by M Maliszewska · 2020 · Cited by 11 — Trade, GDP, and population of African continent as share of global total. 13. 4.1

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THE AFRICAN CONTINENTAL FREE TRADE AREAEconomic and Distributional EffectsTHE AFRICAN CONTINENTAL FREE TRADE AREA T˜˚˛ˆ˚˚˛˝ˆ˘ˆ˛ ˙ˆ˚˚˛˙˛ ˛ †“‘˛€˛˛ ˙˛˛ ˆ˛ ˙˛ˆ ˆ˛ ˛ ˆ˛ ˆ˛ ˜˚˛˝˜ −˛ ˛ ˛ ˛ ˛ ˙˛˛ ˙˛ˆˆ˚˛ ˆ˛ ˙˛˝˛”˛˛ €˛˚‡ ˛ ˛ ˛ 9781464815591 90000

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© 2020 International Bank for Reconstruction and Development / ˜e World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: Some rights reserved 1 2 3 4 23 22 21 20 ˜is work is a product of the sta˚ of ˜e World Bank with external contributions. ˜e ˛ndings, interpretations, and conclusions expressed in this work do not necessarily re˝ect the views of ˜e World Bank, its Board of Exec – utive Directors, or the governments they represent. ˜e World Bank does not guarantee the accuracy of the data included in this work. ˜e boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of ˜e World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of ˜e World Bank, all of which are speci˛cally reserved. Rights and Permissions ˜is work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creative Under the Creative Commons Attribution license, you are free to copy, distrib – ute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution ŠPlease cite the work as follows: World Bank. ˜e African Continental Free Trade Area: Eco nomic and Distributional E˚ects. Washington, DC: World Bank. doi:10.1596/978-1-4648-1559-1. License: Creative Commons Attribution CC BY 3.0 IGO Translations ŠIf you create a translation of this work, please add the following disclaimer along with the attri -bution: ˜is translation was not created by ˜e World Bank and should not be considered an o˛cial World Bank translation. ˜e World Bank shall not be liable for any content or error in this translation. Adaptations ŠIf you create an adaptation of this work, please add the following disclaimer along with the attribu -tion: ˜is is an adaptation of an original work by ˜e World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by ˜e World Bank. ˜ird-party content Š˜e World Bank does not necessarily own each component of the content contained within the work. ˜e World Bank therefore does not warrant that the use of any third-party-owned individual com – ponent or part contained in the work will not infringe on the rights of those third parties. ˜e risk of claims resulting from such infringement rests solely with you. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, ˛gures, or images. All queries on rights and licenses should be addressed to World Bank Publications, ˜e World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: ISBN (paper): 978-1-4648-1559-1 ISBN (electronic): 978-1-4648-1560-7 DOI: 10.1596/978-1-4648-1559-1 Cover illustration: Guillermo Varela and Estudio Prado Cover and interior design: Kirsten Dennison Library of Congress Control Number: 2020942433.

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CONTENTSVI 5 MACROECONOMIC IMPACTS OF Af CFTA 41Real income implications 43Trade implications 46Output implications 52Government revenue implications 54Notes 55References 55 6 DISTRIBUTIONAL EFFECTS OF AfCFTA ON POVERTY AND EMPLOYMENT 57Effects on poverty 57Effects on employment 59Notes 67References 67 7 SENSITIVITY ANALY SIS 69 8 CAVEA TS 71Notes 72Appendix A: Data Preparation on Disaggregated Labor Volumes and Wages 73Appendix B: Summary Description of the GIDD Model 81Appendix C: Deep Commitments in African Regional Economic Communities, Legal Texts 87Appendix D: Literature Review on the Impacts of AfCFT A 93Appendix E: Recent W orld Bank Research on Regional Integration in Africa 97Appendix F: Data Sources 101Appendix G: Summary Description of the ENVISA GE Model 107Appendix H: Statutory Tariff Data Availability by Country 119Appendix I: Maximizing the Potential Bene˜ts of the African Continental Free Trade Area 121Appendix J: Short-Term Revenue Implications of T ariff Liberalization under AfCFTA 127Boxes4.1 The importance of small-scale cross-border trade in Africa 275.1 The impact of CO VID-19 on economic activity in Sub-Saharan Africa 426.1 Wages and employment under AfCFTA in Côte d™Ivoire 64I.1 Maximizing the potential bene˜ts of a free trade agreement 123I.2 Available World Bank Group support to maximize the potential bene˜ts of AfCFTA 125Figures O.1 Real income gains, by country and policy reform 4O.2 Evolution of extreme and moderate poverty under baseline and AfCFT A implementation, 2015Œ35 61.1 AfCFTA member countries , by status of rati˜cation 12

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CONTENTSVII1.2 Trade, GDP, and population of African continent as share of global total 134.1 Female employment intensity in disaggregated labor database , AfCFTA countries 284.2 Projected employment by gender and skill: North Africa and Sub-Saharan Africa, 2020 and 2035 294.3 Share of imports and average tariffs imposed on AfCFT A imports 324.4 Trade-weighted tariffs imposed on AfCFTA imports by country, 2020 and 2035 334.5 Trade-weighted tariffs imposed on AfCFTA imports by sector, 2020 and 2035 344.6 Trade-weighted nontariff barriers imposed on AfCFTA imports by country, 2020 and 2035 354.7 Trade-weighted nontariff barriers imposed on AfCFTA imports by sector, 2020 and 2035 365.1 Equivalent v ariation, percentage relative to baseline, 2035 445.2 Total exports from Africa, deviation from baseline, 2035 505.3 Total imports from Africa, deviation from baseline, 2035 515.4 Output difference relative to baseline, 2035 526.1 Evolution of extreme and moderate poverty under baseline and AfCFT A implementation,˚ 2015Œ35 586.2 AfCFTA employment change with respect to baseline , total and female 616.3 Effects of AfCFT A on wages by skill 626.4 Effects of AfCFT A on wages by gender 63B6.1.1 Côte d™Ivoire: Labor composition by skill and gender: AfCFTA, 2035 64B6.1.2 Côte d™Ivoire: Labor volumes by skill and gender , 2020 and 2035 65B6.1.3 Côte d™Ivoire: Effects of AfCFTA on wages by industry 66B6.1.4 Côte d™Ivoire: Effects of AfCFTA on wages by skill and gender 66A.1 Procedure for establishing wage and employment volume 74G.1 Structure of value added in the production function 109J.1 Taxes on international trade as percentage of government revenue s 128J.2 Share of total tax revenues from imports 129J.3 Average annual change in tariff revenue (average annual percent change) 132J.4 Average annual change in tax revenue (percent of tax revenue) 132J.5 Ratio of statutory to customs import values 136J.6 Imports from AfCFT A countries, statutory and customs 136J.7 Effective tariff rates for AfCFT A countries (weighted average) 137Tables O.1 Overview of policy areas covered in Africa™ s subregional PTAs and AfCFTA 22.1 Overview of policy areas covered in Africa™ s subregional PTAs and AfCFTA 173.1 Summary of key ˜ndings from literature review 214.1 Employment and wages in Africa, initial simulation parameters 304.2 Trade facilitation implementation and iceberg trade costs reductions 385.1 Percentage deviations from baseline of equiv alent variation, exports, and imports,˚2035 455.2 Exports under baseline scenario and AfCFT A 475.3 Imports under baseline scenario and AfCFT A 485.4 Impacts of AfCFT A on trade of member countries, deviation from baseline, 2035 49

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CONTENTSVIII7.1 Real income gains under three scenarios 70A.1 Household surveys used for the construction of wage bill data 75F.1 AVEs of J afari and Tarr service sectors 103F.2 Mapping of Jafari and Tarr service sectors with model™s service sectors 104G.1 Regional dimension 111G.2 Sector dimension 112G.3 GTAP regional concordance 114G.4 GTAP sector concordance 116H.1 Availability of tariff data by country 119J.1 Statutory and collected tariff rates 129J.2 Tariff revenue changes under AfCFTA scenario 130J.3 Tax revenue changes under AfCFTA liberalization scenario 131J.4 Simulation results based on statutory data 133J.5 Import and tariff revenue impacts estimated using customs data and statutory data 135

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IXForeword ˜e African Continental Free Trade Area (AfCFTA) provides a unique opportunity for˙countries in the region to competitively integrate into the global economy, reduce poverty, and promote inclusion. Although Africa has made substantial progress in recent decades in raising living standards and reducing poverty, increasing trade can provide the impetus for reforms that boost productivity and job creation, and thereby further reduce poverty. AfCFTA can provide this spark. By 2035, we estimate that implementing the agree -ment would contribute to liˆing an additional 30 million people from extreme poverty and 68 million people from moderate poverty. Real income gains from full imple – mentation of the agreement could increase by 7 percent, or nearly US$450 billion. As African economies struggle to manage the consequences of COVID-19, AfCFTA can provide an anchor for long-term reform and integration. AfCFTA would signi˛cantly boost African trade, particularly intraregional trade in manufacturing. By 2035, the volume of total exports would increase by almost 29˙ per cent relative to business as usual. Intracontinental exports would increase by more than 81 percent, while exports to non-African countries would rise by 19 percent. ˜is would create new opportunities for African manufacturers and workers. ˜ese gains would come, in part, from decreased tari˚s, which remain stubbornly high in many countries in the region. Even greater gains would come from lowering trade costs by reducing nontari˚ barriers and improving hard and soˆ infrastructure at the bordersŠso-called trade facilitation measures. ˜ese measures would reduce red tape, lower compliance costs for traders, and ultimately make it easier for African businesses to integrate into global supply chains. ˜ese reforms would be diˇcult, but the rewards would be substantial. Freer intra-African trade would help women by lowering the gender wage gap, and it would help all workers by increasing decent employment opportunities. A growing manufacturing sector would provide new job opportunities, especially for women. ˜e report estimates that compared with a business-as-usual scenario, implementing AfCFTA would lead to an almost 10 percent increase in wages, with larger gains for unskilled workers and women.

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