Trade within Regional Trade Agreements more resilient that in regions without FTAs, except in Africa

A new research paper from UNCTAD reveals that trade within Regional Trade Agreements (RTAs) has been more resilient during the COVID-19 crisis, as its decline has been less pronounced than in regional areas where no free trade agreement (FTA) is in place.

At global level, during the pandemic, intra-RTAs trade (i.e. trade between countries member of an RTA) has declined at a slower pace than trade between countries having no preferential trade agreements (by about 5.6 percentage points less). The reason is due to better trade conditions and lower trade costs characterising RTAs (e.g. lower tariffs, cooperation in trade regulatory frameworks and on investment regimes), with respect to trade outside RTAs.

The trade resilience effect has been higher among countries part of deep agreements (agreements going much further than simply removing customs tariffs between member States, covering other regulatory and policy areas, such as services, intellectual property rights protection, investment, competition, etc.). Conversely, trade operations carried out within the framework of shallow trade agreements (agreements solely focused on the reduction of import tariffs and export taxes) has shown a lower resilience.

Surprisingly, and in countertendency with the rest of the world, African RTAs seem to have not determined any significant resilience in trade volumes. This is confirmed by a recent bulletin issued by COMESA, one of the biggest African RTAs, that calculates that the value of Intra-COMESA total exports declined by 11% from 2019 to 2020 (from US$ 10.9 billion to US$ 9.7 billion).

Although the UNCTAD paper does not investigate about the possible reasons for this lack of resilience of African RTAs, a possible explanation is that COVID-19 has determined a rise in protectionism at African borders with precautionary and Covid-mitigation measures that have completely annulated the trade facilitation results achieved in the latest years, despite the many guidelines on movement of goods issued by all African Regional Economic Communities (RECs) to avoid congestion at borders during the crisis. This fact seems to be witnessed by the long queues of trucks observed during the last two years also in those African RECs with a higher level of integration, such as EAC and COMESA.