Trade liberalisation in Africa: a GTAP analysis of intra-African agricultural tariffs going to zero


Trade liberalisation in Africa: a GTAP analysis of intra-African agricultural tariffs going to zero

Trade liberalisation in Africa: a GTAP analysis of intra-African agricultural tariffs going to zero

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Working Papers ~ Hans Grinsted Jensen and Ron Sandrey

This paper uses the Global Trade Analysis Project (GTAP) computer database and takes the full suite of African agricultural sectors and African countries/regions in order to assess the benefits of intra-African tariff liberalisation in agricultural merchandise across the continent.

We start by examining recent intra-African agricultural trade flows by partners and commodities. We find that South Africa is the main trader and tobacco and sugar are the main commodities traded. However, it must be noted that this data is different from the 2011 data used by the GTAP and we caution about data accuracy in Africa in particular. Before undertaking our simulations we incorporate the EU sugar reforms into the data and assess the benefits of liberalisation as they are measured at the end year of 2025.

As is usually the case, South Africa is the leading beneficiary, with the economy at 2015 being some $1,840 million better off than it would otherwise have been. Kenya is the next largest African gainer, followed by Senegal and Côte d’Ivoire. Zimbabwe is the big loser, and outside of Africa all countries/regions show a loss. For South Africa, the largest contribution ($753 million) is from changes in the capital investment situation as investment is attracted into the country, and this is followed by improved terms of trade (as measured by the model).

The key agricultural sectors are vegetables, fruits and nuts; crops (other); meat of cattle, sheep, goats and horses; vegetable oils and fats; dairy products; refined sugar and associated products; food products not classified elsewhere; and beverages and tobacco. By country, the key ones were South Africa, Kenya, Tanzania, Uganda, Zimbabwe and Cote d’Ivoire. Overall, the largest impact is felt in the vegetable oils and fats sector, with Côte d’Ivoire and Kenya the African gainers.

The more interesting outcome, however, is in the sugar sector, where South African gains through better access into Kenya, which in turn makes significant gains as it reduced its sugar production significantly and transferred resources out of a sector which had been heavily protected but technically inefficient. This is a classic example of how regional integration can benefit a country through efficiency gains. Changes in other sectors are often dominated by South Africa.

We find that Kenya, Tanzania, Zimbabwe and the rest of Africa lose significant tariff revenues that in the real world has to be adjusted for in some way, and that Senegal, Kenya and Côte d’Ivoire all report an enhancement in labour market remuneration of around 0.2% or more. Overall, Zimbabwe is the big loser in Africa from this liberalisation, and only Tanzania has a similarly meaningful loss.

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