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TRADE POLICY OPTIONS FOR EASTERN AND SOUTHERN AFRICA Paul Kalenga

TRADE POLICY OPTIONS FOR EASTERN AND SOUTHERN AFRICA Paul Kalenga. 14 TH OCTOBER 2005. I NTRODUCTION. Regional integration: a strategic policy objective for Africa / EPAs

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TRADE POLICY OPTIONS FOR EASTERN AND SOUTHERN AFRICA Paul Kalenga

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  1. TRADE POLICY OPTIONS FOR EASTERN AND SOUTHERN AFRICAPaul Kalenga 14TH OCTOBER 2005

  2. INTRODUCTION • Regional integration: a strategic policy objective for Africa / EPAs • A recognition that EPAs should not determine the future of regional integration in Eastern and Southern Africa but should fit into and be supportive of the process • In view of the above, what are the trade policy options facing Eastern and Southern Africa?

  3. THE PROBLEM • Lack of a clear and credible regional integration strategy (issuing of declarations not informed by national policy priorities/ bottom-up approaches) • Implementation problems – why? • Overlapping membership – undermines progress • Critical decision making required, if regional integration is to succeed

  4. THE PROBLEM (continued) • Four schemes exist: - SACU : New Agreement / global outlook / regional integration? • SADC: FTA (2008/2012), CU (2010) ……. • COMESA : FTA (not completed), CU (2004/2008) …… - EAC: CU (2005)…./ regional integration? • Some facts: - Membership in more than one customs union is technically impossible - Countries will need to take a decision as to whether to be in a COMESA or SADC or EAC customs union (eventually) - CUs require a common external tariff (CET), a mechanism to share the customs revenue and agreeing on a common trade policy - CUs among countries at different level of industrialization and with different additional trade arrangements very difficult to set up

  5. THE CHOICES • Countries need to take informed decisions on multiple memberships both with a view to deeper regional integration (future CUs) and to EPA negotiations • The choices are essentially between deeper and faster economic integration on the basis of the existing CUs acting as fast-track RECs or a larger but shallower integration project for the region • Considering the larger continental integration ambitions (AEC), it is no more politically incorrect not to belong to all RECs (demystification of political sensitivities)

  6. SOME POLICY OPTIONS • “Status Quo” and larger integration option • “Variable Geometry” or “SACU+ and EAC+ Option” • “Leap Forward” Option” • The challenge is to fit EPAs into these options

  7. “Status Quo” and larger integration option • SACU and EAC remain fast-tracking groups, and only comprise of their current members • SADC and COMESA to concentrate on effective implementation of the FTAs

  8. “Variable Geometry” • Enlarged SACU and EAC based on countries that are ready to do so (costs and benefits) • Countries not participating in the CUs remain members of the SADC and/or COMESA FTAs

  9. “Leap Forward” Option” • SADC and COMESA both become fully fledged CUs, and will merge with the current SACU and EAC respectively • All countries take a decision regarding their membership in either the SADC or COMESA CU • This means not using the existing CUs as ‘building blocks’, but doing all negotiations required to establish CUs (a very difficult process)

  10. Fitting EPAs into Regional Integration Process • EPA configurations are riddled with complexities because all of them are not customs unions • The general framework of EPA (RoO, SPS/TBT, development, etc.) can be the same for all countries • The problem is market access - tariff phase-down schedules can only be negotiated individually with the EC, in the absence of customs unions • Those CUs that are in place such as SACU and the EAC can negotiate their own tariff phase-down schedules – this promotes regional integration, and even more so if ‘variable geometry’ option is adopted as a regional integration strategy in Eastern and Southern Africa

  11. CONCLUSIONS • A rational regional integration strategy that solves the problem of overlapping memberships is a prerequisite for effective economic integration process in Eastern and Southern Africa • Variable geometry option – is preferred as the most efficient and fast-tracking strategy for regional integration • EPAs to support this process by strengthening existing CUs (through EPA configurations) while supporting the move towards deeper regional integration based on variable geometry • This means EPAs may lower its ambitious regional integration approach and recognize that this is rather a long-term process

  12. POLICY RECOMMENDATION? WHICH WAY EPAs and REGIONAL INTEGRATION IN EASTERN AND SOUTHERN AFRICA?

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