A new report by the United Nations Conference on Trade and Development (UNCTAD) shows that the European Union (EU) will profit the most from changes in global trade due to the US-China trade war. The EU will benefit from $70 billion worth of increased trade, equivalent to 0.9% of the bloc’s total exports.
The study looks at the repercussions of existing tariff hikes by the United States and China, and the effects of the increase scheduled for 1 March.
The study estimates that of the $250 billion in Chinese exports subject to US tariffs, about 82% will be captured by firms in other countries, about 12% will be retained by Chinese firms, and only about 6% captured by US firms.
Similarly, of the approximately $110 billion in US exports subject to China’s tariffs, about 85% will be captured by firms in other countries, US firms will retain less than 10%, while Chinese firms will capture only about 5%.
The question is what’s in it for Africa? While the EU stands to gain much, it is much less so for Africa. It isn’t that surprising, though. Africa accounts for only 2% of global trade, with intra-regional trade in Africa is very low. Intra-regional trade in Africa stood at 18% in 2015, compared to 69% in Europe, 52% in Asia and 50% in North America.
But the momentum around the African Continental Free Trade Area (AfCFTA) Agreement is growing. Once implemented, the AfCFTA can boost intra-African trade by 52% by 2020, benefitting African producers, consumers and traders.
The progress is encouraging. So far, 52 African countries signed the agreement and 18 countries have ratified in less than 1 year. We have about 3 countries left to ratify for the agreement to come into effect.
Download the UNCTAD report here.