North African Countries Should Look South for Trade
Audrey Verdier-Chouchan: Chief Economist Responsible for North Africa at the African Development Bank
Rising tariffs, geopolitical fragmentation, and ongoing supply chain disruptions are disturbing international trade. The World Trade Organization predicts a contraction of 0.2% in global goods trade in 2025, which could deepen to 1.5% if tensions escalate. The United Nations Conference on Trade and Development warns that uncertainty regarding policies is eroding business confidence, which will slow global growth to 2.3% in 2025. In this context, developing economies are under increasing pressure to diversify partnerships and reduce reliance on external markets.
These pressures are particularly acute in North Africa. The region—comprising Algeria, Egypt, Libya, Morocco, Mauritania, and Tunisia—has long been linked 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. Conversely, North Africa has played a marginal role in international trade, representing only 3.7% of global trade in 2023.
However, this moment of uncertainty also presents a strategic opportunity for North Africa to look south toward the rapidly growing markets in sub-Saharan African countries, which currently constitute only 2.4% of North Africa’s total trade. As I and others argued nearly a decade ago, stronger economic ties within the continent could reshape regional growth trajectories.
This remains true today. With economic growth in sub-Saharan countries estimated at around 3.7% in 2024 and expected to rise to 4% in 2025, the rest of the continent offers numerous opportunities for North African companies as an emerging market for manufactured exports and a region for expanding value chains. North African products—particularly from the automotive, fisheries, food processing, pharmaceuticals, and textiles sectors—are likely to be in high demand in sub-Saharan Africa due to their superior quality and competitive prices.
Progress has been made towards increasing intra-African trade and the role of North Africa in this trade. Morocco has recently become the leading exporter of cars on the continent, with sales amounting to $6.4 billion in 2023. Many of these cars are headed for West Africa, partly due to regional free trade agreements. Some North African countries belong to other regional economic groupings, such as the Common Market for Eastern and Southern Africa (COMESA) and the Community of Sahel-Saharan States (CEN-SAD).
However, the ambitious African Continental Free Trade Area (AfCFTA) offers the best opportunities for deepening continental integration. The AfCFTA came into effect in 2021, with 54 countries signing on, making it the largest free trade area in the world by membership. North Africa can play a significant role in driving growth and enhancing trade within this area. The region has approximately 200 million consumers and occupies a strategic geographical position between Europe, the Middle East, and sub-Saharan African countries. It also possesses considerable natural resources, a diverse industrial base, human capital, and relatively advanced economic infrastructure.
The AfCFTA is widely expected to boost economic growth, develop the private sector, attract investment, and enhance capital flows throughout the continent. An upcoming study by the African Development Bank assessing the impact of the AfCFTA on regional economies using the Global Trade Analysis Project model indicates that this applies particularly to North Africa. Under every possible scenario, GDP and its components in North Africa are expected to increase by 2031. Full integration of the region with sub-Saharan African countries would yield the largest gains in trade (+5.5%) and GDP (+0.77%). The study also anticipates that the implementation of the AfCFTA will reduce poverty and raise wages for both skilled and unskilled labor in the region.
The main downside to the AfCFTA lies in the financial realm. The African Development Bank expects a decline in customs revenues for North African countries; those least affected will be those that have already entered into bilateral free trade agreements or those with relatively high levels of economic diversification and strong productive capacities. There are also significant barriers preventing the realization of the continent’s trade potential, including inadequate infrastructure, challenges in tariff alignment, and limited institutional coordination among Africa’s regional economic communities.
Nonetheless, considering the overall benefits, North African economies should prioritize the implementation of the AfCFTA. Enhanced intra-African trade flows could encourage further economic diversification, job creation, investment, and GDP growth, leading to prosperity and the long-term development of the private sector in North Africa. In a fractured global economy, regional solidarity has acquired renewed importance. By fully committing to the AfCFTA and strengthening ties with partners in sub-Saharan Africa, North African countries can chart a new course towards inclusive, resilient, and sustainable growth.