Emergence of Mega-Regional Trade Agreements and the Imperative for African Economies to Strategically Enhance Trade-Related South-South Cooperation

Abstract

Over the last fifteen years, the number of regional trade agreements have multiplied tremendously and largely as a result of slow progress made in the multilateral trade negotiations. The latest trend towards increased regionalism is the emergence of mega-regional trade agreements (MRTAs). Currently three major MRTAs (i.e. Trans-Atlantic Trade and Investment Partnership (TTIP), Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP)) are envisaged and expected to greatly modifying trading relationships worldwide. Whereas there are developing countries–essentially from Asia and Latin America– amongst the MRTA members, African nations are not part of any of the three rising trade configurations. Relying on a Computable General Equilibrium analysis this paper aims at not only assessing the trade impacts that MRTAs are expected to produce on African economies but most importantly exploring various trade arrangements that could help mitigating any possible negative effect on Africa which are expected to arise as a result of the formation of MRTAs. Findings from the analysis indicate that deepening continental trade integration–by establishing the Continental Free Trade Are (CFTA)– should be seen as a key priority for Africa; it would allow to offset harmful impacts MRTAs would cause on African economies and strongly stimulating intra-African trade. However, results suggest that Africa needs to also start looking beyond its own, and still relatively small, Continental market to expand its trade. Explicitly, African countries should not wait until the CFTA is running up to speed to strategically enhance trade-related South-South Cooperation as the analysis demonstrates that it could clearly offer evident opportunities to support Africa’s structural transformation agenda.