CHAPTER 1. Introduction
- Sanjeev Gupta, and Yongzheng Yang
- Published Date:
- September 2005
Africa is home to some 30 regional trade arrangements (RTAs), many of which are part of deeper regional integration schemes.1 On average, each African country belongs to four RTAs (World Bank, 2004). There has been a renewed push in recent years for broader and deeper preferential trade arrangements in Africa. Some of the previously defunct regional arrangements (e.g., the East African Community) have been revived, while continental institutions—namely, the African Economic Community (AEC), the African Union, and the New Partnership for Africa’s Development (NEPAD)—have been launched under the auspices of the Organization of African Unity (OAU). In addition, African countries are preparing to negotiate FTAs with the European Union (EU) under the Economic Partnership Agreements (EPAs). The Southern African Customs Union (SACU) is negotiating an FTA with the United States. South Africa, the largest African economy, has already signed an FTA with the EU.2
The push for RTAs in Africa has occurred against the backdrop of increasing regionalism worldwide and the ongoing Doha Round of multilateral trade negotiations. The EU is poised to expand further (e.g., with Bulgaria and Romania’s prospective accession) after admitting 10 new members from Central and Eastern Europe in May 2004, while countries in the Americas have been negotiating a hemisphere-wide FTA that would include all democracies in the region. In Asia, regionalism has finally gathered momentum, with the major countries in that region (e.g., Japan, China, India, and Korea) rigorously pursuing preferential trade arrangements, which may eventually lead to an Asia-wide trade bloc. On the multilateral front, the Doha Round has moved slowly. Despite the framework agreement reached in August 2004, it will be difficult to conclude the round by the end of 2005, as originally scheduled.
A key challenge facing Africa is to determine the priorities in its trade policy among competing demands on the unilateral, regional, and multilateral fronts. The preferred course of action will have to be based on both past experiences of RTAs in Africa and elsewhere and an examination of the pros and cons of the various options in moving forward. In this regard, this paper intends to accomplish three tasks. First, it discusses the global trend toward regionalism, the challenges it poses for African trade policy, and the salient features of African RTAs (Chapter 2). The paper then goes on to analyze the effectiveness of the arrangements in achieving their stated objectives (Chapter 3) and explore trade policy priorities and strategies for trade promotion (Chapter 4). This is followed by a discussion of the role of the IMF in helping African countries set these priorities and accelerate trade growth (Chapter 5). The paper offers conclusions in Chapter 6.
The RTAs discussed in this paper include both free trade agreements (FTAs) and customs unions (CUs). Many regional integration schemes in Africa have monetary and economic union dimensions (i.e., monetary union, common market, and economic union)—the so-called deep integration, which involves not only the removal of traditional trade barriers (e.g., tariffs) but also the elimination of other barriers to the free movement of goods, services, and factors and the harmonization of economic policies and regulatory regimes. This paper focuses exclusively on the trade aspects of African regional integration schemes. The term “regionalism” is used to refer to both multicountry and bilateral RTAs.
The South Africa–EU FTA applies de facto to all members of SACU by modifying SACU’s common external tariff to establish preferential tariffs for imports from the EU. The modification enabled South Africa to sign the FTA with the EU while being a member of SACU.