Quantifying tariff revenue losses from the African Continental Free Trade Area

Authors

Lawrence Edwards, Professor, Policy Research in International Services and Manufacturing (PRISM), University of Cape TownFollow
David Fadiran, Carnegie funded Research Fellow, Policy Research in International Services and Manufacturing (PRISM), University of Cape Town
Godfrey Kamutando, Carnegie funded Postdoctoral Fellow, Policy Research in International Services and Manufacturing (PRISM), University of Cape Town and DNA Economics
Matthew Stern, Director, DNA Economics

Corresponding Author

Lawrence Edwards

Document Type

Original Article

Subject Areas

African Trade

Keywords

African Continental Free Trade Area, customs revenue, tariffs

Abstract

This paper presents estimates of customs revenue losses for 45 African countries associated with the phase-down of tariffs under the African Continental Free Trade Area (AfCFTA). Unlike previous studies, the trade and revenue estimates are based on the Provisional Schedules of Tariff Concessions offered by each African state or regional economic community (REC) and therefore map closely with the expected tariff reductions from the AfCFTA. The results show that the removal of tariff barriers under the AfCFTA will be effective in raising and diversifying intra-Africa imports. The customs revenue losses after the phase-down of tariffs are likely to be minor, making up less than 0.2 percent of total government revenue for most African countries. Moreover, many African countries have insulated themselves from tariff revenue losses by excluding revenue-sensitive products from the agreement (Schedule C) and by back-loading tariff reductions on revenue-sensitive products (Schedule B). Not all countries are affected equally. The Congo, D.R., Cameroon, Republic of Congo and Zimbabwe are found to be vulnerable to large decreases in the dollar value of customs revenue and declines in the share of customs revenue in total government revenue. While absolutely revenue losses are low for smaller countries, including Malawi, Liberia, Central African Republic and Sierra Leone, these decreases, nevertheless, constitute high shares of total government revenue. Overall, the results indicate that for most African countries, revenue losses should not be a major obstacle towards the commencement of trade under the AfCFTA. These findings also serve as an important input into the design of the proposed AfCFTA Adjustment Fund, which is intended to support those countries that are most vulnerable to revenue shocks.

How to Cite This Article

Edwards, Lawrence; Fadiran, David; Kamutando, Godfrey; and Stern, Matthew (2024) "Quantifying tariff revenue losses from the African Continental Free Trade Area," Journal of African Trade: Vol. 11: Iss. 1, Article 2.

Receive Date

12/10/2023

Accept Date

23/05/2024

Publication Date

2024