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Development Problems in Africa Spring 2006. Week 6: Trade and Regionalism in Africa. Contents. Trade Outlook North-South to South-South Trade Commodities Trade Terms Regionalism. Trade Outlook.
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Development Problems in Africa Spring 2006 Week 6: Trade and Regionalism in Africa
Contents • Trade Outlook • North-South to South-South Trade • Commodities • Trade Terms • Regionalism
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.
Share in the World Trade Asia Africa • Source: IMF Int’l Finance Statistics
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.
Regional Share of African Trade Others US EU EU Africa • Source: Taniguchi (2005)
South Africa’s Trade with Others Non-SADC African Export Import SADC Non-African
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 >> Prof. Sonobe’s course. • In addition, regional integrations have been establish inter-regional trade through regional integrations. Next, we focus on regional integrations.
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.
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.
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.
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.
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.
