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Regional Integration in a Global Context: Implications for Sub-Saharan Africa

Regional Integration in a Global Context: Implications for Sub-Saharan Africa

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This policy brief compares the founding conditions, processes, and structures of the economic agreements in Africa with those for the EU.
This policy brief compares the founding conditions, processes, and structures of the economic agreements in Africa with those for the EU.

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Published by: German Marshall Fund of the United States on Jul 26, 2011
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: This policy brief compares the founding conditions, processes, andstructures of the economicagreements in Africa with those for the EU, and exploresalternative paths for regionalcooperation. Particularlyin a time of tight budgetsfor development support, transatlantic partners shouldhelp African states honestly
determine the costs and benefts
of various forms of integration,with an eye toward the primarygoal behind integration:economic development.The views expressed here are the views of the authors alone
and do not necessarily reect
 the stance of the GermanMarshall Fund of the UnitedStates.
Regional Integration in a Global Context:Implications for Sub-Saharan Africa
By Dr. Kathleen J. Hancock 
1744 R Street NWWashington, DC 20009T 1 202 683 2650F 1 202 265 1662E info@gmfus.org
July 26, 2011 Number 5
Paper series on transatlantic trade and development policy issues
Te question of Africa’s regional integration has preoccupied many African leaders since the early yearsof independence. Many have viewed it as a tool for promoting economic growth and sustainable development and improving the living standardsof the African people.— Assessing Regional Integration in Africa, IV: Enhancing Intra-Africanrade
. United Nations EconomicCommission or Arica, 2010.
Te European Union (EU) is oenheld up as the most advanced andsuccessul regional economic arrange-ment, the one against which all othersshould be measured. Consciously orunconsciously, Arican states oenautomatically pursue a model basedon the EU when working to inte-grate Arica’s economies. Te EUmodel, as used here, reers to usingsupranational and intergovernmentalstructures to achieve deep levels o economic integration, includingcreating a customs union (removingtaris between members and creatingcommon taris or nonmembers), acommon market (allowing workers tomove reely between member statesand enacting common economicpolicies), and a monetary union(sharing a single currency and centralbank). Aricas small and ragmentedeconomies must pursue some orm o cooperation in order to attract invest-ment and increase trade necessary oreconomic growth and development.However, the EU may be the resulto a highly unusual agreement orgedduring a unique historical period, andthereore may be a poor model orsub-Saharan Arica.Tis policy brie compares theounding conditions, processes, andstructures o the economic agree-ments in Arica with those or theEU, and explores alternative paths orregional cooperation. Particularly ina time o tight budgets or develop-ment support, transatlantic partnersshould help Arican states honestly determine the costs and benets o  various orms o integration, with aneye toward the primary goal behindintegration: economic development.
Types of Regional EconomicIntegration
As o May 2011, the World radeOrganization reported that stateshave signed 371 regional trade agree-ments (RAs), suggesting widespread
economic regionalism.
However, these gures can behighly misleading. Many o the agreements are not inorce. Furthermore, most are shallow rather than deeporms o integration. (Figure 1 shows how agreements vary depending on depth.) O the 193 in orce, 90 percentare ree trade agreements or partial trade agreements,many o which ocus on a handul o sectors or industries.Most o these are not “regional” in the common use o theterm; that is, the member states do not share borders. Inaddition, many o these accords involve only two states.Further, the vast majority o RAs aspire to nothing moresignicant than a marginal increase in trade between part-ners. Members have no intention o deepening integrationto levels nearly as signicant as in the EU.Te remaining 10 percent o RAs are customs unions, amuch deeper orm o integration. Under these accords,members create not only a ree trade agreement — elimi-nate all or nearly all taris among themselves — but alsoset common taris or nonmembers. O the 21 customsunions reported by the WO, seven are either the Euro-pean Community (EC) itsel or EC enlargements and threeothers are EC agreements with other states (Andorra, SanMarino, and urkey).Tis leaves only 11 customs union agreements that donot involve the EC/EU. Interestingly, nearly hal o theseare in Arica: the East Arican Community (EAC); theEconomic and Monetary Community o Central Arica(
Economique et Monétaire l´Afrique Centrale
CEMAC); the Economic Community o West AricanStates (ECOWAS); the Southern Arican Customs Union(SACU); and the West Arican Economic and Monetary 
To see the WTO’s database on regional trade agreements, visit the Regional TradeAgreements Information System (RTA-IS): http://rtais.wto.org/UI/PublicMaintainRTA-Home.aspx.
Union (WAEMU). Tis list suggests that Arica is moreinstitutionally economically integrated than many Ari-cans and Westerners may have thought. Many aspects o these agreements have yet to be implemented; nevertheless,their numbers and content suggest signicant aspirationsor deep economic regionalism in Arica. Tis ambition isembodied in the Arican Unions stated mission o eventualcontinental integration.
Regional Integration in Comparative Perspective
Sub-Saharan Arica’s ormal regional integration agree-ments are importantly rooted in its colonial history, whichdiers markedly rom Europe’s history. Tis raises theundamental question o whether deep regional integrationusing the EU model is the best way to achieve developmentgoals or Arica.
 Africa’s History with Deep Regional Integration
While some Arican nationalists (and pan-nationalists)may be loathe to raise the point, many trade and currency accords in Arica are based on a colonial past. Aerindependence, many o the Arican states opted to remainmembers o these institutions. wo cases illustrate thispoint: CEMAC and SACU.CEMAC’s history begins with two organizations datingrom French colonial rule: the
 Afrique Occidentale Fran-çaise
(AOF), created in 1989, and the
 Afrique EquiatorialeFrançaise
(AEF), created in 1910.
In 1945, the Frenchcreated the
Colonies Française d’ Afrique
 When the Arican members became independent in 1962,they retained the CFA rancs and the state groupingscreated during the colonial period. Until the economiccrisis in the 1990s, the two CFA rancs maintained a xedexchange rate with the French ranc, essentially delegatingmonetary policy to France. Tis was a voluntary action,meant to stabilize the CFA rancs and thus encourageinvestment, a standard recommended practice or states vulnerable to crippling ination. Eventually, however,the crisis became so severe that the states were orced todevalue in 1994. Te present-day CEMAC aspires to a
 Ali Zafar and Keiko Kubota, “Regional Integration in Central Africa: Key Issues,”in
 Africa Region Working Group Series
(New York: World Bank, 2003).
France created the CFA to preserve the exchange rates for the two African groups with the dollar while it devalued the French franc. Although the African states haveretained the acronym CFA, in the Central African states it stands for
Coopération Financière Africaine
, whereas in West Africa it stands for
Communauté Financière Africaine.
    D   e   p   t   h   o   f   I   n   t   e   g   r   a   t   i   o   n
Political UnionEconomic UnionCommon MarketMonetary Union(Dollarization)Customs UnionFree Trade AreaCurrency BoardPreferential Trade AreaPegged CurrencyHigh Trade LevelsHigh Levels oForeign Currency
Trade Mone
Figure 1: Depth of Integration
ull economic community, though thus ar not even thecustoms union is in place.Like the CEMAC, the SACU has colonial roots. Foundedin 1910, which makes it the oldest customs union today,the SACU was created by the British in the same treaty thatdeclared South Arica an independent country. Te annexorming the SACU stated that South Arica would set thetaris and other trade policies as well as collect taris oritsel and Britain’s three Arican-ruled High Commis-sion erritories. Te taris collected by South Arica atits borders and those o the three territories, which laterbecame known as BLS — Botswana, Lesotho, and Swazi-land (BLNS when Namibia joined) — were redistributedto the member states, providing sufcient unding to runthe erritories’ governments. When the territories becameindependent states, they were given the choice o creatingtheir own currencies and trade policies, or remaining parto the SACU. All members opted to remain part o thecustoms union; only Botswana opted out o the CommonMonetary Area, under which the South Arican rand istraded in all countries and the smaller states’ currenciestrade at par with the rand.
Governance Structures: Regional Plutocracy
One eature oen considered critical to the EU’s successis its use o supranationalism combined with intergovern-mental governance structures. Under supranationalism,states delegate policymaking to a third party and themembers agree to abide by the supranational organization’sdecisions. Te European Court o Justice and the EuropeanParliament are primary examples o supranationalism.Under intergovernmental structures, states delegate admin-istrative responsibilities to a bureaucracy while retainingindependent policymaking authority. Bureaucracies inu-ence policymaking through agenda setting, or example,but member states do not delegate policymaking itsel. Tatis le to political leaders rom the individual states whobargain with each other over policies.While supranational and intergovernmental accords arenow well known, a third type o structure — plutocratic —has been largely ignored, despite the act that it has playeda critical role in several important integration eorts,including in Arica. Under plutocratic structures, statesdelegate policymaking to the wealthiest state among them
The other currencies are the Namibian dollar (NAD), the Basotho loti (LSL), Swazililangeni (SWL), and the Botswana pula (BWP).
— the plutocrat — in exchange or the plutocrat supplyingimmediate economic benets to the other members.Te most important integration agreement, as measuredby its success in becoming a single political entity, was theZollverein, ormed in early 1800s Europe. Te Zollvereinwas a customs union that started between Prussia andanother German-speaking state and ended in the unica-tion o all German-speaking states except Austria.
TeZollverein initially used plutocratic accords, eventually switching to supranational and intergovernmental accords.Russia used similar structures in the customs union itcreated with Belarus and Kazakhstan in the 1990s, nowknown as the Eurasian Economic Community (EAEC).Like the Zollverein, the EAEC has since transitioned tointergovernmental structures.
 Te CEMAC and SACU regional integration agreementsshare a common ounding process under which a singlewealthy state — colonial powers in the case o thesetwo agreements — created the organizations, requiringmembers to adhere to policies set by either that wealthy state (France in the case o CEMAC), or by the regionalwealthy state (South Arica in the case o the SACU).Te plutocrat’s critical role is its ability to oer nancialrewards to the other member(s). Tis may be throughin-kind contributions, such as access to pipelines oeredby Russia, or by distributing more o the tari revenues tomembers than they would otherwise get on their own, aswith South Arica and the SACU members. In the case o the SACU, the smaller states viewed this quid pro quo higher revenues in exchange or delegated authority — as asmart choice, compared to going it alone or relying only onthe global agreements o the General Agreement on arisand rade (GA) and later the World rade Organization(WO).Why would states agree to enter an accord in which they delegate policymaking to a wealthy state? Tis seems to goagainst nationalist interests and the desire to be autono-mous, something Aricans longed or during the colonialperiod. Yet the German-speaking states in the 1800s andthe ormer Soviet states in the 1990s were equally nation-
Prussia intentionally excluded Austria because it too wanted to unite the Germansunder its leadership.
For more on the three types of structures and for a detailed account of theSouthern African Customs Union, the Zollverien, and EAEC, as well as the reasons why states tend to form different types of structures, see Kathleen J. Hancock,
 Regional Integration: Choosing Plutocracy
(New York: Palgrave, 2009).

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