Why Regionalism A Look At The Costs And Benefits Of Regional Trade Agreements In Africa

Regional trade integration in the EU and East Asia is two successes. However, the two regions have taken different paths to success: European integration has been fostered by formal institutional agreements, while the integration of East Asia has been the result of «natural» market forces. Both stories, however, underline the importance of the initial economic conditions and the sustainable dismantling of the MFN in trade barriers. Regional trade agreements refer to a treaty signed by two or more countries to promote the free movement of goods and services beyond the borders of its members. The agreement contains internal rules that Member States comply with each other. As far as third countries are concerned, there are external rules to which members comply. More fundamentally, the rise of regionalism reflects changes in the trade strategies of key WTO members. The United States, which has traditionally been an advocate of the multilateral trading system, has led the current wave of regionalism by catching up (and defying) the EU, the leader of regionalism. The change in policy in the United States has led to an acceleration of regionalism around the world, including in East Asia, which until recently relied on the multilateral system to support its export-oriented growth. These changes may have led the future liberalization of world trade on an uncertain path.

However, the role of the RTA in the prevention and resolution of conflicts in Africa should not be overstated. First, while closer trade relations strengthen incentives for regional intervention in the event of conflict, ATRs that do not increase intra-regional trade will not make this intervention more likely. Indeed, in Africa, regional cooperation agreements that address cross-border resource issues (such as water) are more effective than trade-based ATRs (World Bank, 2004) in reducing military conflicts. Second, effective regional intervention requires regional agreements that go beyond trade. This suggests that some regional policy and cooperation agreements can be as effective as trade agreements to prevent and resolve conflicts. Moreover, a regional intervention is not effective without the broad support of the international community. An RTA that diverts trade from the rest of the world could do little to attract the attention of the rest of the world. Member States benefit from trade agreements, including increased employment opportunities, lower unemployment rates and increased market opportunities. Since trade agreements generally come with investment guarantees, investors who wish to invest in developing countries are protected from political risks. As EPA negotiations inevitably continue, African countries should consider making reducing their external MfN tariffs an integral part of the design and implementation of the EPA. It is clear that widespread liberalization could result in significant adjustment costs in the short term. Costs may justify a gradual liberalisation of the MFN rather than discriminatory liberalization.

Indeed, trade liberalization can and will be phased in over a long period of time. If African countries wish to use external commitments to facilitate trade reforms and strengthen national institutions, the WTO can also serve as a useful multilateral engagement mechanism. Indeed, most African countries have not yet committed to imposing broader WTO customs obligations, which are somewhat close to their applied tariffs. Member States of a Customs UnionA customs union is an agreement between two or more neighbouring countries for the removal of trade barriers, the abolition or abolition of tariffs and the abolition of quotas.

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