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Trucks and commericial vehicles are unloaded at the Mercato market in Addis Ababa September 11, 2015. Addis Ababa's 'Mercato' - Italian for 'market' - is reputedly the biggest open-air market in Africa, lying in the west of the capital. Supermarkets have sprouted across the city as the metropolis has expanded with Ethiopia's booming economy, but Mercato remains a popular destination for shoppers seeking clothing, electronics and a huge range of other items. It has been around for as long as the city, which was founded at the end of the 19th century, but it took its current form, and its name, from the Italians who invaded Ethiopia in 1935. The Italian occupation ended in 1941. Picture taken September 11, 2015.    REUTERS/Tiksa Negeri - GF10000267939
Africa in focus

Figures of the week: With AfCFTA officially in force, Africa is now the largest free trade area

Today, May 30, 2019, the African Continental Free Trade Agreement officially comes into force. Now, according to a recent Brookings Africa Growth Initiative policy brief, under a successfully implemented AfCFTA, Africa will have a combined consumer and business spending of $6.7 trillion in 2030.

Author

Nirav Patel

Research Analyst - Global Economy and Development

Indeed, Africa is home to the world’s largest free trade area since the establishment of the World Trade Organization, with nearly every country on the continent joining (Figure 1).

Figure 1: Africa is now the world’s largest free trade area

Figure 1: Africa is now the world’s largest free trade area

Source: TRALAC. African Continental Free Trade Area (AfCFTA) Legal Texts and Policy Documents. Accessed: May 29, 2019.

This much-needed agreement and new free trade area are important achievements for the region’s economic development. Figure 2 puts into perspective the current gap between Africa’s intra-regional trade compared to other regions. In this light, the AfCFTA is critical because it could boost intra-Africa trade by 15 to 25 percent by 2040. This increased market access to other African countries has positive spillovers too, including improving the competitiveness of industries and enterprises, increasing opportunities for economies of scale improvements, and boosting the efficacy of resource allocation.

Figure 2: Africa’s intra-regional merchandise trade compared to other regional blocs

Figure 2: Africa’s intra-regional merchandise trade compared to other regional blocs

Source: Landry Signé and Colette van der Ven, Brookings Institution, “Keys to success for the AfCFTA negotiations,” 2019.

Importantly, not all the work to implement the AfCFTA is done: The brief outlines important steps yet to be completed for a successful agreement (Figure 3). The brief also recommends avoiding complicating the negotiations by adding further layers of complexity to established trade agreements, maximizing the benefits from the AfCFTA by making commitments in line with existing country specific trade advantages, and thinking beyond goods and exploiting the opportunities of the services industry.

Figure 3: The status of the AfCFTA protocols and annexes

The status of the AfCFTA protocols and annexes

Source: Landry Signé and Colette van der Ven, Brookings Institution, “Keys to success for the AfCFTA negotiations,” 2019.

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