Feasible Aspects of Regional Integration For Africa SYPALA 2015

What Aspects of Regional Trade Integration are
Feasible for Africa Today?
Presentation by: Patrick K Stephenson

Venue: SYPALA 2015, UGBS
Outline
Key Facts about RI in Africa

Historical Legacy
Africa & RI
Upside of RI
Key Issues for Discussion
The Integration Process
Synopsis of RI from Other Jurisdictions
Outcome of RI efforts in Africa
Feasible Aspects of the RI Model
Feasible Aspects of RI for Africa, 2015
9/28/2015
Key Facts: Historical Legacy

Balkanisation of the African continent: 55 countries,
fragmented and fragile economies (focus on fighting
poverty rather than production)
Permanent situation of insecurity and conflicts: DR Congo,
Madagascar, Mali, Guine Bissau, Sudan, etc.
High
dependence
on
agriculture
development and employment
for
economic
Lack of adequate infrastructure: high costs of transport

and communication, lack of education and low literacy
level
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Key Facts about Africa and RI

The African Economic Community AEC (Abuja Treaty- 1991)
adopted a six stages roadmap:
Regional Economic blocks (RECs) 1999
Strengthening intra REC integration and intro REC

harmonisation 2007
Establish a continent-wide Customs Union and FTA 2019
African Common Market - 2023

African Economic and Monetary Union with single currency
, plus the Pan African Parliament 2028
Transitional Period for continental integration - 2034 at least

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Key facts: Upside (What has been done)

African Union recognised eight RECs as pillars of the AEC: CEN-SAD,
COMESA, EAC, ECCAS/CEEAC (CEMAC), ECOWAS (UEMOA/WAMZ),
IGAD, SADC (SACU), AMU/ UMA
Tripartite FTA signed by COMESA, ESA and SADC: 26 countries
representing half of the continent with a population of more 580 millions
and a combined GDP of 700 Billion USD
Emerging economies: 7 out of 10 worlds fastest growing economies are

in Africa, the prospects of discoveries of extensive mineral resources all
over the continent
Need for a new development model and shift towards Market
Integration, regional infrastructure and fast tract industrial development
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Regional Integration Process
Preferential
Trade Area
(PTA)
Low
Tariffs
between
members
Free
Trade
Area
(FTA)
No
Tariffs
between
members
Customs
Union
(CU)
Common
Market
Common
Free
External movement
Tariffs of factors of
production
Economic
Union
Unified
monetary
and fiscal
policies
Political
Union
Ultimate
stage: cession
of sovereignty
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Eccentric Focus of RI; Redefine???

7
Free-Trade Area
Customs Union
Common Market
Economic Union
Political Union
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Why Regional Integration (Pros & Cons)

PROS
Foster competiton
Access to wider markets
Diversified investment and production
Socioeconomic policy harmonization
Infrastructure development
Defense, peace, governance and security
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Key Issues for Discussion

Understand the different levels of economic
INTEGRATION among nations
What are the POLITICAL and ECONOMIC
arguments FOR and AGAINST regional integration?
What are the IMPLICATIONS for business from
regional economic integration?
What should be the course of ACTION for Africa?
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10
SYNOPSIS OF RI IN OTHER JURISDICTIONS
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11
The EUROPEAN UNION

15 member countries; 350mm people; GDP > US
1951 6 members of coal and steel community
France, Germany (W.), Italy, Belgium, Netherlands,
Luxembourg
1957 Treaty of Rome: European Community

Common market
Elimination of internal trade barriers

Common external tariff
Free movement of factors of production
1973 1st enlargement: Britain, Ireland, Denmark

9/28/2015
12
The EUROPEAN UNION

1981 2nd enlargement: Greece
1983 3rd enlargement: Portugal, Spain
1992 single European act
Remove all frontier controls
Principle of mutual recognition to product standards
Open public procurement to non-national suppliers
Lift barriers of competition to banks and insurance
Remove restrictions on foreign exchange transactions
Abolish restriction on cabotage (trucking)
1994 Maastricht treaty: European Union

1996 4th enlargement: Austria, Finland, Sweden
2002 5th enlargement: Cyprus, the Czech Republic, Estonia,

Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic
and Slovenia conclude accession agreements.
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The EURO ()
13
Maastricht treaty:
European common currency adopted 1/1/99
Common foreign and defense policy
Common citizenship
EU parliament with teeth
now used by 28 countries (x-Sweden,

Denmark, Britain)
Currency was issued 1/1/2002 and 12
national currencies were withdrawn by April
2002
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14
The AMERICAS
North American Free Trade Agreement (NAFTA)
USA, Mexico, Canada
The Andean Pact

Bolivia, Chile, Ecuador, Colombia, Peru
MERCOSUR (FTA)
Brazil, Argentina, Paraguay, Uruguay
Central American Common Market (CARICOM)

Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua
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15
The AMERICAS
North American Free Trade Agreement (NAFTA)
Andean Community
Latin American Integration Association (ALADI)
Southern Common Market (MERCOSUR)

Central America and the Caribbean
Free Trade Area of the Americas (FTAA)
Transatlantic Economic Partnership (TEP)
9/28/2015
16
ASIA
Association of Southeast Asian Nations (ASEAN)
Brunei, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand, Vietnam
Asia Pacific Economic Cooperation

USA, Japan, China + 15 Pacific nations
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Outcome of RI Efforts in Africa
17
9/28/2015
18
Exports
Libya
Algeria
Cote dIvoire Ghana
Egypt
Nigeria
Cameroon
Kenya
Total imports in US$ (not to scale), 2011
Zambia
Crude & petroleum products
Metals, ores & precious stones
Timber & wood products
Cocoa, coffee & tea
Cotton
Angola
9/28/2015
South Africa
18
19
Imports
Libya
Algeria
Cote dIvoire Ghana
Egypt
Nigeria
Cameroon
Kenya
Total imports in US$ (not to scale), 2011
Zambia
Machinery, vehicles & electronics
Iron & steel
Cereals & flour
Sugar
Angola
9/28/2015
South Africa
19
Commodity exporters dominate trade volumes

20
The oil & gas exporters run large trade surpluses
Total trade, US$ million, 2011
Country
Exports
Imports
Total trade
Algeria
Angola
Cameroon
CDI
Egypt
Ghana
Kenya
Libya
Nigeria
South Africa
Zambia
73,562
59,349
4,387
11,049
30,782
7,988
5,853
18,266
95,199
92,976
8,954
46,426
15,181
4,187
6,720
59,269
12,341
15,028
6,084
43,389
99,726
7,149
119,988
74,530
8,574
17,769
90,051
20,330
20,881
24,350
138,588
192,702
16,102
Trade
balance
27,136
44,168
200
4,329
(28,487)
(4,353 )
(9,174 )
12,182
51,811
(6,750 )
1,805
South Africa has by far the largest trade volumes, followed by Nigeria & Algeria
Oil exporting countries run healthy trade surpluses, with the exception of Cameroon
Egypt has the largest trade deficit, followed by Kenya, South Africa & Ghana
9/28/2015
EU, China and USA dominate bilateral trade

21
Africas key trade partners, 2011
Country
EU
Africas trade with the world, 2011
Exports to Imports from

Africa
Africa
(US$ m)
(US$ m)
Bilateral
trade
(US$ m)
186,387
206,125
392,512
China
85,212
113,136
198,348
Other Africa
70,191
63,024
133,215
USA
32,845
68,522
101,367
India
23,346
39,780
63,126
Brazil
12,210
14,266
26,476
Others
125,231
89,131
214,362
World
535,422
593,984
1,129,406
% of
total
34.8%
17.6%
11.8%
9.0%
5.6%
2.3%
19.0%
100.0%
19%
35%
2%
6%
9%
12%
EU
USA
Others
17%
China
India
Other Africa
Brazil
Intra-regional trade totalled US$133bn in 2011, just 11.8% of Africas trade with
world
Although it has grown from 4% in 1960, it is still below the peak of 15% in 1997
Key trade partners are the EU (35%), China (18%) and the USA (9%)
Africas share of world trade is just 3.1%, a proportion that has been stable for years
9/28/2015
Africas Intra-regional Trade Is Poorly Developed

22
Intra-regional and extra-regional trade
US$ billion & %, 1990-2009
Source: World Bank.
9/28/2015
23
Intra-African exports
Maghreb
WestAfrica
EAC

Metals, ores & precious stones
Food products
Cash crops
SADC
9/28/2015
Intra-African Imports
24
Maghreb
WestAfrica
EAC
.

Food products
SADC
Iron & steel

Cement
9/28/2015
SADC dominates intra-African trade

25
West Africa is more focused on crude oil exports

Share of Africas trade with world, 2011
Share of Africas intra-regional trade, 2011
Maghreb
13%
18%
West Africa
Central Africa
46%
44%
32%
24%
EAC
4%
5%
SADC
7%
7%
SADC dominates external and intra-regional trade flows

Nigerias share of intra-regional trade is smaller than its external trade, reflecting the
dominance of hydrocarbons in the countrys exports
9/28/2015
But few have well developed intra-regional trade links

26
Commodity exporters contribute little to intra-regional trade

Top 20 African traders, US$ billion, 2011
200
150
100
50
9/28/2015
Landlocked countries drive intra-regional trade

27
Top 20 African countries intra-regional trade, US$ billion, 2011
Country
Total intra-African
trade
Mali
Zimbabwe
Namibia
Rwanda
Cte dIvoire
Botswana
Zambia
Togo
CAR
Malawi
DRC
Senegal
Niger
Uganda
Burkina Faso
Guinea-Bissau
Mozambique
Kenya
Libya
Cameroon
Burundi
Ghana
1.85
3.49
6.67
0.85
7.20
4.91
5.40
0.69
0.10
1.18
3.54
2.35
0.68
1.74
0.97
0.13
2.01
3.99
4.67
1.61
0.19
4.75
% of countrys
total trade
60.9%
54.0%
54.0%
47.8%
40.5%
37.3%
33.4%
33.2%
32.3%
30.6%
30.5%
27.8%
23.7%
22.3%
20.6%
20.3%
20.3%
19.1%
18.1%
16.9%
15.2%
14.9%
% of regions total
trade
0.5%
0.7%
1.2%
1.7%
1.9%
0.9%
1.0%
0.2%
0.2%
0.2%
6.5%
0.6%
0.2%
3.5%
0.3%
0.0%
0.4%
8.1%
3.0%
3.0%
0.4%
1.3%
9/28/2015
Intra Regional Trade (EAST & SOUTH AFRICA)

28
Intra-regional Trade: Grown by

threefold between 2004 2014,
grew from $30 billion to $102.6
billion:
Comesa: $8 billion to $22 billion.
SADC: $20 billion to $72 billion.
EAC: $2.6 billion to $8.6 billion.
9/28/2015
29
FEASIBLE ASPECT OF THE RI MODEL
9/28/2015
Feasible Aspects of the RI Model for Africa

30
Preferential
Trade Area
(PTA)
Low
Tariffs
between
members
Free
Trade
Area
(FTA)
No
Tariffs
between
members
Customs
Union
(CU)
Common
Market
Common
Free
External movement
Tariffs of factors of
production
THIS IS A REQUIREMENT
Economic
Union
Unified
monetary
and fiscal
policies
Political
Union
Ultimate
stage: cession
of sovereignty
WHAT LEADERS DREAM
9/28/2015
TRIPARTITE FREE TRADE AREA

31
From Cape Town to Cairo
Possibly the most significant event in

Africa since the formation of the
Organization of African Unity in
1963.
The TFTA covers a population of 632
million and a combined GDP of $1.3
trillion. The area spans 17.3 million
square kilometers, which is nearly
twice the size of China or the United
States.
9/28/2015
32
TFTA Contd
The TFTA will benefit Africa in at least six mutually reinforcing ways
The conclusion of the agreement will generate the impetus for the creation of similar
arrangements in western Africa, bringing economic powerhouses such as Nigeria into
a continental free trade area.
A much larger market whose free flow of goods and services will help to maintain
economic growth at 67% per year. At this rate the combined GDP of Africa is
projected to reach $29 trillion by 2050, which would be equal to the current
combined GDP of the EU and the US. With additional policies, such growth will
contribute significantly to spreading prosperity and reducing poverty.
The TFTA will serve as an impetus for investment in Africa's cross-border infrastructure. It
is estimated that Africa needs to invest nearly $100 billion annually in infrastructure
over the next decade. Less than half of this target is met currently.
9/28/2015
TFTA Contd
33
The prospects for the larger markets and supporting infrastructure will spur
industrial development. The associated technological development will
lead to the creation of new industries.
The signal of larger markets will also help to stimulate trade in services. The
first beneficiary is likely to be the financial sector, which will be able to lend
to larger industrialists seeking to benefit from economies of scale. Such
financial services will reinforce the increase in cross-border investments by
emerging African firms that are serving as regional champions of industrial
development.
By being part of larger markets small African countries will no longer be
restricted to producing their traditional products. With better policies and
human resources they can become the locus of new manufacturing
operations that serve wider markets.
9/28/2015
34
Costs of Inaction!!!
Over US$ 138 Billion lost through corporate tax incentives as a result of
racing to the bottom
Its enough to put every primary school aged child in school, meet all the
health-related Millennium Development Goals, and invest in the agricultural
programmes needed to end hunger
Kenya loses net of US$ 3Billion Dollars
Ghana loses net of US$ 2.27Billion Dollars
Net negative benefits from trade agreements with other trade partners
Loosing out on the pros of globalization; which cannot be afforded
Strategies for dealing with current security threats across the Continent
9/28/2015
Thank You
35
9/28/2015

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What Aspects of Regional Trade Integration are

Feasible for Africa Today?

Presentation by: Patrick K Stephenson

Key Facts about RI in Africa

Key Issues for Discussion

The Integration Process

Synopsis of RI from Other Jurisdictions

Outcome of RI efforts in Africa

Feasible Aspects of the RI Model

Feasible Aspects of RI for Africa, 2015

Key Facts: Historical Legacy

Lack of adequate infrastructure: high costs of transport

Key Facts about Africa and RI

Strengthening intra REC integration and intro REC

African Common Market - 2023

Transitional Period for continental integration - 2034 at least

Key facts: Upside (What has been done)

Emerging economies: 7 out of 10 worlds fastest growing economies are

Regional Integration Process

Feasible Aspects of RI for Africa, 2015

Eccentric Focus of RI; Redefine???

Feasible Aspects of RI for Africa, 2015

Why Regional Integration (Pros & Cons)

Feasible Aspects of RI for Africa, 2015

Key Issues for Discussion

SYNOPSIS OF RI IN OTHER JURISDICTIONS

Feasible Aspects of RI for Africa, 2015

The EUROPEAN UNION

1957 Treaty of Rome: European Community

Elimination of internal trade barriers

1973 1st enlargement: Britain, Ireland, Denmark

The EUROPEAN UNION

1994 Maastricht treaty: European Union

2002 5th enlargement: Cyprus, the Czech Republic, Estonia,

now used by 28 countries (x-Sweden,

The Andean Pact

Central American Common Market (CARICOM)

Feasible Aspects of RI for Africa, 2015

Southern Common Market (MERCOSUR)

Transatlantic Economic Partnership (TEP)

Feasible Aspects of RI for Africa, 2015

Asia Pacific Economic Cooperation

Feasible Aspects of RI for Africa, 2015

Outcome of RI Efforts in Africa

Feasible Aspects of RI for Africa, 2015

Cote dIvoire Ghana

Total imports in US$ (not to scale), 2011

Feasible Aspects of RI for Africa, 2015

Cote dIvoire Ghana

Total imports in US$ (not to scale), 2011

Feasible Aspects of RI for Africa, 2015

Commodity exporters dominate trade volumes

EU, China and USA dominate bilateral trade

Africas key trade partners, 2011

Africas trade with the world, 2011

Exports to Imports from

Africas Intra-regional Trade Is Poorly Developed

Source: World Bank.