African Free Trade Agreement Benefits

The creation of regional value chains, supported by the removal of trade barriers between African countries, can help build regional industrial capacity and increase the added value of African exports. Indeed, development models that depend on the export of primary raw materials have proven vulnerable due to price volatility. In 2018, more than 75% of external exports were exports of raw materials, according to Uneca. For example, cocoa accounts for a third of Côte d`Ivoire`s export earnings, while crude oil accounts for about 95% of Nigeria`s total exports. This makes these economies vulnerable to changes in international market prices and other exogenous shocks. In addition, it has a negative impact on employment, as extractive products are less labour-intensive than manufactured and processed goods. This dependence shows the need to restructure economies in order to achieve a more diversified and sustainable export base. The Manufacturers Association of Nigeria (MAN) has congratulated the Nigerian government for not signing the Framework Protocol, as the proposed agreement is vague with regard to market access and the application of rules of origin. Between 2012 and 2014, more than 75% of the continent`s exports were raw materials; Yet less than 40% of intra-African trade has been extractive during the same period, according to the African Union (AU), unders highlighting the need to boost intra-continent trade. The full text of this publication is available under www.technologyandpolicy.org/2015/06/11/the-benefits-of-africas-new-free-trade-area/#.VXn6e_lVhBc Israel Osorio Rodarte is an economist in the Trade and Regional Integration Department at the World Bank. He has more than 10 years of experience in international development, particularly in the areas of economic diversification, structural change and analysis of the distribution of trade and macroeconomic policies. Guillermo Arenas is an economist at the World Bank`s Trade and Regional Integration Unit (ETIRI). It covers several aspects of international economics and public policy, including trade policy, export competitiveness and impact assessment.

The widespread development of roads, ports, railways and special economic zones has made considerable progress. Thus, in recent years, massive investments have been directed in Djibouti in its transport and logistics networks, including three new ports, a railway line to Addis Ababa and the development of Africa`s largest free trade area. While Djibouti is a small country of only 900,000 people, it is strategically located and borders one of the busiest trade routes in the world and one of the continent`s most dynamic economies, namely Ethiopia. The agreement aims to make the regional bloc the largest free trade area in the world relative to the number of participating countries since the creation of the World Trade Organization in 1995. . . .