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2021 | Book

The State of the Unions Read chapter Read first chapter

Regional Integration, Trade and Industry in Africa

Author: Prof. Helmut Asche

Publisher: Springer International Publishing

Book Series : Advances in African Economic, Social and Political Development

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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About this book

This book examines the past, present and prospects of regional economic integration in Africa. The empirical analysis ranges from unions formed during the years following independence, to the proposed African Continental Free Trade Area (AfCFTA), which aims to remove trade barriers between all 55 African states. In addition, the book explores to what extent Africa’s Regional Economic Communities (RECs) have advanced in accordance with a linear integration model of goods, labor and capital markets.

The book subsequently evaluates the suitability of the European model of deep integration with costly institutions for the conditions specific to Africa, considering, for example, the role of informal and non-recorded trade. Stylized cases of regional division of labour with increasing returns and imperfect competition are introduced to support the economic integration logic. Past and current economic policies in Africa are scrutinized to answer the question: how can African regions best foster new manufacturing industries and value chains across the continent? In conclusion, the book outlines content and processes of Common Industrial Policy in the African regions. The book also addresses the controversial issue of international trade agreements between developing countries and the European Union or the USA and investigates whether these agreements impede or promote economic development in Africa. The book includes a detailed roadmap describing how to improve key clauses of agreements for economic partnership in the interest of African countries. In closing, it outlines a new vision of joint sustainable development for Africa and Europe.

Table of Contents

Frontmatter

The Economic Regions in Africa

Frontmatter
Chapter 1. The State of the Unions
Abstract
What defines an economic region and distinguishes it from other spatial concepts? This fundamental question is addressed based on the dimensions of space, borders, action and time. An overview of the landscape of African Regional Economic Communities (RECs) follows. RECs are briefly portrayed, and the bewildering multitude of RECs is demystified to create a better understanding of the pattern of economic integration in Africa. The exercise is guided by a matrix of general-purpose versus functional/sectoral as well as effectual versus ineffectual/dormant economic unions. This analysis forms the basis for a critical discussion of the African Union’s practice of only granting official recognition to a subset of RECs. The ‘spaghetti bowl’ of African RECs is disentangled, and an orderly range of the economic unions relevant for general-purpose integration is established. The chapter concludes with a depiction of the factual landscape of economic integration in Africa, which is characterized by a great vertical rift and the challenge to achieve effective trade integration between Northern and Sub-Saharan Africa.
Helmut Asche
Chapter 2. The Logical Sequence of Regional Economic Integration
Abstract
Globally, regional economic communities are classified in what is customarily called the linear model of integration. The question arises as to where African RECs stand on a stylized linear path of economic integration and to what extent this model can provide guidance for further integration steps. The factual nonlinearity of the ‘model’ is discussed and the ensuing challenges for economic integration are identified in terms of monetary unions, non-tariff measures/barriers (with a new typology) and harmonization of standards. In a final step, the ‘model’ itself is amended and critically discussed in the light of the question of whether a scheme largely inspired by the European experience can be followed in Africa.
Helmut Asche
Chapter 3. The Reality of African Trade Integration—Challenges of Implementation
Abstract
In the course of their evolution on the stylized path of economic integration, African RECs face a number of implementation challenges, beginning with a range of typical domestication issues for trade agreements. A fundamental problem is that African regional trade arrangements (RTA) are all based on two GATT/WHO clauses which do not require full internal liberalization. The chapter analyses how RTA implementation on this basis has led to a general logic of exclusions and exemptions in Africa’s trade relations and traces how entrenched empirical practice meant to serve developmental purposes—protection of the weakest economic actors—often caters to vested interests. Inconsistency is aggravated by special features such as bilateral country-to-country agreements within and across RECs, REC overlaps, and the complicated architecture of customs unions. In view of these features, it is difficult to say where present-day African RECs basically stand in their evolution. Therefore, the chapter looks at key indicators in order to gauge trade integration statistically. It is determined that the degree of trade integration is still low by any measure. The continued and as yet under-researched importance of informal cross-border trade (ICBT) is discussed. All evidence considered, African RECs remain contested in theory and practice.
Helmut Asche
Chapter 4. Regional Integration in Trade Theory
Abstract
Given widespread scepticism in trade economics about the value of RECs comprised of developing countries, the formal theory of regional economic integration is critically examined in four stylized configurations. Based on the overarching logic of trade creation and diversion, the usual diagrammatic treatment of tariff effects is critically discussed in terms of its numerous shortcomings. A single-country and REC-wise diagrammatic treatment of tariffs in the presence of increasing returns is proposed to allow quantitative assessment of the arguably most promising case for South-South RECs. Building on the literature, the cases of full and incomplete specialization within a regional group are discussed to capture concentration effects. This analysis is followed by an empirical investigation of the level which African economies have achieved with regard to diversification, specialization and sophistication of products. In addition, it is depicted what drives Africa’s cross-border agricultural trade in homogeneous products, where political concerns for food security intervene. It is concluded that South-South integration may be effective and useful, but it can only function with the help of strong policy coordination.
Helmut Asche
Chapter 5. The Coordination Problem in Regional Integration
Abstract
A catch-22 situation or coordination failure between the slow creation of well-integrated regional markets and low economic diversification (plus sophistication and specialization) is unfolding in Africa. Ubiquitous trade barriers translate into a paradoxical tariff pattern by which African neighbours are treated worse than remote trade partners. In the face of widespread irregularities and high trade costs, ‘trade facilitation’ has become an important technical approach to easing trade with the support of donor agencies. This chapter examines the systemic potential and limits of trade facilitation programmes. As a general alternative to institution-heavy, imperfect integration along the trodden linear path, ‘light integration’ is suggested in parts of the economic literature. The extent to which light integration can avoid the pitfalls of the classical approach is investigated. Dynamic effects are invoked as the last line of defence for the classical model of economic unions but remain contested, as trade research cannot empirically identify them in South-South RECs. The chapter concludes by asking what kind of new economic policy is required to effectively realize such dynamic effects. The answer is given in Part II.
Helmut Asche
Chapter 6. On the African Continental Free Trade Area
Abstract
Africa-wide integration projects have competed with step-wise regional integration since independence. This chapter examines the new project of an African Continental Free Trade Area (AfCFTA). The project’s potential to become an economic game-changer for Africa is analysed alongside the likely pitfalls of the arrangement. We conclude that while a well-staged AfCFTA can resolve a number of critical issues associated with intra-African integration, it cannot replace existing RECs, especially not with respect to negotiating extra-regional trade agreements. It is argued that to avoid undercutting the entire process, the entrenched logic of exceptions and exclusions from tariff liberalization must not be reproduced at the continental level, and a generic developmental set of rules of origin must be defined. The chapter closes with a description of the essential elements that must be included in a higher-order project of economic integration at both the regional and continental level in order to respond to what the literature calls transformative or developmental regionalism.
Helmut Asche

Industrial Policy in the African Regions

Frontmatter
Chapter 7. A Fourfold Justification of Common Industrial Policy
Abstract
Most industries need wider regions to flourish. Conversely, most regions need some industries to grow; few can live on agriculture or services alone. However, the interplay of industries and regions is not yet sufficiently developed in African economic practice. This chapter develops a fourfold technical argument for common industrial policy (CIP) in African RECs. Part of the argument is that African RECs already engage in such joint policies, but under different names and not in the required sequence. The opportunity for a regional union to act as a lock-in mechanism for such structural policies is also discussed. Up until now, advanced economy RECs have viewed CIP as a third-rank policy area. Little can be learnt from them, even after the recent turn towards a new European industrial policy, which is analysed for comparison’s sake. This chapter concludes by arguing that developing country RECs have a greater systemic need than advanced economies for such joint policies to avoid disintegration.
Helmut Asche
Chapter 8. Essentials of Common Industrial Policy
Abstract
A set of sixteen principles of modern industrial policy is derived from the literature for application to entire regions. Such policy strives to create industrial commons and to rectify market failures which cannot reasonably be expected to self-correct over time. This chapter creates a workable typology of genuine regional industries, distinguishing two main types: Type I is the outcome of targeted selection and Type II of broad investment promotion. A ‘dual core’ of both types is appropriate to most African industrial ecosystems. The chapter goes on to clarify the distinction between regional production networks and stand-alone ‘lighthouses’. The incentive system for regional industries is examined, and the distinction between national and regional incentives is elaborated. Practical conflict between allocative efficiency, which most often favours existing industrial hubs in the African regions, and distributive equity is examined. Cross-border policy dialogue has to identify the most binding constraints for new industries at both regional and national levels. This ideal-type policy is juxtaposed against the current practice of ‘buy national’ campaigns in East Africa.
Helmut Asche
Chapter 9. Industrialization Strategies and Regional Actors
Abstract
Against the backdrop of the partly normative, partly empirical policy framework, the major regional industrial policy documents of the African Union, EAC, ECOWAS, SACU and SADC are examined as to their applicability. The empirical cases of the West African dairy and textile value chains are used to discuss the difficulties of regional priority-setting. The precise roles of (a) regional financial institutions, (b) regional development aid, including the panoply of ‘private sector development’ (PSD) projects and (c) regional business associations are defined. A concise summary of the essentials of common industrial policy concludes the chapter.
Helmut Asche

Global Dimensions of Regionalism

Frontmatter
Chapter 10. Shallow and Deep Integration
Abstract
The concepts of shallow and deep economic integration are introduced and discussed as to their pertinence. The conflicting results of successive rounds of global trade negotiations for developing and least developed countries are examined in the context of deep integration attempts in North-South agreements. It is established as a guiding principle that North-South agreements should normally not go deeper or run faster than South-South agreements. In light of observed global trends, upcoming inter-regional trade deals will differ from current preferential North-South trade agreements, and Northern partners will be adamant that future agreements should go deep, as the chapter critically discusses at the example of the three contested principles of comprehensiveness, reciprocity and irrevocability. A short look at the implications for the US–African AGOA arrangement and an introduction to the EU–Africa EPAs concludes.
Helmut Asche
Chapter 11. The EU-Africa Trade Agreements
Abstract
This chapter scrutinizes the successive rounds of EU-Africa agreements and the four-tier preference system of the European Union for developing countries, with special attention to the Economic Partnership Agreements (EPA). Full EPAs and interim EPAs are reviewed in terms of the resulting country configurations in Africa and their impact on the officially intended consolidation of African regional communities. The analysis concludes that the artificial EPA configurations do not correspond to any existing REC in Africa. If they last, they will have a very critical effect on Africa’s regional economic integration, all the more as they start to be emulated in other trade agreements between African and Northern parties.
Helmut Asche
Chapter 12. The Content of Economic Partnership Agreements
Abstract
This chapter contains the second part of exemplary EPA critique related to the content of the treaties. All relevant economic aspects and clauses of the trade-in-goods agreements are critically examined, including the market access offer, quantitative restrictions, trade remedies, export duties and subsidies, national treatment and procurement, and rules of origin. The agreed and proposed clauses are submitted to scrutiny of whether the remaining policy space still allows sensible infant industry protection in Africa. The analysis concludes that some policy space is left for targeted developmental efforts by African governments but is made very difficult in the practical management of the new trade rules. The chapter contains two case studies on global poultry and cashew trade. The overall result of the EPA examination with regard to partnership, development orientation and sustainability is a mixed picture at best.
Helmut Asche
Chapter 13. Final Assessment of the EU-Africa Trade Deals—Ways Out?
Abstract
Based on the emerging country configurations (EPA groups) and the content of the EU-Africa trade arrangements, the chapter reviews the political impasse between the EU and Africa following the highly contested implementation start of the bi-regional trade agreements. Regional economic integration in Africa is considered to be in present danger with regard to the engendered fragmentation of main African RECs, namely the emerging customs unions. Suggestions are reviewed on how these and other North-South agreements can be either replaced by treaties that will be more beneficial for African countries and regions (‘grand alternatives’) or at least substantially improved (‘repair work’). New areas for the intercontinental policy dialogue and for new and better aid for trade are identified.
Helmut Asche
Chapter 14. Conclusion and Outlook
Abstract
The basic line of argument in this text is straightforward. Creating economic unity in Africa has preoccupied political leaders and economic actors since the years of independence. The continent presently has a varied landscape of regional economic communities which is difficult to map. A handful of unions stand out as consolidated institutions. However, all are largely imperfect as to their aspirations to become free trade areas, customs unions or more.
Helmut Asche
Backmatter
Metadata
Title
Regional Integration, Trade and Industry in Africa
Author
Prof. Helmut Asche
Copyright Year
2021
Electronic ISBN
978-3-030-75366-5
Print ISBN
978-3-030-75365-8
DOI
https://doi.org/10.1007/978-3-030-75366-5