CHAPTER 6. REGIONAL INTEGRATION IN AFRICA

Multiplicity of schemes...

This chapter considers the experience of regional integration schemes in sub-Saharan Africa (SSA). Regionalism in Africa has always had a strong political motive. “Pan-Africanism, as an expression of continental identity and coherence, distinguishes regional integration in Africa from other regions in the developing world” (McCarthy, 1995, p. 14). But the economic arguments for regional co-operation are also particularly strong given the small size of many SSA countries in economic terms. Furthermore, most African countries remain highly dependent on agriculture and suffer from high levels of food insecurity. In these circumstances, one would expect African regional integration schemes to be most focused on exploiting whatever synergies may exist to promote food security. Despite the force of these arguments, virtually all regional integration efforts in SSA to date have failed. The reasons for the lack of success in the past and whether the current momentum for new regional initiatives addresses these problems are discussed in this chapter.

African regionalism in perspective

The Economic Commission for Africa (ECA) became the champion of regional integration, already in the mid-1960s proposing the division of Africa into regions for the purposes of economic development. Current African integration arrangements can be divided into two broad groups: those that fit into the Lagos Plan of Action (LPA) adopted in April 1980, and those that were either in existence or came about outside the LPA (Table 4).

The Lagos Plan was promoted by the ECA and launched in a special initiative by the OAU. It envisaged three regional arrangements aimed at the creation of separate but convergent and over-arching integration arrangements in three sub-Saharan sub-regions. West Africa would be served by the Economic Community of West African States (ECOWAS) which pre-dated the Lagos Plan. A Preferential Trade Area (PTA) was established in 1981 to cover the countries of East and Southern Africa, which was eventually replaced in 1993 by the Common Market for Eastern and Southern Africa (COMESA). For Central Africa the treaty of the Economic Community of Central African States (ECCAS) was approved in 1983 but remains to be fully ratified. Together with the Arab Maghreb Union (AMU) in North Africa, these arrangements were expected to lead to an all-African common market by the year 2025. The Lagos Plan was followed up in 1991 by the Abuja Treaty, re-affirming the commitment of the OAU’s Heads of State to an integrated African economy (McCarthy, 1995). In April 2001, African Heads of State launched the African Union at Sirte to replace the OAU.

A second group of integration arrangements has grown up outside the LPA. Two important RTAs are associated with the former CFA zone^[20]. There is the West African Economic and Monetary Union (WAEMU) within the ambit of ECOWAS and the Economic and Monetary Union of Central Africa (CEMAC) within the proposed ECCAS region. Within the geographic area of COMESA there are the Southern African Customs Union (SACU) with its associated monetary union (the Common Monetary Area, CMA), the Southern African Development Community (SADC) and the East African Community (EAC). Some countries in this region are also joined with countries in the Horn of Africa in the Intergovernmental Authority on Development (IGAD).

Reasons for the past lack of success of African regional groupings

...but few successess

Despite the multiplicity of groupings, SSA regional groupings have not been very effective. Among the reasons for this can be mentioned the following:

• Intra-regional trade in Africa as a share of total foreign trade has traditionally been low compared to other regions. Figures in the early 1990s suggest that the proportion was only 8.4 per cent in 1993 compared with Western Europe (69.9 per cent), Asia (49.7 per cent), North America (33 per cent) and Latin America (19.4 per cent) (WTO source, quoted in McCarthy, 1995, p. 21). However, recorded trade underestimates the volume of actual trade and, if proper account was taken of the size of informal trade, the African numbers would not look so out of line. Furthermore, there is evidence that the importance of intra-regional trade has been steadily increasing in recent years.

• Most African states have suffered from severe macroeconomic disequilibria, foreign debt service burdens, over-valued currencies, lack of trade finance, and a narrow tax base, with customs duties a substantial source of revenue. The protective import substitution strategies adopted by most countries since independence resulted in a host of regulations restricting trade such as licensing, administrative foreign exchange allocation, special taxes for acquiring foreign exchange, advance import deposits etc. Thus the economic context has been unfavorable to the development of regional commitments.

• The design of African integration schemes around inward-looking industrialization meant that the economic costs of participation for member states are often immediate and concrete (in the form of lower tariff revenues and greater import competition), while the economic benefits are long-term and uncertain and are often unevenly distributed among member states.

Table 4 - Structure of African regional groupings

The dominance of a few countries and the huge disparities in size among members of regional groupings led to concerns about the distribution of benefits. Regions have found it difficult to address the equitable distribution of gains and losses from integration. Mechanisms to provide compensation to the less developed members of groupings have been either absent or ineffective.

• The dependence of many African countries on their former colonial powers tended to work against viable regional groupings. The importance of North-South linkages (Franco-African and Commonwealth links and various Lomé Conventions) may have distracted commitment from intra-African groupings.

• Regionalism has been driven from above by public sector organizations and has lacked the support and involvement of the private sector and the general public. Cooperation has been seen as involving bloated and expensive bureaucracies, rather than opportunities for growth and development.

• Institutional weaknesses, including the existence of too many regional organizations, a tendency towards top-heavy structures with too many political appointments, failures by governments to meet their financial obligations to regional organizations, poor preparation before meetings, and lack of follow up by sectoral ministries on decisions taken at regional meetings by Heads of State.

• Integration is hampered by the existence of weak states and political opposition to sharing sovereignty. Integration arrangements are not characterized by strong supranational bodies and virtually all integration institutions are intergovernmental.

The debate on the “new regionalism” in Africa

Cross-Border Initiative

Despite these problems, there is a new optimism that the new approach to regionalism may have greater success in Africa. An example of the new approach in action is the Regional Integration Facilitation Forum (RIFF) which originated as the Cross-Border Initiative (CBI) in 1992 as a framework of harmonized policies to facilitate a market-driven concept of integration in Eastern and Southern Africa and the Indian Ocean countries. Fourteen countries participate in the CBI/RIFF, which is co-sponsored by the African Development Bank, the European Union, the International Monetary Fund and the World Bank. Given the ongoing economic reform programs in these countries, the underlying premise is that regional integration can accelerate the pace of economic growth by fostering efficient cross-border investment and trade flows. In contrast to previous regional initiatives the CBI/RIFF is characterized by: (i) outward-orientation and openness to the rest of the world to ensure that regionalism is accompanied by greater integration of the sub-region into the world economy; (ii) avoidance of the creation of new institutions; (iii) direct involvement of the private sector in the formulation and implementation of a conductive policy environment; (iv) peer pressure from fast reformers setting the pace of integration. Assessments by the co-sponsors suggested that good if variable progress has been achieved by the Initiative and that the model represents an effective example of regional partnership (Fajgenbaum et al, 1999). While the CBI/RIFF is criticized as being incompatible with the ECA-driven regional framework for Africa and for proposing a market-driven rather than development-oriented regionalism model (Asante, 1997), its particular emphasis on private sector participation in formulating strategy and programs would be useful to encourage in other SSA regional groups.

The Cotonou Agreement

The restructuring of trade relations between the ACP States and the EU foreseen in the Cotonou Agreement will also help to develop momentum behind regional integration in Africa in this decade. Trade relations, which are now based on non-reciprocal trade preferences granted by the EU, will in future be based on economic integration agreements. The EU intends to negotiate these Economic Partnership Agreements (EPAs) with ACP countries engaged in a regional integration process, and not with individual States except in exceptional circumstances. EPAs are thus intended to consolidate regional integration initiatives within the ACP. Formal negotiations of EPAs started in September 2002 in a two-phase process. The first phase of the negotiations takes place between the EU and the ACP group as a whole with the aim of defining the format, structure and principles for the negotiations, to be followed by the negotiation of individual EPAs. It is envisaged that EPAs will enter into force by 1 January 2008 at the latest.

Decisions about the geographical configuration of future EPAs are still outstanding. Under the Cotonou Agreement, this decision lies with the ACP countries, but the EU has added the rider that it is up to the Community to ensure that this decision is in line with the objectives and principles of the Agreement. The EU has published “Orientations on the Qualification of ACP Regions for the Negotiation of EPAs” setting out the Commission’s views in this respect (EU Commission, 2001).

Criteria for ACP regions...

The criteria for eligible regions are clear enough; the difficulty lies in implementing them in the specific context of the existing structure of African regional groupings. Thus, the Commission favors groupings which are large enough to constitute “poles of attraction” which would create positive trade and economic dynamics, which aim at forming a customs union, which are willing to tackle the non-border barriers to a common market and which have effective enforcement mechanisms. It highlights the importance of structural funds financed by customs and taxation revenues to assist weaker partners in the integration scheme to ensure an equitable distribution of the gains of regional integration. Finally, it recommends that integration should take account of existing infrastructures, trading and production links. It is not a requirement that eligible regional groupings exhibit these characteristics at the start of EPA negotiations but they “should aim, within reasonable timeframes, to build on these principles in order to provide an optimal framework for the attainment of the development objectives of the Cotonou Agreement”.

...may give rise to difficulties in practice...

In implementing these principles, the Commission rules out of eligibility for the negotiation of EPAs regional groupings which are “not effectively engaged in an economic integration process but rather pursue common political or economic objectives through co-operation”. The key requirement is that the negotiations must take place “in one single setting, including appropriate co-ordination between the member states of the organization or initiative, and lead to one single agreement”. This requirement runs up against the overlapping membership and fragmented nature of African regional organizations. There are a number of permutations. The simplest is where one grouping is a sub-group of another, possibly embarked on pursuing deeper integration as an example of variable geometry. An example typical in West and Southern Africa is where there is a wide free trade area arrangement, within which a sub-group has established a customs union or an even more deeply integrated group. Here the options are for the negotiations to proceed with either one group or the other as it would be impossible to have two negotiations in parallel, one with respect to the free trade area and one with the customs union. The difficulty is that if negotiations proceed with the customs union sub-group, it is hard to see how this could avoid fragmenting the larger grouping unless it decides to accelerate its own integration ambitions.

More tricky situations arise with groupings that have members in common. In this situation, overlapping membership would lead to the negotiation of two or more EPAs with the same countries, which is not conceivable. The Commission does not rule out overlapping membership but points to the obvious corollary that the regional groupings concerned would have to harmonize their negotiating position vis-à-vis the EU to ensure that all countries of both groupings have the same access arrangements to the EU, and that negotiations take place in one setting. As overlapping memberships mainly affect the broad, free trade groupings, this could effectively end up forcing even larger integration arrangements than currently exist.

Another difficult situation is where groupings have non-ACP States as members. The Commission points out that while, legally, arrangements could be put in place to allow free circulation of goods within the free trade area while confining the benefits of the EPA to the ACP members of the group, in practice this situation would not be tenable in the longer term because of the possibility of trade deflection. Given that the EU will have entered into separate FTAs with many of these non-ACP African states, it suggests that a logical step would be to extend the geographical coverage of EPAs by merging the existing agreements. An obvious case in point is South Africa (which has now signed its own FTA with the EU) and SADC.

...and create difficulties for least developed countries

Finally, the EU has now classified the ACP countries into developing and least developed countries in the sense that the latter benefit from the unilateral duty-free access offered to all least-developed countries (LDCs) under the “Everything But Arms” initiative. While this might imply that only the former are required to provide some measure of reciprocity under the new regime, in practice it is hard to see how LDCs which are members of regional groupings with non-LDC ACP States can retain external protection against EU imports. The EU Commission states that “It has sometimes been understood that the principle of differentiation implies that reciprocity would not be required from least developed countries participating in an EPA. This is, of course, not the case” (EU Commission, 2001, p. 13). It goes on to suggest that the appropriate response for LDCs in a regional grouping is to adopt a variable speed approach under which they would be offered a delayed start or a slower pace of tariff dismantlement. In practice, such an arrangement would give rise to the potential for goods with reduced (or zero) tariffs to be imported from the EU by the more advanced ACP members and re-exported under the FTA to LDC members which have the right to protect themselves by higher tariffs. While the problem can be avoided in principle by proper documentation of rules of origin, the difficulties of policing these may in practice undermine the tariff policies of the least developed countries. As the LDCs also lose out because of the potential for trade diversion under EPAs as EU exporters now gain better access to the markets of ACP countries at their expense, there is a strong case for compensation measures in their favor.^[21]

Although the issue of the composition of Sub-Sahara African regional groupings has been highlighted here, the EU-ACP negotiations raise many of the issues pertinent to regional integration among developing countries raised in this paper (see also Bilal and Van Hove, 2002). These include whether trade diversion will dominate trade creation, the loss of fiscal revenues from the abolition of customs duties, the limited capacity in most ACP countries to conduct parallel sets of trade negotiations, and how to provide for sufficient scope for flexibility, special and differential treatment and asymmetry while ensuring that the agreements reached remain WTO-compatible. The fact that the interpretation of Article XXIV itself is under discussion in the Doha Development Round makes the legal context of the EPA negotiations all the more complicated.

The future of regional integration in Africa

Despite competing visions of regional integration...

We have seen how a new momentum is building up behind regionalism in Africa, but that there are competing visions for the objectives and design of regional integration arrangements. On the one hand, there are those who argue that, because of the poor record of regional economic integration, African countries should “forget theoretical schemes of the pan-African type (a ‘United States of Africa’) or the neo-colonial type (a customs union), replacing them with simpler, cheaper, more productive, and more cost-effective models of integration through projects - choosing priority sectors for development (agriculture, industry, power, transportation, and training) and identifying specific, concrete projects in each sector to be implemented on a community basis, with possible financial support from outside (Diouf, quoted in McCarthy, 1995, p. 37). On the other hand, there are the erstwhile sceptics among the donors who have been converted to supporting regionalism of a certain type, one which is outward-looking, which is focused on trade facilitation, which has strong private sector involvement and which has light institutional structures. Finally, there is the traditional model of top-down African regionalism, espoused by the OAU and endorsed by African Heads of State, which has a strong rhetorical basis and a largely political significance.

The EU’s desire to encourage regional economic groupings as potential trade partners in negotiating EPAs under the Cotonou Agreement implies that trade integration as well as functional co-operation will necessarily be an important policy instrument of African regionalism during the next decade. This has implications for those interested in promoting a food security dimension to these agreements as outlined more fully in Chapter 5. For example, food security is explicitly addressed in the Cotonou Agreement in the provision which reads: “The Agreements shall include provisions aimed at fostering food security in accordance with WTO rules”.

...specific problems must be addressed

If the new regional groupings in Africa are to have a role in tackling food security, they need to be placed on a firmer footing. The new regionalism must address the following issues which have been partly responsible for the poor record of the past:

• Overlapping memberships of competing groups should be resolved to allow a clear political commitment to particular country groupings.

• For a common market to function its members at least need to be at peace. The wars and conflicts in a number of African regions which have devastated transport networks, communications and other basic infrastructure need to be peacefully resolved.

• Ways must be found to involve the private sector in the integration process. It should not be expected that all private sector groups will favor regional integration. In some countries, farmers may fear low-cost competition from elsewhere in the region and may take quite a protectionist stance. The participation of consumer groups and other NGOs should be encouraged as these groups can also gain from exploiting the opportunities for greater intra-regional trade.

• Given the disparities in economic weight that exist between members of some groupings, new policy instruments to deal with the fears of economic polarization must be found, for example, multispeed arrangements (allowing weaker members more time to liberalize), compensation schemes, regional investment banks, or structural solidarity funds such as the Food Security Financial Instrument proposed in Chapter 5.

• Dispute settlement mechanisms need to be strengthened and ways to ensure policy credibility must be put in place. Investors need to have confidence that integration measures will not be reversed and that barriers to regional markets will not be re-instituted overnight. Binding liberalization commitments in the WTO should be encouraged where possible, while the opportunity of the REPA negotiations with the EU should also be used to bind and enforce policy commitments.