Insa Diop

The impact of the African continental Free Trade Agreement: A continentwide macroeconomic assessment and distributional analysis in Nigeria and Rwanda

Africa remains the least open continent in the world, with high trade restrictions for both intra- and extra-African partners. These restrictions include both tariff and nontariff measures, as well as high transportation costs due to poor infrastructure. However, previous studies have highlighted the crucial role of intra-regional trade in boosting national economies, promoting development, and enhancing food security by increasing the availability of food and stabilizing domestic markets. In particular, informal cross-border trade, which is pervasive in Africa, contributes to food security, although further research is needed on its magnitude. This research aims to enhance the understanding of current and future trends in Africa’s food systems, focusing on continental) trade and its impact on national economies and markets. Its objective is to assess the impact of the African Continental Free Trade Agreement (AfCFTA), the most ambitious regional trade agreement in Africa, on national economies and markets. The study uses state-of-the-art tools, includes informal cross-border trade of agricultural products, and considers realistic scenarios of trade liberalization. The study finds that the AfCFTA’s impact will be positive, although limited. Because most African countries are already trading under preferential regimes within regional economic communities (RECs), AfCFTA primarily affects trade flows outside of these communities. We observe traditional trade diversion effects from partners outside of Africa (up to −1.68 percent) and trade creation within the continent (up to 18.48 percent). Like the agreement’s macroeconomic impacts on gross domestic product growth and trade, its effects on poverty are also limited, with more positive effects in Rwanda than in Nigeria, the two countries analyzed in the microsimulation. A gender bias is present in the results: Female-headed house-holds benefit less from the agreement than male-headed households. Given the continent’s high trans-portation costs, significant gains can occur by reducing transport margins in addition to implementing the AfCFTA. In that case, the positive results are amplified, while the negative effects are dampened. Because AfCFTA implementation is still in early stages, more information is needed to fine-tune the results. First, it is important to examine the assumptions behind the selection of sensitive and excluded products. In the absence of official lists, which are not available for most countries, the final lists may differ from the selection made in this report, although the method we use has proven to be effective for past agreements. In addition, rules of origin and other nontariff measures will play a significant role in the future of the agreement, affecting the results and likely changing the distribution of gains and losses.

The political economy of food self sufficiency policies and food security in African countries

Food security deteriorated in Africa during the past decade, and the number of undernourished people has been increasing since 2010. The prevalence of undernourishment is now above pre-pandemic levelsat 9.7% compared with 7.2% in 2019, and Africa reports the highest level in the world. External factors, such as the Russia-Ukraine conflict, have contributed to this increase Projections show that almost 600 million people in Africa will be chronically undernourished in 2030. Moreover, Africa is not on track for SDG2, eradicate hunger by 2030. To achieve food security and reduce the number of undernourished people, many policymakers are advocating for food self-sufficiency. Relying on local production and promoting it through various policy measures, including restrictive trade policies, appears to many to be a natural solution. Yet, there has been a long-standing debate among analysts as to whether trade restrictions are a good strategy, especially in Africa, to achieve food security. The proponents of food self-sufficiency argue that trade liberalization increases food dependency (and import bills) and makes consumers vulnerable to external shocks in food availability, as well as exposing them to unhealthy foods. They advocate for stimulating local production with subsidies and trade restrictions. For the opponents, opening borders to international trade is a guarantee of cheap and easy access to diversified food products. Furthermore, by partially decoupling local markets from domestic shocks, trade can also help stabilize domestic food markets. This report contributes to that debate. Using both qualitative and quantitative analysis, we reach the conclusion that food self-sufficiency is neither a necessary nor a sufficient condition for food security. Food security is a multidimensional concept, and only two dimensions– availability and utilization—seem to be affected by food self-sufficiency in Africa. Also, while public support to agriculture can help achieve food self-sufficiency, its impact is not linear, and beyond a certain threshold, diminishing returns are observed. Overall, different approaches can achieve food security, and there is no “one-size-fits-all strategy.” International or regional trade can contribute to food security and stabilize domestic food markets, as regional production is usually less volatile than domestic supply.

The paradox of the supply elasticity of cotton in Mali