KATALA Kao

Research project
Theme: Regional Economic Communities: W hat importance in the
intensification of trade under the African Continental Free Trade Area.

1- Introduction
Doesn't the implementation of the AfCFTA come up against the
existence of Regional Economic Communities? Promoting inter-state
cooperation and integration has always been one of the major concerns of our
African leaders. This desire originated already in the sixties with
independence, where we witness the creation of many Re gional Economic
Communities (RECs). When the OAU became part of the African Union in
2002, only eight regional economic communities were officially recognized,
namely: the Arab Maghreb Union (AMU), the Community of Sahelo-Saharan
States (CENSAD), the Common Market for Eastern and Southern Africa
(COMESA), the East African Community (EAC), the Economic Community of
Central African States (ECCAS), the Economic Community of West African
States (ECOWAS), the Intergovernmental Authority on Development (IGAD)
and the Southern African Development Community (SADC); passing off other
Communities such as the West African Economic and Monetary Union and
the Central African Economic and Monetary Community (CEMAC) as
unofficial arrangements. This aspiration for regional integration is also
reflected in Agenda 2063: "The Africa We Want", which cites the desire of
African Union member states to achieve by 2063, "an integrated, prosperous
and peaceful Africa, led by its own citizens, and representing a dynamic force
on the world stage". The multiplicity of RECs shows how States attach
paramount importance to the development of their countries through these
RECs. Thus, each country, depending on its geographical position and
interests, seeks to integrate the RECs as much as possible to maximize its
interest. It is in this sense that a vision beyond the sub-regional level was
announced in 2018 seeking a gradual integration of the entire African
continent: This is the African Continental Free Trade Area (AfCFTA). This
project involves connecting more than 1.3 billion people accross 55 countries
with a combined GDP of $3.4 trillion and a positive impact of lifting more than
30 million people out of extreme poverty by 2035 (World Bank 2020). Indeed,
most African countries are characterized by low middle incomes and therefore
need access to large markets in order to experiment with economies of scale
(McKay et al 2022). Thus, the AfCFTA comes in this perspective, strengthen
inter-African trade ties in order to promote the development of the
continent. For trade in goods and services, the agreement aims to eliminate
tariffs on 90% of product categories (Lo 2022), leaving the remaining 10% to
sensitive product categories for which countries will be given more time before
liberalizing them (Jaldi 2O21). This elimination of tariffs at the continental
level had already been undertaken at the sub-regional level by the RECs with
the aim of also developing their respective sub-regions through multilateral
cooperation. Despite the large number of RECs and the growing ambition of
recent initiatives, the actual achievements of many have always been limited
and disappointing since the liberalization measures needed to make them
effective have often not been implemented (Mc Kay & al). It is in this sense
that we considered it interesting to bring together the existing RECs and the
new emerging RECs with the aim of achieving a transition towards a more
realistic and advantageous integration for all African countries. We therefore
title the theme: "Regional Economic Communities: What importance in the
intensification of trade under the African Continental Free Trade Area.
The main implicit question can be formulated as follows: What is the
importance of the RECs in intensifying trade between AfCFTA
countries? Specifically, it is first of all a question of assessing the impact of
the cancellation of sub-regional trade tariffs on the level of trade and,
secondly, of analyzing the effects of trade facilitation on intra-regional trade.

2- Specific objectives and research hypotheses:

In this analysis, we propose objectives developed as follows:
Objective 1: To assess the impact of cancelling trade tariffs on the level of
trade.
Objective 2: To analyze the effect of trade facilitation on the level of trade.
The assumptions relating to the above objectives are formulated as follows:
H1: The cancellation of trade tariffs has a positive impact on trade.
H2: Trade facilitation has a positive impact on trade.

3- Literature review:
Bruce Biyers and Sean Woolfrey's paper is a conceptual analysis studied in the
specific case of Nigeria using a two-tiered set of political economy factors that
determines the extent to which a country implements a regional trade
agreement. Alemayehu Geda and Addis Yimer present an empirical analysis to try to
estimate the likely impact of the AfCFTA on intra-African merchandise trade. First,
they use an indicator-based approach to trade indicators to try to estimate trade
creation and diversion; This analysis suggests that trade diversion dominates and
that trade liberalization measures alone may have limited short-term benefits.
Karishma Banga and Neil Balchin's paper examines opportunities for producers
in Southern African countries to provide intermediate inputs for South African
exports. They analyze the top ten categories of finished goods exports to South Africa,
using two measures of competitiveness, and find that, in different regions, Botswana,
Namibia, Zambia and Mozambique can provide intermediate inputs on a competitive
basis. The article by Maureen Were and Maureen Odongo examines the relative
importance of trade in services in trade for sub-Saharan Africa, with a focus on the
competitiveness and diversification of services exports. Measures of comparative
advantage revealed show that sub-Saharan Africa has no comparative advantage in
modern commercial services, having only a comparative advantage in traditional
tourism and transport services. However, the region's share of world services exports
remains minimal.
The paper by Ebo Turkson, Abena D. Oduro, Priscilla Twumasi Baffour and Peter
Quartey takes a continent-wide perspective and examines the impact of past regional
integration agreements as well as other factors such as financial integration and
factors that can be understood as general non-tariff barriers to trade such as
distance, landlocked or language differences influence trade flows between sub-
Saharan African countries. The authors include these factors as explanatory
variables in a gravitational model of bilateral trade flows among 43 sub-Saharan
African countries from 1960 to 2015. Participation in RECs in general has a
significant positive impact on trade flows, but in terms of specific agreements, this is
particularly notable for SADC and ECOWAS among those considered.

4- Research methodology:
In order to answer the questions raised by our analysis, we can first ask
ourselves how to measure the level of trade. Indeed, the latter can be
measured via the combination of the level of exports and that of
imports. Theoretically, the level of trade can be explained by: The level of
consumption, income, trade policy, trade facilitation, productive capacity,
quantity and/or quality of infrastructure as well as the level of trade
credits. By naming each variable respectively conso, rev, poca, faco, capro,
infra, and creco, we can model the problem in the following form:

ln(𝑋𝑖𝑡 + 𝑀𝑖𝑡 ) = 𝛽0 + 𝛽1 𝑙𝑛𝑐𝑜𝑛𝑠𝑜𝑖𝑡 + 𝛽2 𝑙𝑛𝑟𝑒𝑣𝑖𝑡 + 𝛽3 𝑙𝑛𝑑𝑒𝑝𝑢𝑏𝑖𝑡 + 𝛽4 𝑙𝑛𝑝𝑜𝑐𝑎𝑖𝑡 +

𝛽5 𝑙𝑛𝑓𝑎𝑐𝑜𝑖𝑡 + 𝛽6 𝑙𝑛𝑐𝑎𝑝𝑟𝑜𝑖𝑡 + 𝛽7 𝑙𝑛𝑖𝑛𝑓𝑟𝑎𝑖𝑡 + 𝛽8 𝑙𝑛𝑐𝑟𝑒𝑐𝑜𝑖𝑡 + 𝛾𝑡 + 𝜃𝑖 + 𝜀𝑖𝑡 (1)

In this model, X and M represent respectively the level of exports and

imports by Regional Economic Community; conso, the level of consumption of
the regional economic communities; rev, the average income of the Poca RECs
represents the trade policy materialized by the effective average level of taxes
between regions; FACO trade facilitation reflecting customs clearance time
and administrative burden; capro, the productive capacity of companies
allowing them or not to conquer markets; infra involving the state of
infrastructure; creco, the level of trade credits stimulating trade; γ and θ are
variables used to capture respectively the variations in trade linked to time
and the variations linked to the different characteristics of the Community
areas; ε represents the term error.
Data source:
All of our data come from the World Bank database from 1990 to 2018 and
covers all 8 Regional Economic Communities namely AMU, CEN-SAD,
COMESA, ECAS, ECOWAS, IGAD and SADC.

5- Expected results:
At the end of this study we hope to find results that more or less corroborate
with economic theories of trade. These claims are expressed in the following
table :
 𝑐𝑜𝑛𝑠𝑜 𝑟𝑒𝑣 𝑝𝑜𝑐𝑎 𝑓𝑎𝑐𝑜 𝑐𝑎𝑝𝑟𝑜 𝑖𝑛𝑓𝑟𝑎 𝑐𝑟𝑒𝑐𝑜
X+M + + +/- + + + +/-

References

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