Abdalla Hamdok - UNECA 23rd Annual Conference Regional Cooperation Peace & Development: Issues & Lessons for MENA Amman, Jordan 18-20, 2017 www.erf.org.eg

1. ECA
How regional
cooperation
evolved in
practice
March 18-20, 2017
Oman, Jordan
Economic Research Forum 23rd
Annual Conference
1
Dr. Abdalla Hamdok
Executive Secretary, a.i.

2. How regional cooperation evolved in practice
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Outline
 Challenges of RTAs
 Africa’s regional integration efforts
 Key features of RTAs
 Potential for RTAs to support growth

3. How regional cooperation evolved in practice
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Introduction
 RTAs give rise to trade-offs: there are gainers and
losers
 Africa stands to benefit fromregional trade agreements
 There is a wide variety of RTAs worldwide that differ in
terms of their ambition and development over time
 RTAs use various mechanisms to ensure that all members
benefit – Africa has used a variety of these

4. ECA
Challenges of RTAs
How regional cooperation evolved in practice

5. How regional cooperation evolved in practice
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CHALLENGES WITHRTAs (1/2)
TRADE AGREEMENTS PRODUCE
 Trade creation (trade becomes possible where it was not
before, enhancing efficiency)
 BUT also trade diversion (preferences vs third countries
means that imports may be sourced from less efficient
producers)

6. How regional cooperation evolved in practice
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CHALLENGES WITHRTAs (2/2)
Trade agreements give numerous rise to trade-offs with
gainers or losers– consistent finding across theoretical
models of international trade
Those employed in sectors that become uncompetitive
(outside of comparative advantage) lose employment, even
as other sectors expand

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RTAs BENEFIT AFRICA
Diversity of African economies (manufacturing hubs, natural
resource producers, agrarian economies, services hubs) means
plenty of potential for gains from trade
Costs of intra-African trade currently very high – including
tariffs (intra-African average applied tariffs faced greater than
those faced vis-à-vis rest of world)
This potential is unexploited (intra-African trade share in
Africa’s total trade is low)

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GREATERINTRA-AFRICAN TRADE POISED TO
SUPPORT INDUSTRIALIZATION
Intra-African trade relatively industrialized (40 per cent of intra-
African trade in goods is manufactured products)
Removal of barriers should allow African manufacturers to
capture even more market share
ECA modelling work shows increase of $60 bn in Africa’s
manufacturing exports as a result of CFTA + trade facilitation
reforms

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MILESTONES OF AFRICA’S INTEGRATION
VISION
The Lagos Plan of action was launched in 1980 - a critical agreement in the
history of regional integration
The Abuja Treaty was signed in 1991- the most important agreement as it
lays out the guiding principles to establish an African Economic Community
The New Partnership forAfrica’s Development (NEPAD) was ratified by the
African Union in 2002, in Durban : a comprehensive and integrated
development plan.
Agenda 2063 was adopted at the African Union Summit in January 2015, in
Addis Ababa : the continental, sequenced, forward-looking vision for the next
fifty years.

10. How regional cooperation evolved in practice
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MAPOF AFRICA’S REGIONAL ECONOMIC
COMMUNITIES : Building blocks forRegional
Integration

11. Phases Duration Key milestones
First stage 1994–1999
•Strengthening of existing regional economic communities; establishing new
regional economic communities in regions where they did not exist previously
Second stage 1999–2007
•Stabilization of tariff and non-tariff barriers, customs duties and internal taxes in
each regional economic community
•Schedules for the removal of such barriers
•Harmonization of customs duties
•Strengthening of sector integration
•Coordination and harmonization of the activities of regional economic communities
Third stage 2007–2017
•Establishment of a free trade area and customs union in each regional economic
community, leading to a CFTA
Fourth stage 2017–2019
•Coordination and harmonization of tariffs and non-tariff systems among regional
economic communities, leading to a continental customs union
Fifth stage 2019–2023
•Common sector policies
•Harmonization of monetary, financial and fiscal policies
•Free movement of persons and rights of residence and establishment
Sixth stage 2023–2028
•African Common Market
•Pan-African Economic and Monetary Union
•African Central Bank
•Pan-African Parliament
•Development of African multinational enterprises
ECAAdaptation of the six successive stages envisaged by the
Abuja Treaty in view of establishing the African Economic
Community

12. ECA
Key features of regional
trade agreements
How regional cooperation evolved in practice

13. How regional cooperation evolved in practice
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REGIONAL TRADE AGREEMENTS ARE MANY AND
DIVERSE (1/2)
 Include APTA, ASEAN, CARICOM, COMESA, EAC, ECOWAS,
EU, Eurasian Economic Union, GAFTA & customs union,
MERCOSUR, NAFTA & SADC.
 Bring together developed and developing, least developed,
landlocked developing countries
 Differ in terms of ambition: some stop at FTA, others take FTA+
measures on services, NTBs etc; others proceed to customs
union, common market

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REGIONAL TRADE AGREEMENTS ARE
MANY ANDDIVERSE (2/2)
 Some FTAs are subregional building blocks to achieve a
larger regional or mega-regional FTA
 e.g. : Treaty Establishing the African Economic Community
foresees subregional customs unions to be combined into a
continental customs union

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ESSENTIAL TOENSURE THAT ALL MEMBERS
BENEFIT
 Given the economic diversity of economies brought together in
RTAs, flanking measures are sometimes necessary to ensure
that all benefit
e.g. : EU solidarity fund , COMESA fund for compensation of
tariff revenue losses, Tripartite Free Trade Area – flanking
measures on industrialization and infrastructure development

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DIFFERENCE IN COVERAGE
 Some RTAs only include trade in goods, others include
services and investment
 African CFTA – include services negotiations in parallel with
goods
To ensure that CFTA delivers on industrialization (given
importance of services for manufacturing competitiveness)
 Credibility on industrialization essential for all African
countries to be on board

17. ECA
Role of RTAs in
promoting growth
and peace
How regional cooperation evolved in practice

18. How regional cooperation evolved in practice
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AFRICA’S EXPERIENCE WITHRTAs:
CONTRIBUTION TOGROWTH
 All functioning African RTAs in AU-recognised Regional
Economic Communities experienced significant increases in
real-terms, per capita growth among RTA members after
introduction of RTAs and outstripped growth
 Expected to continue with Tripartite and Continental FTAs

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TRIPARTITE FREE TRADE AREA (1/3)
 Covers 26 countries in Eastern and Southern Africa
 To liberalize 100 per cent of tariff lines (with general, specific
and security exceptions) – 60 – 85 on entry into force, remainder
to be negotiated over 5-8 years
 20 countries offered 100 per cent liberalization on reciprocal
basis
 Mechanism for removing non-tariff barriers

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TRIPARTITE FREE TRADE AREA (2/3)
 Product-specific rules of origin – rules for products covering
50% of trade agreed so far
 Anti-dumping, countervailing & safeguard measures, dispute
settlement body
 Quotas for imports to be eliminated
 Commitments to trade facilitation and transit trade, infant
industry protection and balance-of-payments

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TRIPARTITE FREE TRADE AREA (3/3)
 Second phase of negotiations on services, competition
policy, intellectual property rights, movement of business
persons, inter alia
 Entry into force after ratification of 14 members
 From agreement on trade in goods alone, forecast to
increase intra-regional trade by around 1/3 ($8.5 billion),
mostly in industrial goods, > Also $2.4 billion forecast increase
in welfare

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REGIONAL TRADE AGREEMENTS: ROLE IN
PROMOTING PEACE
 European Union is obvious example: members had fought
each other for centuries since establishment; no interstate
conflict since
 Same is true in Africa : no two African countries have gone
to war while members of the same Regional Trade Agreement
(since 1946) – ECA analysis based on Uppsala Conflict Data
Program

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AFRICA REGIONAL INTEGRATION INDEX:
MONITORING IMPLEMENTATION
 Tool to monitor countries’ progress in implementing regional
integration commitments
 Based on the range of African commitments in legal
instruments
 First edition published in April 2016 – second edition (with
improved methodology) foreseen for April 2018

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CONCLUSION (1/2)
 There are misgivings forRTAs, especially as gainers and
losers are associated with relating trade-offs
 In Africa, there are strong reasons to expect the effect of
RTAs to be overall positive – boost trade and
industrialization
 In view of the wide variety of RTAs, with different scope and
objectives, various mechanisms must be put in place to
ensure that all member benefits from it.

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CONCLUSION (2/2)
 RTAs benefit Africa, and are expected to continue to do so
both in terms of growth and in terms of peace
 Africa Regional Integration Index will track
implementation of regional integration commitments

27. THANKYOU!
ECA
more info:
pmundala@uneca.org
UNECA.ORG