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A New Impetus for Regional Economic Integration?

November 2012

Hove, K. Van. 2012. A new impetus for regional economic integration? GREAT Insights, Volume 1, Issue 9. November 2012. Maastricht: ECDPM

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In this issue of GREAT Insights, Frederik Söderbaum points to rhetorical and symbolic regionalism that characterise regional integration in Africa. While officially the stated integration goals are ambitious and abound, one has to question what and who drives those lofty agendas and declarations? As the multilateral trade dynamics have fizzled out, there is an increased focus on the regional processes. But if one follows Söderbaum’s argument, the renewed efforts on facilitating the transposition of the regional agenda at national level or the implementation of regional commitments, are not really a serious exercise. 

Today African integration is characterised by multiple and overlapping memberships in Regional Economic Communities (RECs) which are at different stages of the integration process. This has created a complex web of competing commitments, which together with different rules and standards, result in high costs to intra-African trade and undermines trade facilitation efforts that are at the core of the economic integration agenda. So, what is the best way to foster regional integration, which ultimately should promote economic development?

Various responses to the ‘how’ question

Peter Draper (1) has been a great advocate for an endogenous African model of integration that is more in line with the political, economic and capacity realities of the continent. He argues for a limited agenda, focused on trade facilitation and regulatory cooperation in areas related primarily to doing business. The process should avoid formal institution-intensive arrangements, which entail major capacity and funding challenges. ‘Champion countries’ have a major role to play and should spearhead a less ambitious but more effective agenda that addresses the regions’ immediate development needs. 

Experts like UNECA (2) emphasize the importance of mainstreaming the regional commitments in national laws and regulations. They argue for more resources and technical capacity at national level, combined with a strong monitoring mechanism is the way to reinforce implementation. Trademark East Africa, with a regional and 5 national offices, can be seen in this context as a long term aid for trade initiative to enhance regional integration. 

A key argument for launching the Tripartite Free Trade Agreement (TFTA), in East and Southern Africa in 2005, was to address the contradictions of overlapping membership of the SADC, EAC and COMESA countries. This is heralded again as an important stepping stone towards the Continental Free Trade Area, in the latest ‘Assessing Regional Integration V’ from the AU, AfDB and UNECA. The TFTA has an ambitious agenda going beyond the traditional elements of trade negotiations to explicitly include cooperation on infrastructure and industrialization. This has led some analysts to praise the development of an endogenous model of regional integration taking into account the continent’s infrastructural deficit and the low productive capacities of some countries. However, critical voices have questioned publicly why this integration effort would have any more chances of success with such an enormous heterogeneous group of countries who have shown little appetite for the regional integration agenda before. If the SADC or COMESA process has little traction, the incentives for implementing the commitments in the wider configuration seem even more insipid.

Moving forward with a coalition of the willing and getting back to basics

In September 2012 in the Seychelles (3)  the Accelerated Programme for Economic Integration (APEI) was launched which might hold some promise. Five countries belonging to COMESA and SADC, (Malawi, Mauritius, Mozambique, Seychelles and Zambia) agreed to speed up their economic integration agenda by: (i) improving the business regulatory environment; (ii) eliminating barriers to trade in goods; (iii) promoting trade in services; and (iv) capacity building through peer-to-peer learning. The participating countries insist this APEI is not to counter or complicate the ongoing COMESA-SADC or tripartite integration process. But dissatisfied with the pace of integration in their current regional groupings, the 5 countries teamed up to agree on implementing the agreed agenda in a higher gear. This initiative is anchored on the ‘variable speed and geometry’ principles that were agreed by the respective RECs in 2011.

If the five countries are serious about wanting to increase trade and investment among the group, barriers need to be removed, which are mainly government measures (laws, regulations and administrative procedures). This basically requires three sets of changes that have been long recognized as fundamental principles in international trade rules. First, all five governments must grant national treatment to goods, services and investment from each other. Second, they must all make their rules and regulations regarding trade and investment transparent and predictable for business people and the general public. Third, they must not discriminate among economic agents (manufacturers, traders, exporters, importers, investors, etc.) or in other words, treat all economic agents from the respective countries the same way. This will avoid sweetheart deals and vested interests getting special preferences and privileges that frustrate real competition and efficiency. 

In principle, none of these changes should require significant financial resources. Business operators know the market access, regulatory and investment barriers in the national markets. Removing those government measures requires mainly changes to legislation and regulations, which governments can do if they want to. This recent APEI program could be supported by donors, but should not rely mainly on external resources since that is often a recipe for little action. Time will tell whether this new initiative will be carried forward strongly, and whether there are sufficient interests that will push this accelerated integration agenda forward, despite hurdles along the way. As the underlying thought is that success will create the incentives for other countries in the region to hop on the train.

Kathleen van Hove is Programme Manager, Trade & Regional Integration at the European Centre for Development Policy Management 

Footnotes
1. Peter Draper, Rethinking the (European) foundations of Sub-Saharan African Regional Economic Integration: A political economy essay, OECD Working Paper No 293, September 2010
2. UNECA, Mainstreaming Regional Integration at national level, E/ECA/CTRCI/6/7 27 July 2009
3. The Nation, Ministers act to speed up regional integration – 06.09.2012, http://www.nation.sc/index.php?art=28713 

This article was published in Great Insights Volume 1, Issue 9 (November 2012)

 

Economic Transformation and TradeRegional Integration