The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world, measured by the number of countries participating. The pact will connect 1.3 billion people across 55 countries with a combined GDP valued at $3.4 trillion. It has the potential to lift 30 million people out of extreme poverty by 2035. But achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures. The scope of the agreement is considerable. It will reduce tariffs among member countries and cover policy areas, such as trade facilitation and services, as well as regulatory measures, such as sanitary standards and technical barriers to trade. It will complement existing subregional economic communities and trade agreements by offering a continent-wide regulatory framework and by regulating policy areas—such as investment and intellectual property rights protection—that have not been covered in most subregional agreements. The African Continental Free Trade Area: Economic and

Distributional Effects quantifies the long-term implications of the agreement for growth, trade, poverty reduction, and employment. Its analysis goes beyond that in previous studies that have largely focused on tariff and nontariff barriers in goods—by including the effects of services and trade facilitation measures, as well as the distributional impacts on poverty, employment, and wages of female and male workers. It is designed to guide policy makers as they develop and implement the extensive range of reforms needed to realize the substantial rewards that the agreement offers. The analysis shows that full implementation of AfCFTA could boost income by 7 percent, or nearly $450 billion, in 2014 prices and market exchange rates. The agreement would also significantly expand African trade—particularly intraregional trade in manufacturing. In addition, it would increase employment opportunities and wages for unskilled workers and help close the wage gap between men and women.

Under the AfCFTA scenario, manufacturing exports would gain the most, 62 percent overall, with intra-Africa trade increasing by 110 percent and exports to the rest of the world rising by 46 percent. Smaller gains would be observed in agriculture—49 percent for intra-Africa trade and 10 percent for extra-Africa trade. The gains in the services trade are more modest—about 4 percent overall and 14 percent within Africa.

In fact, two out of every three jobs in Africa are in the group formed by (1) agriculture; (2) wholesale and retail trade, accommodation, and food services (trade); and (3) education, health, electricity, water, and public sector (public services). At the continental level, the manufacturing sector accounts for 12.6 percent of employment, of which 42 percent is in food processing.

The COVID-19 pandemic would affect nearly every sector of the economy, including agricultureband nontradable services, where most of the poorest workers in the region are employed.
The extractives sector (oil and mining) experiences the largest decline in production. In thebbaseline scenario, the level of production of this sector would be about 21.5 percent lower than in the no-COVID-19 scenario in 2020. Services and agricultural production also shrink considerably.
In the baseline scenario, the value added of the services sector would be 6.5 percent lower than in the no-COVID-19 scenario in 2020. Agricultural production would be 2.6 percent lower during the same period. The downfall in these sectors indicates that the crisis would severely hit the poorest and the most vulnerable; in particular, it would greatly affect women, who depend heavily on these activities in the region.