such as opening their markets and accepting continental competition, allowing free movement of persons and trade across borders. Others find it too expensive to deal with the internal political fallout from their populace’s scepticism regarding the agreement’s effects on jobs (due to increased competition) and livelihoods. This article examines the AfCFTA to determine its impact and related advantages in respect of continental trade policies. It discusses the advantages of the AfCFTA and its potential challenges.

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

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.

Intra-African Trade in the Context of Globalization: A Re-examination of the ECOWAS Protocol on Trade Liberalization

The Protocol on Trade Liberalization is one of the first five protocols that were originally annexed to the Treaty of ECOWAS. It was signed at Lome, Togo on November 5th 1976. To give further impetus to the Protocol, the Authority of Heads of States and Government at a summit held in Dakar, Senegal from July 25-27, 1992 adopted some modifications of the Trade Liberalization Scheme. With the sweeping torrent of Globalization, ECOWAS member-states have found themselves in a dilemma. The dilemma arises from the fact that pursuing the goals of integration and at the same time embracing the gains of globalization creates a paradox. The study investigates whether ECOWAS Protocol on Trade Liberalization enhanced intra-African trade more than trade with third countries with the emergence of globalization. It is anchored on the neo-functionalist theory and made use of documentary method of data collection. The study contends that intra-African trade within ECOWAS has declined with globalization while trade with third countries has increased. The implication is that the stimulation and synergy of economies of member-states which Trade Liberalization is supposed to engender has been weakened. The study recommends a further revision of the provisions of the Trade Liberalization scheme by ECOWAS member states to align with the emerging realities of globalization. It further recommends the improvement of transportation infrastructure in the sub-region and mustering of political will by the leaders to implement their resolutions, among others.

‘COVID-19/Food Insecurity Syndemic’: Navigating the Realities of Food Security Imperatives of Sustainable Development Goals in Africa

Abstract The current coronavirus disease 2019 (COVID-19) pandemic is impacting on food systems and has exposed the poor state of food security and lack of food system infrastructures. Consequently, sub-Saharan Africa countries face the compounded risk of COVID-19 and hunger. The syndemic will pose serious challenges for achieving food security imperatives of the Sustainable Development Goals (SDGs) by 2030. This article discusses the dynamics of food security imperatives brought about by COVID-19 pandemic. It examines the mitigating efforts of sub-Saharan African governments in addressing COVID-19 and how this effort impacts the attainment of SDGs One, Two, Three and 12. It finds that while the pandemic provides an opportunity for governments to strengthen their commitments, it raises questions on the ambitious global efforts to deliver SDGs by 2030. It recommends that African governments need to maximize intra-African trade with investments in agricultural biotechnological infrastructure in order to close the gap between the targets and the realities, in the efforts towards achieving the SDGs.

Liberalizing Regional Trade Regimes Through AfCFTA: Challenges and Opportunities

AbstractThe ratification of the African Continental Free Trade Agreement (AfCFTA) marked a landmark event in the quest to achieve intra-African free trade. AfCFTA is poised to represent the largest free trade area outside the World Trade Organization. Although AfCFTA aspires to liberalize intra-African trade in goods and services to foster socio-economic development, there are concerns that capacity constraints may stultify the underlying goals. AfCFTA is expected to build on the considerable successes already achieved by Africa's regional economic communities. However, it fails to clarify how the overlapping regimes will be reconciled and harmonized. Nevertheless, the agreement is laudable for its quest to facilitate intra-African trade, foster regional value chains that can facilitate integration into the global economy, and energize industrialization, competitiveness and innovation. This article examines the celebrated AfCFTA to understand its potential amid local realities and the possible implications for the multilateral trading system.

The Belt and Road Initiative and Africa’s regional infrastructure development: implications and lessons

The Belt and Road Initiative (BRI) is outward-looking, being part of China’s ‘Going Out Strategy’ while Africa’s current regional infrastructure programmes are primarily inward-looking as they seek to deepen the continent’s regional integration. This paper argues, drawing from international cooperation theory, that China and Africa can cooperate in implementing BRI despite the apparent conflict in their infrastructure connectivity aspirations. They can coordinate their policies for the purpose of mutual benefit through enhanced connectivity and trade between Africa and China on the one hand and deepened African regional integration and intra-African trade on the other. This could be achieved by using Africa’s regional programmes as building blocks for cooperation in BRI. This paper also highlights lessons from BRI that Africa could use to fast-track implementation of its own initiatives including the mobilisation of stakeholders by political leaders, creation of dedicated institutions and funds, and building of local capacity in the infrastructure sector.

Assessing the Potential Impact of the African Continental Free Trade Area on Least Developed Countries: A Case Study of Malawi

The agreement establishing the African Continental Free Trade Area (AfCFTA) has been touted as an important pillar and driver for economic growth, industrialisation and sustainable development in Africa. Among its expected key benefits is the promise to increase the level of intra-African trade by eliminating import duties and other tariffs among member countries, in addition to general trade expansion. However, unlocking the AfCFTA’s full potential will largely depend on how the continent is able to restructure its exports, which are poorly diversified and remain highly dependent on primary commodities. Moreover, intra-African trade remains dominated by a few big regional players. To this end, there have been growing fears that the AfCFTA’s anticipated gains, and associated losses, are likely to accrue unevenly. Countries with large productive capacities in manufacturing or stronger supply capacities in non-manufactured products may reap more rewards than weaker landlocked and smaller economies, particularly the least developed countries (LDCs). These concerns have led to a number of countries, including Malawi, pushing for special and differential treatment in the implementation of the AfCFTA’s provisions on the elimination of import duties and other tariffs. Many LDCs, including Malawi, rely heavily on international trade taxes as a source of government revenue. There is a legitimate concern that such economies are likely to be left grappling with the negative effects of tariff cuts in the form of substantial fiscal revenue loss. This article explores the potential impact of the AfCFTA on LDCs, with a focus on Malawi. It reviews Malawi’s intra-African trade position in terms of its export potential and examines the likely impact that the AfCFTA agreement would have on the country’s fiscal revenues.

Nigerian Transnational Companies and Economic Development across Sub-Saharan Africa

In examining how the private sector could be gainfully engaged in economic development of African countries, issues such as corporate social responsibility (CSR) framework, multinational enterprise and livelihood option suffice. These are some key elements of a credible policy package that will promote private sector development and boost intra-African trade. Another vital area that needs to be creatively addressed in the capacitation of African enterprises is access to financial resources, which studies suggest is one of the major constraints to private sector development in Africa. As one of the largest economies in Africa, Nigeria has played a leading role in private sector engagement in economic development. A number of Nigerian transnational companies have extended their operations and maintained active presence in some other Africa countries, particularly Sub-Saharan African countries. In addition to their primary business, they have invested heavily in some human development sectors such as health, workforce development and infrastructure—initiatives which not only benefitted them, but create richer economies and enhance human capital development of the host countries. The study is mainly focused on the capital investments of two Nigerian Transnational Companies— Globalcom, a Telecommunication company and the Dangote Group—a manufacturing and trading firm. The study uses their operations and investments across Sub-Saharan Africa as case studies of Nigeria’s private firms’ contribution to economic development in Africa. The study will look into published statistical records and other materials to generate information on trade and foreign investment within the study area. Keywords : Transnational Companies, Economic Development, Africa DOI: 10.7176/IAGS/83-05 Publication date: June 30 th 2020

Intra-African Trade, Macroeconomic Conditions and Competitiveness in Africa

Abstract More than ever before, trade and regional integration have become two important arguments in the development equation of most modern states and, probably, explains the current rise in regional integration around the world. However, regional integration will not produce optimal benefits in the absence of favourable macroeconomic conditions and substantial internal trade among the integrating members. This paper employs descriptive statistics and econometric techniques to analyze the competitiveness of the continent by studying the impact of relevant intra-African trade indices on the competitiveness of Africa, based on a panel dataset spanning 2000 to 2016. The results show considerable variations in both inter- and intra-regional trade performance and competitiveness among African regional groupings and nations. Intra-African trade, especially in exports, over the study period, was consistently low. While the South Africa region had the highest intra-regional trade in imports, East Africa region had the highest level of inter-regional imports. West Africa, with Nigeria’s dominance, had the highest level of intra-regional exports, while South Africa had the highest inter-regional exports at country level. For the Regional Economic Communities (RECs), SADC reported the highest intra-African import trades, while SACU reported the highest inter-regional imports. SADC has the highest intra-African exports, while COMESA has the highest inter-regional exports. African Competitiveness Index (ACI) ranking puts the East Africa Region on top, and South Africa as the most competitive African economy. Using panel data covering 2012 to 2016 for 20 African economies, ACI was regressed on a 7-variable model, including intra-regional imports and exports, inflation rate, nominal exchange rate, gross capital formation, and the growth rate of GDP. The results were mixed but plausible. All the variables were correctly signed and significant in different regions, reflecting the huge structural and policy disparities among the regions. Continued transformation of African economies with emphasis on both physical and financial infrastructure, and human capital development will enhance intra-African trade and regional competitiveness.

Impact of Infrastructure on Trade: An Empirical Assessment by the Gravity Model in ECOWAS

Increased trade is nowadays seen as one of the channels that can boost economic growth in ECOWAS. However, we are witnessing a relative decline in intra-ECOWAS trade. This relative weakness in intra-African trade is said to be due to trade barriers and obstacles. Notably, the quality of infrastructure and transport costs that reduce trade flows in Africa. In this paper, we have tried to understand the impact of infrastructure quality on trade in ECOWAS countries by referring to the gravity model. Estimates show that bilateral trade increases as the quality of infrastructure improves. Also, the results show that the value of bilateral trade increases with the size of the economies. Overall, geographical and structural factors have a decisive impact on intra-regional trade.

South Africa and Nigeria in intra-African trade

South Africa and Nigeria in intra-African trade

An overview of the obstacles to the African economic integration process in view of the African continental free trade area

ABSTRACTAfrican governments signed the largest trade agreement, the Continental Free Trade Agreement in 2018 in order to boost intra-trade thereby improving economic welfare of African citizens. This paper provides an overview of the obstacles to the African economic integration process experienced in the past and the possible solutions. The paper discussed the theoretical postulations and empirically reviewed some African experiences. Some theoretical aspects included not only the traditional international trade theories but also other non-orthodox theories such as organizational theories which include intergovernmentalism, neofunctionalism and neorealism. Empirically, Africa’s economic integration challenges range from economic such as polarization of benefits towards larger economies at the expense of smaller economies, an unclear model of distributing welfare gains (or losses), traditional trade models which do not stimulate intra-African trade, several non-tariff and institutional barriers among other factors. Other challenges include lack of political will to implement signed trade contracts and political instability in some economic regions which results in small and fragmented markets. The paper also discussed the legal challenges such as lack of standardization on products and procedures which result in subjectivity in interpretation of trade instruments. The paper made recommendations to each identified challenge in order to make the CFTA more effective.

African Continental Free Trade Area Agreement: The Euphoria, Pitfalls and Prospects

The ratification of African Continental Free Trade Agreement (AfCFTA) climaxes African Union effort to foster intra-African Trade. AfCFTA is expected to foster socio-economic development and industrial competitiveness in Africa. AfCFTA will engender massive liberalization of intra-African trade in goods and services, making it easier for business to trade across borders and reduce the costs of trade. But there are fears that a successful implementation of the agreement in a continent that lacks capacity, industrial competitiveness and infrastructure will be fraught with challenges. The article examines the dynamics, and contends that the success of AfCFTA will be significantly dependent on a number of factors, namely the level of commitment exhibited by the Member States, availability of technical capacity and infrastructure, transparency and accountability of processes, and the manner infractions and complaints are addressed or redressed.

Regional Integration: Do Intra-African Trade and Migration Improve Income in Africa?

Regional integration in Africa is a subject of great interest, but its impact on income has not been studied sufficiently. Using cross-sectional and panel estimations, this article examines the impact of African integration on real per capita income in Africa. Accordingly, we consider intra-African trade and migration flows as quantitative measures reflecting the intensity of regional integration. To address the endogeneity concerns, we use a gravity-based, two-stage least-squares strategy. Our results show that, from a long-term perspective, African integration has not been strong enough to generate a positive, significant, and robust impact on real per capita income in Africa. However, it does appear to be significantly income-enhancing in the short and medium terms but only through intercountry migration. These results are robust to a wide range of specifications.

Reimagining the Framework for Resolving Intra-African Commercial Disputes in the Context of the African Continental Free Trade Area Agreement

AbstractThis article examines the effectiveness of the framework for the resolution of intra-African cross-border commercial disputes, arising from the projected increase in intra-African trade in goods, services, and investments under the African Continental Free Trade Area. It examines the peculiar nature of intra-African trade and of the participating entities to provide the context to discuss the three major processes adopted in commercial dispute resolution (litigation, mediation, and arbitration) in Africa. It then argues for the promotion of arbitration as the dispute resolution process of choice for such disputes. It reimagined the framework for arbitration at the continental level and made two proposals targeted at the greater efficiency of the process: the designation of Regional Arbitration Centres across the African Union's eight recognized Regional Economic Communities, to administer such references; and the establishment of an African Commercial Court as a one-stop court for the enforcement or annulment of the final award.

How to Boost the Impact of Intra-African Trade on Income in Africa?

Regional trade integration is viewed by both international institutions and local political leaders as a key tool for promoting inclusive growth and reducing poverty in Africa. However, several structural weaknesses in African economies undermine trade integration and inhibit its income-enhancing effect. This paper aims to study the conditional effects of intra-African trade openness on the standard of living in Africa by highlighting the influence of these structural weaknesses. Our results clearly show that the impact of intra-regional trade on income depends on the diversification of African economies, their financial development and the quality of their transport and telecommunications infrastructures. Specifically, we find that a substantial improvement in these fundamentals would make intra-African trade significantly income-enhancing.

International Economic Law In Africa: Is the African Continental Free Trade Area a Viable Project?

Africa’s share of global trade has declined over time in spite of efforts aimed at increased participation in international trade. With the proliferation of regional economic communities on the continent, there would have been the expectation that, at least, intra-regional and intra-African trade would steadily increase and contribute significantly to Africa’s contribution to international trade. However, due in part to export of largely unrefined natural minerals, a predominant agrarian economy, and a lack of diversified exports intra-African trade has continued to be quite sluggish. The signing of the African Continental Free Trade Area thus holds a lot of potential for shoring up intra-African trade and economic performance. However, while rules aimed at breaking down the barriers to intra-African trade are steps in the right direction, they are not self-enforcing. The institutional mechanisms established to ensure compliance with the rules on trade liberalization on the continent are of vital importance. If the established institutions fail, the prospect of a viable African Continental Free Trade Area will become a mirage. This article critiques some of the provisions on legislative and judicial decision-making in the Agreement Establishing the African Continental Free Trade Area and suggests ways of enhancing the performance of the established legislative and judicial systems. It also conducts a brief analysis of the viability of the rules of origin regime in the African Continental Free Trade Area.