Regional Integration in Africa: what has been done and what needs to be done

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1 World Trade Organization Regional Integration in Africa: what has been done and what needs to be done Dr Faustin Mukela LUANGA Counselor, Institute for Training and Technical Cooperation of the WTO Contact: Workshop on Transforming Political Structures: Security, Institutions, and Regional Integration Mechanisms. Florence, Italy, April 16 th 17 th, 2009.

2 Outline Introduction The Building Blocks for an African Economic Community (Abuja Treaty) The Implication of the Abuja Treaty for Trade Liberalization in Africa Progress made by the Regional Integration Groupings in Africa Intra-Regional Trade in the Recs Challenges of Regional Integration in Africa Recommendations Conclusion

3 Introduction Economic Integration in Africa has a long history. The two oldest regional economic groupings in Africa are SACU and EAC. Both formed in early 1900s as Custom unions. UEMOA and CEMAC were established as monetary union after the second world war Since independence there has been a number regional groupings created, most in the 1990s.

4 The Building Blocks for an AEC (Abuja Treaty) Abuja Treaty (1991) provides a roadmap for full continental economic integration. Stage I ( ): The strengthening of existing RECs and if necessary new ones created Stage II ( ): (1) Member States should stabilize tariffs and non-tariffs barriers, custom duties and internal taxes; (2) Member States should strengthen sectoral integration; (3) Activities of RECs should be coordinated and harmonized. Stage III ( ): 2016): Establishment of Custom Unions at level of RECs

5 The Building Blocks for an AEC (Abuja Treaty) (cont d) Stage IV ( ): 2018): Coordination and Harmonization of tariff and Non-tariff barriers and CET for Africa. Stage V ( ): 2022): Creation of an African Common Market. This would be done through: (1) common policy for all sectors; (2) continent-wide harmonization of monetary, financial and fiscal policies; and (3) free mobility of factors (capital and labor) of production Stage VI ( ): 2027): Establishment of African Economic Community

6 The Imperative of Regional Integration What many Africans aspire for is that the 53 fragmented economies on the continent become integrated into one strong, robust, diversified and resilient economy, supported by a first-class trans-boundary infrastructure; highly educated, flexible and mobile workforce; financial capital that is highly mobile; sound health facilities; and peace and security.

7 The Benefits of Regional Integration Creating a common market Increasing the bargaining power of African countries Pooling Resources to deal with trans-boundary issues such as Climate Change, Water, HIV/AIDS Framework for coordination Conflict Prevention

8 Progress made by the RECs in Africa Asses the progress made by 8 IGOs recognized by the AU as RECs and UEMOA and CEMAC RECs are considered by the African Union as the Building Block for Continental Integration. Mixed progress

9 Progress made by the RECs in Mixed progress Africa (continued) Low intra-trade trade Challenges

10 Arab Maghreb Union (UMA) Created in 1989 under the Marrakech Treaty. Objective is to create a common market. In 1991 adopted an agreement on trade and tariffs. Un the protocol on rules of origin, 17.5 % is to levied on goods manufactured with imported inputs. Hope to pursue Euro-Mediterranean FTA through the Mediterranean Development Assistance Program provided by the EU.

11 COMESA Created as a PTA in 1981 and was reconstituted in FTA launched in 2000 and working towards a Customs Union in Reduced non-tariff barrier: (1) introduced a harmonized single customs form in 1986; (2) third party insurance (Yellow Card)

12 COMESA (Cont d) Follow a monetary program with member countries expected to follow convergence criteria. Has a financial integration program: PTA Bank and PTA Reinsurance Company. Strong infrastructure program: Harmonized transport policies; developing competition rule for air transport with SADC

13 CEN-SAD Created in 1998 and therefore the youngest REC Objective is to form a common market Pursuing programs that seeks to reverse desertification Established African Development and Commerce Bank in 1999 as a source of financing projects that contribute to strengthening integration

14 EAC Formed in 1900; strengthened in 1967; cease to exist in 1977; and reconstituted in Treaty Objective under the Arusha Treaty includes: broad based cooperation; gradual creation of a Customs Union, a common market a monetary union and political federation; etc. It is a Customs Union and close to forming a Common Market

15 EAC (Cont d) Harmonized custom rules to facilitate trade within the region Harmonized financial rules governing security markets. Created the supra-national East African Securities Regulatory Agency (EASRA) to regulate Banks and the stock markets in the three member countries Has a framework for the coordination of monetary and fiscal policies, including macroeconomic convergence.

16 ECCAS Created in 1983 Objective is to improve the living standards of the member states, through coordinated and harmonized programs Has about twenty protocols covering trade liberalization and facilitation; infrastructure developments; free mobility; and an ECCAS passport. Recent conflicts in the region has prevented the implementation of the protocols. In recent years the agenda has been revived.

17 ECOWAS Created in 1975 but revised its Treaty in 1993 to speed up and strengthen full integration It is an FTA (started in 1990) Has harmonized its custom to be in line with WCO so as to speed up the flow of goods Yet to create a Customs Union Adopted programmes that allow for mobility of citizens, macroeconomic policy harmonization. Working hard to create a second monetary zone (WAMZ)

18 ECOWAS (Cont d) To support investments and promote financial cooperation in the region a number of regional banks have been established: Ecobank; ; ECOWAS Regional Development Fund (ERDF) and ECOWAS Regional Investment Bank (ERIB) It has very strong programmes on infrastructure developments, particularly in the areas of roads and Energy (Trans West African Highway and the Trans-Sahelian highway; West African Gas pipeline) Harmonized transport policies and introduced third-party motor insurance (Brown Card)

19 IGAD Created in 1986 to tackle drought in the Region. Was reconstituted in 1996 to broaden its objectives. Current focus is on: peace and security; drought and development; infrastructure development and food security

20 SADC It was created in 1994, out of Southern African Development Cooperation Conference (SADCC) Working on the creation of FTA 2008), Customs Union (2010) and Monetary Union in the foreseeable future Harmonized a number of its customs and transport policies so as to speed the facilitation of trade in the region In 1995 the Southern African Power Pool (SAPP), a consortium of twelve national electricity companies, was created to provide economical and reliable supply of electricity to member states

21 Intra-regional regional trade in ECOWAS ECOWAS Value of exports by economic grouping ($US millions) Value of intra-community trade

22 Intra-regional regional trade in SADC SADC Value of exports by regional economic grouping (in millions of dollars) Value of intra-community trade

23 Intra-regional regional trade in COMESA COMESA Value of exports by regional grouping (in million of dollars) Value of intra-community trade

24 Intra-regional regional trade in ECCAS ECCAS Value of exports by regional economic groupings (in millions of dollars) Value of intra-community trade

25 Intra-regional regional trade in UMA UMA Value of experts by regional economic groupings (in millions of dollars) Value of intra-community trade

26 Regional Integration in Africa: Mains Challenges Why is intra-african trade very low? Rationalization of the African Regional Economic Communities Multiple and overlapping membership by Member states Duplication of mandates and programs at the RECs level RECs multiplicity and effectiveness towards the goals of the African integration.

27 Challenges of Regional Integration in Africa Lack of political will Overlapping and duplication of integration Groupings and multiplicity of membership Fear of loss of sovereignty Lack of a compensation mechanism Weak Infrastructure Poor macroeconomic environment Weak financial environment

28 Recommendations (Achieving deeper integration) Strong need for coordination and harmonization of the programs of the RECs Strengthening of the capacities of AUC, RECs and all the partners Establish inter-rec FTA as well as a clear and unified definition of rule of origin. Set up at the continental, regional and national levels mechanisms to harmonise custom procedures; reduce the number of roadblocks; improve the efficiency of maritime ports and to implement other trade facilitation policies. Deepening Capital and Financial Markets

29 Recommendations (Rationalization) Taking account of the Constitutive Act, the Sirte Declaration and the Abuja Treaty as well as the gains that have been achieved so far by the African Union and the RECs the following recommendations are made as the way forward: Within a reasonable period of time to be define but not exceeding 10 years, RECs need to standardize, harmonize and coordinate, within themselves and between themselves, programs, polices and activities including those trade, monetary, financial and fiscal polices, transport and communication inter-linkages, energy and movement of persons. In this regard, the AUC, ECA and the ADB should assist the RECs in achieving this goal.

30 Conclusion African RECs are making tremendous progress on the integration of the continent. However more needs to done. We need get the RECs to harmonize and coordinate their programs and activities Speed up the process of dismantling all non- physical and non-tariff barriers so as to improve intra-african trade Consider inter-recs FTAs.. For example an FTA between SADC and COMESA; or ECOWAS-CENSAD CENSAD FTA.

31 Conclusion (Cont d) We need to abolish visas for Africans traveling within Africa. Both public and private sector need to be mobilised for Africa to meet resource requirements for its infrastructure development Need to create conducive environment for private sector participation Need to have innovative policies and measures to increase financial resources Need for stable macroeconomic policies; and development of cross border financing

32 MANY THANKS FOR YOUR ATTENTION

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