North Africa Must Look South for Trade

Rising tarifs, geopolitical fragmentation, and persistent supply-chain

disruptions are roiling international trade.

The World Trade Organisation projects a 0.2% contraction in global goods

trade in 2025, which could deepen to 1.5% if tensions escalate.

United Nations Trade and Development warns that policy uncertainty is

eroding business confidence and will slow global growth to 2.3% in 2025.

Against this backdrop, developing economies are under mounting pressure

to diversify partnerships and reduce external dependencies.

The pressure is particularly acute for North Africa.

The region – comprising Algeria, Egypt, Libya, Morocco, Mauritania, and

Tunisia – has long been tethered to European economic cycles.

In 2023, the European Union accounted for 45.2% of North Africa’s trade,

making the region vulnerable to any slowdown in European demand.

At the same time, North Africa has played a marginal role in international

commerce, accounting for only 3.7% of global trade in 2023.

But this moment of uncertainty also represents a strategic opportunity for

North Africa to look southward, toward the fast-growing markets of Sub-

Saharan Africa (SSA), which currently account for just 2.4% of North Africa’s

total trade.

VALUE CHAINS

As I and others argued nearly a decade ago, stronger economic ties within

the continent could reshape regional growth trajectories.

That continues to be true today. With SSA’s economic growth estimated at

3.7% in 2024 and projected to rise to 4% in 2025, the rest of the continent

offers many opportunities for North African businesses as an emerging

market for manufactured exports and as a region to expand value chains.

North African products – particularly from its automotive, fisheries, food

processing, pharmaceuticals, and textiles sectors – would likely be well

received in SSA, owing to their good quality and competitive prices.

Some progress has been made toward increasing intra-African trade and

North Africa’s role in it.

Morocco recently became the continent’s leading automobile exporter, with

sales of US$6.4 billion in 2023.

Many of these cars went to West Africa, partly owing to regional free-trade

agreements.

Some North African countries belong to other regional economic

communities, such as the Common Market for Eastern and Southern Africa

(Comesa) and the Community of Sahel-Saharan States (CEN-SAD).

But the ambitious African Continental Free Trade Area offers the best chance

of deepening continental integration. In effect since 2021, the AfCFTA has

been signed by 54 countries, making it the world’s largest free-trade area by

membership.

DRIVING GROWTH

North Africa could play an important role in driving growth and enhancing

trade within this area.

The region has around 200 million consumers and occupies a strategic

geographical position between Europe, the Middle East, and SSA.

It also possesses significant natural resources, a diversified industrial base,

and relatively well-developed human capital and economic infrastructure.

The AfCFTA is widely expected to boost economic growth, private sector

development, investment, and capital flows across the continent.

A forthcoming study by the African Development Bank (AfDB) assessing the

AfCFTA’s impact on regional economies using the Global Trade Analysis

Project model suggests that this is especially true for North Africa.

Under every scenario, North Africa’s GDP and its components are projected

to increase by 2031.

The region’s full integration with SSA would bring the largest gains in trade

(+5.5%) and GDP (+0.77%). The study also predicts that implementing the

AfCFTA will lead to a decline in poverty and an increase in wages for both

skilled and unskilled workers in the region.

The AfCFTA’s main downside is in the fiscal domain. The AfDB study

anticipates a reduction in North African countries’ customs revenues; the

least affected will be those that have already entered into bilateral free-trade

agreements, or that have relatively high levels of economic diversification

and strong productive capacities.

BARRIERS AND POTENTIAL

There are also major barriers to realising the potential of intracontinental

trade, including inadequate infrastructure, tariff harmonisation challenges,

and limited institutional coordination across Africa’s regional economic

communities.

But, given the overall benefits, North African economies should make

implementation of the AfCFTA a high priority.

Enhanced intra-African trade flows would promote further economic

diversification, job creation, investment, and GDP growth, generating long-

term prosperity and private-sector development in North Africa.

In a fracturing world economy, regional solidarity has taken on new

importance.

By fully committing to the AfCFTA and strengthening ties with SSA partners,

North Africa can chart a new path toward inclusive, resilient, and sustainable

growth.

– AudreyVerdier-Chouchane is lead economist for the North Africa region at

the African Development Bank.

– Copyright: Project Syndicate, 2025; www.project-syndicate.org

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