Abstract

Africa has traditionally recorded dismal levels of intra-African trade. The African Continental Free Trade Area (AfCFTA) and the action plan for Boosting Intra-Africa Trade (BIAT) is a strategy to change this pattern. The effect of this on sub regional as well as countries share of trade in total intra-African trade is, however, an empirical issue that deserves careful investigation. This paper estimates the impact of the AfCFTA on intra-African trade to assess regional and country distributional effects. The set up is a computable general equilibrium (CGE) model with a calibrated global trade analysis project (GTAP) data on Africa. Our results show that there are significant regional gains in intra-African trade, especially from a product point of view where the effects on regional exports are large. Specifically, we document changes in the intra-regional trade landscape of at least 30% in mostly the value-added non-traditional sectors such as textiles and apparel, light manufacturing, processed food and heavy manufacturing. Our work further establishes strong value chain and diversification effects across regions. There is growth in export and import volumes and generally terms of trade gains for participating countries. However, a few countries (four) suffer adverse terms of trade changes as well as direction of trade (intra-African trade) losses. We discuss a number of policy choices for maximising the benefits of the AfCFTA and mitigating the adverse effects.