Using bilateral trade data for 157 countries and applying a General Equilibrium Poisson Pseudo Maximum Likelihood (GEPPML) model, we estimate the effects of the African Continental Free Trade Agreement (AfCFTA) on Tanzania’s trade/exports and welfare. The baseline estimates on the international border suggest that all else equal, the international border decreases trade by 97 percent.
The empirical results show that the AfCFTA could raise Tanzania’s trade/exports growth by 57% under the conditional general equilibrium (the direct effects) and by 75% more under the full endowment general equilibrium (allowing both for direct and indirect effects) in 2019. The estimated trade effects for Tanzania are relatively higher as compared to most other African countries, the fourth behind the three top countries. Allowing for the removal of the international border under both scenarios, we find that most of Tanzania’s trade will be diverted from RoW to RoA with which Tanzania does not have a trade agreement by about 23 percent, while that to the EAC market by 18 percent and to SADC market by 19 percent under both scenarios.
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