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Week 6: Trade and Regionalism in Africa

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African countries are still relying on primary goods whose ... Interregional Bloc Export. in % of Total Exports. in $million. 1. 1.4. 181. 163. ECCAS. 17.6 ... – PowerPoint PPT presentation

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Title: Week 6: Trade and Regionalism in Africa


1
Development Problems in Africa Spring 2006
Week 6 Trade and Regionalism in Africa
2
Contents
  • Trade Outlook
  • North-South to South-South Trade
  • Commodities
  • Trade Terms
  • Regionalism

3
Trade Outlook
  • African countries are still relying on primary
    goods whose prices have declined in the past, as
    predicted by Raul Prebisch in 1950s. His
    argument led to the import-substitution
    industrialization policy (see handouts).
  • However, recent boost of the prices of primary
    goods have boosted economic growth of some
    African countries, yet the boost could be
    short-lived (see handout).
  • African exports face protections of developed
    countries.

4
Share in the World Trade
Asia
Africa
Source IMF Intl Finance Statistics
5
Gradual Changes of Trading Partners
  • Originally, the African trade was mainly with
    European countries, but recently the trade with
    non-EU countries has increased (gradually).
  • Notable, trade between African countries have
    been increasing especially with South Africa.
  • In the post-Apartheid period, from 1990 to 1995,
    the trade between SA and non-African countries
    increased from 14 to 21 billion.

6
Regional Share of African Trade
Others
US
EU
EU
Africa
Source Taniguchi (2005)
7
South Africas Trade with Others
Non-SADC African
Import
Export
SADC
Non-African
8
Summary
  • Many African countries have not succeeded in
    diversifying their export commodities and are
    facing a declining terms of trade.
  • Even if barriers to international markets are
    removed, they will still need to rely on primary
    goods. Thus, they need to develop industries gtgt
    Prof. Sonobes course.
  • In addition, regional integrations have been
    establish inter-regional trade through regional
    integrations. Next, we focus on regional
    integrations.

9
Regional Trade
10
Kenya-Uganda Border
11
Kenya-Uganda Border 2
12
Kenya-Rwanda Border
13
Type of Regional Integrations
  • A free trade area (FTA) occurs whenever two or
    more countries agree to lower and ultimately
    remove barriers to trade, while maintaining their
    respective external tariffs against other
    countries.
  • A custom union (CU) refers to an arrangement
    whereby two or more countries agree not only
    remove trade barriers among themselves but also
    maintain a common external tariff (CET) against
    products from other countries.

14
Type of Regional Integrations
  • A common market (CM) is an arrangement
    thatobliges two or more countries to remove
    internal barriers, adopt common external barriers
    against trade from third countries, and promote
    the free movements of goods and services, labor,
    capital, and technology.
  • An economic and monetary union (EMU) is an
    arrangement that coordinate their economic
    policies in order to achieve a common currency,
    in addition to the requirements of CM.
  • A political union (PU) is the final stage of
    regional integration, because it means that in
    addition to the cumulative obligations of an
    economic and monetary union, participating
    countries will share political decision-making
    over foreign policy, security policy, and so
    forth.

15
Regional Integrations in Africa
Regional Support FTA CU CM CM EMU
No tariff within X O O O O O
Common tariff to outside X X O O O O
Free Inputs Movement X X X O O O
Common Economic Policy X X X X X O
ECOWAS UEMOA CEMAC EAC COMESA SADC SACU (ECOWAS) (UEMOA) (CEMAC) (COMESA) (SADC) (ECOWAS) (UEMOA) (CEMAC) (COMESA) (SADC) (EAC)

16
Regional Integrations
  • A. African Economic Community (AEC) includes 52
    countries, almost all African countries, was
    inaugurated in 1991, aims to be EU of Africa.
  • B. Arab Maghreb Union (AMU) includes 5 North
    African countries, was inaugurated in 1989.
  • C. Common Market for Eastern and Southern Africa
    (COMESA) includes 23 Eastern and Southern African
    countries, was established in 1993, aims to
    establish a tree trade by 2000, implement a
    common external tariff by 2004, and later a
    common market.

17
Regional Integrations
  • D. East African Community (EAC) includes Kenya,
    Uganda and Tanzania, was launched in 1967 but was
    dissolved in 1977 because of charges and
    countercharges over unequal distributions of
    benefits. Yet, it is revived in 1994.
  • Economic Community of Central African States
    (ECCAS) includes 10 Central African countries,
    was set up in 1983 and aims to promote financial
    and commercial cooperation by eliminating
    internal barriers and adopting a common external
    tariff.
  • F. Economic Community of West African States
    (ECOWAS) includes 16 Western African countries,
    was established in 1975 to promote cooperation
    and development in economic, social, and cultural
    activity.

18
Regional Integrations
  • G. Southern Africa Development Community (SADC)
    includes 14 South African countries, was funded
    in 1992 to defuse the potential economic threat
    from a more powerful post-apartheid South Africa.
    But South Africa joined the SADC in 1994.

19
Regional Integrations in Africa
States Pop. million GNP Billion US Year Year
AEC 52 659 313 1991 1991
COMESA 23 380 170 1993 1993
SADC (incl. SA) 14 200 170 1992 1992
AMU 5 77 130 1989 1989
ECOWAS 16 236 70 1975 1975
ECA 3 86 26 1994, 1967 1994, 1967
ECCAS 10 90 19 1983 1983

20
Interregional Bloc Export
in million in million in of Total Exports in of Total Exports in of Total Exports
1990 2000 1990 2000 2000
AEC
COMESA 963 1534 6.6 6.0 6.0
SADC (1994 SA) 930 4419 2.8 12.2 12.2
AMU 958 1081 2.8 2.3 2.3
ECOWAS 1533 3331 7.8 10.8 10.8
ECA 229 504 13.3 17.6 17.6
ECCAS 163 181 1.4 1 1
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