Potentials of the African Continental Free Trade Area: A combined partial and general equilibrium modeling assessment for Central Africa

Abstract

This study evaluates the potential impacts of the implementation of the African Continental Free Trade Area's (AfCFTA) tariff modalities on tax revenues, industrial production, trade flows, welfare and consumption for seven central African countries. Drawing on data from member states and the Global Trade Analysis Project (GTAP) database, two methodologies are applied in the study. Computable general equilibrium (CGE) and partial equilibrium (PE) are used to evaluate the long-and short-term effects respectively. The results show that the reduction in tariff barriers provided by the AfCFTA will lead to a decrease in tariff revenue in some Central African countries in the short term. However, in the long term, these losses remain largely offset by the socio-economic benefit issues generated by the implementation of the agreement, particularly in terms of economic growth and the well-being of the region's population. To cub these revenue deficits, this paper encourages Central African countries to ratify and implement the AfCFTA. Also, they should diligently adopt all necessary reforms that could help reap the potential long-term gains. | INTRODUCTIONOn 21 March 2018 the legal act creating the African Continental Free Trade Area (AfCFTA) which has become a priority for the continent's union was signed in Kigali, Rwanda by African countries.

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