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7. The MFA governed world trade in textiles and apparel from 1974 through 2004, with quotas imposed on the totals that certain LMICs could export to high-income countries. 8. Chapter 6 provides a discussion of the impacts, challenges, and opportunities of the AfCFTA and the policy implications of the success of this ambitious continental project. 9. As of July 2021, of the 40 countries that have complied with their domestic requirements for ratification, 34 countries have deposited their instruments of ratification with the depositary (Chair of the

African Union Commission). 10. The G-20 Compact with Africa was launched in 2017 to promote private investment in Africa, including in infrastructure. Its primary objective is to increase attractiveness of private investment through substantial improvements of the macro, business, and financing frameworks. (“About the Compact with Africa,” G-20 Compact with

Africa website: https://www.compactwithafrica.org/content/compact withafrica/home.html).

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PART I Access to Traditional Markets: Taking Stock of Nonreciprocal Trade Agreements and the Way Forward

The US African Growth and Opportunity Act (AGOA) and the European Union’s Everything but Arms (EBA) preference program have been operational for nearly two decades. Yet few studies have investigated the impacts of preferential market access on creating trade as well as the subsequent implications for economic transformation through exports, particularly manufacturing exports. This book attempts to fill this gap and derive policy implications for the Sub-Saharan Africa region.

The AGOA provides duty-free access to the US market for a selected group of products from eligible Sub-Saharan African countries. Most of the region’s countries have registered gains in exports owing to the AGOA. However, the results have varied across countries, and most of the export gains have been unsteady. The EBA covers only least developed countries (LDCs); it excludes countries that could cross the threshold to access global markets. So far, exports of natural resources, mainly oil, account for the bulk of Africa’s exports through these preferences. The next-largest boost has been for textile and apparel products, which have benefited from the largest tariff preferences.

The findings of this book suggest that preferential market access granted to Sub-Saharan African countries has the potential to foster their economic transformation through exports. Success would be conditional on changes in infrastructure, connectivity, the fundamental institutions of legal frameworks and property rights protection, and smart macroeconomic management with stable and competitive exchange rates and low inflation.

Achieving durable gains from trade would also entail reducing the uncertainties associated with preferential trade agreements (PTAs) and expanding preferential access to products in which African countries could have a comparative advantage.

The World Bank and donor countries should take the lead in reorienting the debate on Africa’s development challenge—by moving from a “countryspecific” to a “neighborhood-specific” approach—to maximize the gains from PTAs as well as aid-for-trade initiatives. This would have the added advantage of reducing the risk of cross-border conflicts by increasing the economic interdependence of the member countries, which would raise the costs of conflict.

The following key messages emerge from the chapters in Part I (chapters 1–3) of the book: • PTAs must be reinforced with specific reform of how high-income countries extend the preference to select beneficiary countries. PTAs need to be integrated with other efforts to deepen trade and investment between Sub-Saharan African countries and the Organization for Economic Co-operation and Development countries, mainly the

United States and the European Union. This includes integrating the AGOA and EBA with foreign aid policy instruments to address the structural challenges limiting export capacity. • Expansion to non LDCs of quota-free, tariff-free access to the products in which most African countries may have comparative advantage, such as agriculture and nontextile manufacturing, may expand the benefits for African firms. • The appeal of preferences should be reoriented toward building a competitive manufacturing sector. Ethiopia’s recent success in attracting foreign direct investment and exploiting the AGOA is an important milestone in improving the competitiveness of the manufacturing sector, which supports the growth of manufacturing for exports. • Sound macroeconomic policies to maintain stable, competitive exchange rates and low inflation and improvements in the quality of infrastructure (especially information and communications technology) provide the underpinnings necessary to allow economies to take advantage of the export opportunities provided by the AGOA.

Reforms to improve the business environment should focus more on improving the quality of the judiciary, infrastructure, and macroeconomic stability.