IMPACT OF TRADE REFORM IN AFRICAN BLOCS

Impact of Trade reform in African Blocs

--Dr.Debesh Bhowmik

Using a multi-country and multi-sector CGE model, we  can assess the economic effects of an African CFTA.The analysis is based mainly on quantitative trade barriers (tariffs). The modelling exercise envisages two scenarios for comparison purposes. The first one considers the impact of two large FTAs in Africa: the South-Eastern (S-E) FTA group comprising COMESA, SADC, EAC and IGAD,which reflects the tripartite initiative; and the North-West-Central (N-W-C) FTA group covering ECOWAS,CEN-SAD, ECCAS and UMA. The second scenario applies a continental approach, where all African countries fully liberalize trade in goods. All scenarios are assumed

to be fully implemented by 2017. However, as variables need time to adjust in the model, results are given for the year 2022. Comparisons are made between the scenarios considered and the baseline (i.e. situation without the implementation of any trade reforms) and expressed in per cent or absolute change, unless otherwise stated.

The prevailing conditions tend to indicate that high tariffs could potentially contribute to low intra-African trade. Within the two FTA groups—S-E and N-W-C—average protection rates are 7.7 per cent and 8.2 per cent. Intergroup average protection rates also show wide variations in imposed and faced protection: S-E exports to the N-W-C group face an average tariff of 16.5 per cent, and S-E group imposes 4.3 per cent tariff on N-W-C imports (table ). The formation of two regional FTAs (scenario 1) or the CFTA (scenario 2) would expand trade flows of African countries. Thus, establishing two large trading blocs—SE and N-W-C—would increase total African exports by US$ 17.6 billion (a 2.8 per cent increase from the baseline where FTAs are not set up) and the CFTA would add as much as US$ 25.3 billion (4.0 per cent) to the baseline, in 2022 .

PROTECTION AND TARIFF REVENUES BEFORE AND AFTER TRADE REFORM

		Before trade reform 2004			After regional FTAs2022		After CFTA,2022
Exporter	Importer	Trade million us$	Advalorem Equivalent Tariff%	Tariff revenue Million US$	Advalorem Equivalent Tariff%	Tariff revenue Million US$	Advalorem Equivalent Tariff%	Tariff revenue Million US$
S-EFTA GROUP	S-EFTA GROUP	8541	7.7	653	0	0	100	0
N-W-CFTA GROUP	N-W-CFTA GROUP	5251	8.2	430	0	0	100	0
S-EFTA GROUP	N-W-CFTA GROUP	2521	16.5	417	16.5	417	100	0
N-W-CFTA GROUP	S-EFTA GROUP	1827	4.3	78	4.3	78	100	0
AFRICA-TOTAL	AFRICA-TOTAL	18140	8.7	1578	2.7	495	0	0
S-EFTA GROUP	ROW	90162	3.6	3283	3.6	3283	3.6	3283
N-W-CFTA-GROUP	ROW	121409	1.7	2092	1.7	2092	1.7	2092
ROW	S-EFTA-GROUP	92709	10	9237	10	9237	10	9237
ROW	N-W-CFTA GROUP	96119	17.1	16415	17.1	16415	17.1	16415
ROW	ROW	7878099	3.2	251391	3.4	282913	3.4	282418
WORLD-TOTAL	WORLD-TOTAL	8066926	3.4	283996	3.4	283996	3.4	283996

Source-African Development Bank,2013