African economic integration and trade

Abstract

Economic integration ranks as one of the leading development strategies in Africa. The newly created African Continental Free Trade Area (AfCFTA) and the proposed Tripartite Free Trade Area (TFTA) linking three major regional blocks offer a new impetus to studying trade policy effects. Using a structural gravity model of bilateral manufacturing trade between the African Union member states and all countries in the world, the trade effects of African economic integration agreements (EIAs) are assessed. The findings suggest that economic integration, in aggregate, enhances total African exports. Disaggregating the effects by type of agreement and by subgroups of countries, free trade agreements (FTAs) and partial scope agreements (PSAs) are found to increase extra-African exports, but have no effects on intra-African exports. A positive and significant effect on intra-African exports is introduced when the FTA dummy is combined with AfCFTA in contrast to a neutral effect stemming from the joint FTA-TFTA dummy. The findings suggest that a continent-wide FTA yields greater benefits when compared with integrating the subregions.