EPAs and regional integration what future for SADC

EPAs and regional integration – what future for SADC and COMESA? TIPS Workshop, Pretoria 4 -5 March Dr Mareike Meyn Future of regional integration? TIPS workshop March 2008

Outline First a little bit of theory: q What is regional integration? q Motivations for regional integration q Static effects of regional integration q Dynamic effects of regional integration Then: 5. The status quo of regional integration in southern and eastern Africa 6. Problems of overlapping memberships 7. How EPAs shaped regional integration in southern Africa 8. Reasons for the regional fragmentation as a result of Future of regional integration? TIPS workshop March 2008 EPAs 2

1. What is regional integration? q Regional/economic integration describes six stages how economies can integrate: 1. Preferential Trade Agreement 2. Free Trade Agreement 3. Customs Union 4. Common Market 5. Economic Union 6. Political Union Future of regional integration? TIPS workshop March 2008 3

2. Motivations for regional integration Ø Economic integration implies the acceptance of national constraints in favour of regional decisions. Ø Why are countries giving up national sovereignty? q Economic motivation Ø Static and dynamic gain of economic integration q Political motivation Future of regional integration? TIPS workshop March 2008 4

3. Static effects of regional integration q Trade creation: Domestic products are replaced by more competitive regional products. Ø Effects on domestic producers? Ø Effects on domestic consumers? q Trade diversion: Products which were formerly imported from the rest of the world are now imported from regional producers as their production costs are lower than those of the rest of the world plus customs duty. Ø Effects on domestic producers? Ø Effects on domestic consumers? Future of regional integration? TIPS workshop March 2008 5

4. Dynamic effects of regional integration q Economies of scale due to an enlarged market q Enhanced efficiency due to increased competition q Better and cheaper products (consumer benefits) q Increased specialisation due to concentration on comparative advantages q Learning effects by competition q Chance to attract FDI by enlarged market Future of regional integration? TIPS workshop March 2008 6

5. The status quo of regional integration in southern and eastern Africa q One functioning customs union: SACU Ø Intra-regional trade largely liberalised Ø Three quarter of BLNS trade is within SACU while SA’s trade with BLNS is minor Ø SA accounts for 93% of SACU’s GDP (2003) q One customs union to be implemented: EAC-5 Ø CET not yet implemented Ø Intra-regional trade not yet liberalised (2010) Ø EAC collapsed in 1977: problem of trade diversion and Uganda and Tanzania did not benefit from trade creation. Future of regional integration? TIPS workshop March 2008 7

6. Overlapping membership of regional integration in southern Africa EAC Tanzania SADC Mozambique SACU Botswana Lesotho Namibia South Africa Kenya Uganda Burundi Rwanda Angola DR Congo Malawi Madagascar Mauritius Zambia Zimbabwe Swaziland COMESA Comoros Djibouti Eritrea Ethiopia Seychelles Sudan Egypt Libya Future of regional integration? TIPS workshop March 2008 8

6. Problems of overlapping memberships Future of regional integration? TIPS workshop March 2008 9

7. How EPAs shaped regional integration in southern Africa: early ESA EPA SADC EPA Angola Mozambique Botswana Lesotho Namibia Swaziland South Africa 2007 Tanzania Kenya Uganda Burundi Rwanda DR Congo Malawi Madagascar Mauritius Zambia Zimbabwe (Seychelles Ethiopia Eritrea Sudan Comoros Djibouti) Future of regional integration? TIPS workshop March 2008 10

8. How EPAs shaped regional integration in southern Africa: the status quo EAC EPA SADC EPA Kenya Uganda Burundi Rwanda Tanzania Mozambique Botswana Lesotho Namibia Swaziland ESA EPA Malawi Madagascar Zambia Comoros Mauritius Zimbabwe South Africa Ethiopia Eritrea Angola Djibouti Sudan Future of regional integration? TIPS workshop March 2008 11

8. Reasons for the regional fragmentation as a result of EPAs q Non-LDCs were in a very difficult position Ø Loosing EU market access or Ø Disrupting regional integration q Some countries preferred bilateral option Ø Hardly involved in regional integration Ø No regional compromises necessary q EC was accused of ‘divide and rule’ Ø ACP: bilateral interim deals were negotiated without involving the region Ø EC: only way to avoid market disruption Future of regional integration? TIPS workshop March 2008 12

? What scenarios of regional integration in southern Africa can you imagine? Future of regional integration? TIPS workshop March 2008 13

Where to go from here? q Scenario 1: The status quo prevails Ø What happens to SACU (South Africa and BLNS divide)? Ø What happens to SADC? Ø What happens to COMESA? q Scenario 2: The SADC CU and COMESA CU will be implemented Ø Bearing in mind that one country can only join ONE customs union, what countries do you think would join SADC and what countries would join COMESA? Why? Ø How could the SADC and COMESA custom union’s negotiations be aligned with the ongoing EPA negotiations and what policy steps need to be done to synchronise the processes? Future of regional integration? TIPS workshop March 2008 14

Where to go from here? q Scenario 3: ‘One happy family’ Ø Southern and eastern African countries merge regional integration efforts and form a new integration body covering all SACU, SADC, EAC and COMESA countries Ø What are the promoting factors for such a scenario? Ø What are the constraining factors? q Further questions for each group: - What scenario do you think is most likely? Why? - What would be the ‘ideal case’ of economic integration in southern and eastern Africa? - Please describe the economic effects of trade creation and trade diversion for the single member states in your scenario. Future of regional integration? TIPS workshop March 2008 15

EPAs and regional integration – what future for SADC and COMESA? TIPS Workshop 5 -6 March 2008 Future of regional integration? TIPS workshop March 2008