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How Africa Should Approach Trade and Industrialization

The African Continental Free Trade Area is a positive step, but it is no panacea. If Africa is to overcome barriers to structural transformation and industrialization, a broader strategy, based on developmental regionalism, will be needed.

CAPE TOWN – The African Continental Free Trade Area, launched on January 1, has been hailed as a “game changer.” By bringing together 55 countries – with a total population of 1.3 billion and a combined GDP of $3.4 trillion – in a single market, many believe the AfCFTA could fuel Africa’s recovery from the COVID-19 crisis, spur structural transformation, and drive rapid industrialization. The World Bank estimates that trade integration could raise Africa’s income by 7% by 2035, lifting 30 million people out of extreme poverty.

Those are lofty expectations. Unfortunately, lowering trade barriers alone will not enable Africa to fulfill them.

The AfCFTA will eliminate tariffs on 90% of goods and reduce non-tariff barriers. Liberalization, the logic goes, will lead to a sharp increase in continental trade, with production – especially of manufactured goods – rising to meet growing export demand. And higher exports would encourage longer-term industrialization, by bringing about more efficient allocation of resources and economies of scale.

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