The International Trade Council (ITC) has today highlighted concerns over potential economic implications for Sub-Saharan Africa amid escalating geopolitical tensions. In a scenario of global bifurcation into two isolated trading blocs centered around the United States/European Union and China, Sub-Saharan Africa could experience a permanent decline of up to 4% of real GDP after a decade, based on our estimates.
The ITC is a staunch advocate of free trade, human rights, and anti-corruption measures. We reiterate the importance of these principles in light of the potential disturbances to Sub-Saharan Africa's economic growth. Countries in the region have significantly benefited from new economic alliances, notably with China. However, this development has also increased their susceptibility to global shocks, including potential disruptions caused by the surge in trade restrictions following Russia's invasion of Ukraine.
In such an escalated geopolitical climate, countries could face increased import prices or even lose access to vital export markets. Approximately half of the region's international trade value could be impacted. Moreover, potential capital flow disruptions between trade blocs could result in an estimated annual loss of $10 billion in foreign direct investment (FDI) and official development assistance inflows.
The ITC strongly encourages resilience-building measures. These include regional trade integration under the African Continental Free Trade Area (AfCFTA), broadening financing sources through deepening domestic financial markets, reducing trade barriers, enhancing customs efficiency, leveraging digitalization, and addressing infrastructure gaps.
In a "strategic decoupling" scenario, where only the US/EU severs ties with Russia, opportunities may arise for new partnerships, potentially boosting intra-regional trade and preventing a region-wide GDP loss. Identifying and nurturing sectors that could benefit from trade diversion, such as energy, is a key resilience strategy.
The ITC also encourages the use of trade promotion agencies to identify potential opportunities, develop necessary export skills and capacities, and re-orient production to capitalize on new trade flows. Improving the business environment, lowering entry, regulatory, and tax barriers could significantly aid in this endeavor.
While the precise outcomes of fragmentation and polarization remain uncertain, the need for multilateral institutions to foster dialogue and promote economic integration and cooperation is paramount. The ITC remains committed to its role in promoting free trade, supporting human rights, and combating corruption, working to ensure a stable, prosperous global economy.