Analyzing the Impact of AfCFTA on Product Diversification: The Mediating Role of Non-tariff Measures

Abstract

This study investigates the causal impact of the African Continental Free Trade Area (AfCFTA) on export product diversification, with particular attention to the role of non-tariff measures (NTMs).  While tariff reductions under AfCFTA are expected to stimulate intra-African trade, the persistence  of NTMs raises important questions about the extent to which the agreement can drive structural transformation. Using a panel of 36 African countries from 2015 to 2023, we apply the Synthetic Control Method (SCM) to estimate counterfactual outcomes for treated units. The analysis incorporates NTMs and export volumes as predictors, ensuring a comprehensive assessment of both trade barriers and trade intensity. Results show that AfCFTA membership increased product diversification by an estimated 9.84 additional products relative to synthetic controls, with placebo tests confirming the robustness of this effect. However, the results also reveal that NTMs act as a mediating factor, dampening but not eliminating the gains from AfCFTA. The findings highlight that AfCFTA can substantially promote diversification, but its success depends on complementary policies to streamline NTMs. These results provide important policy insights for African trade policymakers seeking to enhance regional trade integration and support sustainable economic transformation.