The International Monetary Fund (IMF) has urged African Goverment to collaborate in order to bring down trade barriers down to 1%.
The International body posited that the trade barriers among African Countries is counter-productive. IMF said this in its recent report titled, ‘Trade Integration in Africa: Unleashing the continent’s potential in a changing world.’
According to the organisation, African governments need to work collaboratively with all trade and development stakeholders and financial institutions to bring down trade barriers from six per cent to one per cent.
IMF has said that removing trade barriers and deepening trade integration under the African Continental Free Trade Area (AfCFTA), will increase trade flow among African countries by 53 per cent
The International body also noted that the removal of trade barriers among African countries will help lift 50 million people out of poverty. It stated that removing trade and non-trade tariff bottlenecks will lead to an increase in the real Gross Domestic Product (GDP) per capita of the median African country of more than 10 per cent.
IMF, in the report, also said the trade barrier removal would increase median goods trade between African countries by 53 per cent. The report added that it would also increase to the rest of the world by 15 per cent.
“It finds that removing trade barriers would increase the median goods trade between African countries by 53 percent and with the rest of the world by 15 percent; raise the median African country’s real per capita GDP by more than 10 percent; and help lift an estimated 30-50 million people out of extreme poverty.”
The Washington DC based body said successful implementation of the African Continental Free Trade Agreement could unlock important benefits in the continent.
“Successful implementation of the African Continental Free Trade Area could unlock important benefits including for jobs and income,” it added.
The report further read in part, “The paper investigates the role of trade policy and the broader trade-enabling environment in determining the bilateral goods trade flows and country-level trade in services. It sheds light on how the implementation of the trade area and supporting policies could boost trade and income as well as help African countries integrate into regional value chains.”
Speaking at launch and the discussion of the outcome of the research paper, Kristalina Georgieva, IMF Managing Director urged African governments to work collaboratively with all trade and development stakeholders and financial institutions to bring down trade barriers from six per cent to one per cent.
She said that: “Even more important is the removal of non-trade barriers” and urged that Africa used trade as an engine for integration in the global supply chains and make regional supply chains vibrant, and diversify its economy.
Georgieva said that when African countries traded amongst themselves, the more, they would deepen specialisation, which was a boost to productivity and diversification.
On her part, Dr Ngozi Okonjo-Iweala, Director-General, World Trade Organisation (WTO), said that recovering from the recent global economic challenges and chain supply vulnerabilities required strengthening of global trade.
“At this particular time, making the African Continental Free Trade Area agreement work is important so that we can strengthen our regional economic activity with each other,” she said.
She noted that the cost of the continent trading with the outsider cost the equivalent to a tariff of 350 per cent, which was one and half times larger than what you would find in developed countries, while intra-trade was equivalent to a 435 per cent tariff.
The WTO Director-General urged that the cost of trade was reduced to actualise the good implementation of the continental free trade area.