Wednesday , April 14 2021
Home / David Henderson /Africa Tries Free Trade

Africa Tries Free Trade

Summary:
With all the proposals for hundreds of billions of dollars in new government spending and new taxes in the United States in recent days, there hasn’t been much good economic news. Alexander C. R. Hammond, of the Institute of Economic Affairs (IEA) and of African Liberty, writes about it in “Africa Tries Free Trade,” Reason, April 2021. He writes: On January 1, the long-awaited African Continental Free Trade Area (AfCFTA) came into effect. Aside from the economic benefits that the arrangement will bring to the continent, Africa’s newfound support for free trade and liberalization marks a clear rejection of the socialist ideology that has tormented African politics for decades. In recent decades Africa has been the sick puppy of the six heavily populated

Topics:
David Henderson considers the following as important: , , , , , , , ,

This could be interesting, too:

Scott Sumner writes The future belongs to the Squamish

Pierre Lemieux writes Should Karl Marx Be Canceled?

David Henderson writes The Bad and Good Vaccine Passports

David Henderson writes Charles Ball’s Humanity

Africa Tries Free Trade

With all the proposals for hundreds of billions of dollars in new government spending and new taxes in the United States in recent days, there hasn’t been much good economic news.

Alexander C. R. Hammond, of the Institute of Economic Affairs (IEA) and of African Liberty, writes about it in “Africa Tries Free Trade,” Reason, April 2021. He writes:

On January 1, the long-awaited African Continental Free Trade Area (AfCFTA) came into effect. Aside from the economic benefits that the arrangement will bring to the continent, Africa’s newfound support for free trade and liberalization marks a clear rejection of the socialist ideology that has tormented African politics for decades.

In recent decades Africa has been the sick puppy of the six heavily populated continents. A glance at the Economic Freedom of the World map of economic freedom shows why. Over half of the 50+ African countries are in the least-economically-free quartile of the world’s 190+ countries. Not a single African country is in the top quartile. Hammond calls Nigeria, South Africa, and Egypt “regional economic powerhouses,” but of the three, only Nigeria is in the second-from-the-top quartile, South African is in the second-from-the-bottom quartile, and Egypt is in the bottom quartile.

One of the five measures of economic freedom is freedom to trade internationally. With AfCFTA, this will increase for many African countries.

This is a big, if slow, step toward freer trade.

Hammond writes:

Within 5–10 years, the AfCFTA will ensure that 90 percent of tariffs on goods traded between member states will be abolished. Within 13 years, 97 percent of all tariffs will be removed. By 2035, the World Bank has predicted, this enormous liberalization effort will boost Africa’s gross domestic product by $450 billion, increase wages for both skilled and unskilled workers by 10 percent, and lift more than 30 million people out of extreme poverty, defined as living on less than $1.90 per day. According to the same estimates, by 2035, the AfCFTA will see more than 68 million people rise out of moderate poverty, defined as living on $1.90–$5.50 per day. The “countries with the highest initial poverty rates,” the World Bank says, will see the “biggest improvements.”

Given Africa’s flirtation with socialism and protectionism from the 1960s through at least the 1980s, this is a welcome development.

For more on free trade agreements, see Douglas A. Irwin, “International Trade Agreements,” in David R. Henderson, ed., The Concise Encyclopedia of Economics.

UPDATE: Originally, I had claimed that NAFTA and USMCA are customs unions. A commenter below, Radford Neal, stated that I was incorrect. I consulted Doug Irwin, one of the top 5 or 10 trade economists in the United States, and it turns out that I was wrong and Radford Neal is right. So I made the appropriate change.

David Henderson
David R. Henderson (born November 21, 1950) is a Canadian-born American economist and author who moved to the United States in 1972 and became a U.S. citizen in 1986, serving on President Ronald Reagan's Council of Economic Advisers from 1982 to 1984.[1] A research fellow at Stanford University's Hoover Institution[2] since 1990, he took a teaching position with the Naval Postgraduate School in Monterey, California in 1984, and is now a full professor of economics.[3]

Leave a Reply

Your email address will not be published. Required fields are marked *