Intra-Regional Economic Integration

Abstract

Trade integration is a mechanism for fostering prosperity. African countries have created several regional economic integration arrangements. The African Continental Free Trade Area (AfCFTA) is the most ambitious initiative in this vein. The AfCFTA also seeks to build on the integration already achieved by existing REAs. The AfCFTA has the potential to increase income and welfare significantly; however, these benefits are unequally distributed for member countries. Maximizing potential welfare and income gains by member countries requires substantial and strategic reduction of non-tariff barriers. Also, improved quality of trade logistics and the provision of infrastructural deficits are critical. Net impact of the AfCFTA on tax revenues depends on the combined effect of four channels; direct tax revenue reduction, trade diversion, higher GDP, and increased consumption. Thus, ensuring a strong governance framework of the AfCFTA, is germane to reduce trade policy uncertainty.