Academic journal article Africa Policy Journal

Economic Integration in Africa: Past, Present, and Future

Academic journal article Africa Policy Journal

Economic Integration in Africa: Past, Present, and Future

Article excerpt

Introduction

Regional integration has been a long-standing objective of African political leaders. Policy experts have, for years, emphasized the need for regional economic integration. In this case, integration means the reduction of tariffs and other trade barriers between countries belonging to a certain regional group with the objective of boosting intraregional trade.

There is a broad consensus among policymakers that economic integration and increased intraregional trade have the potential to catalyze significant growth and development in Africa. This article briefly examines the rationale for and history of economic integration in Africa. It then analyzes the present levels of integration across the continent, and concludes by exploring key challenges and opportunities the future may hold for the processes of regional economic integration.

The Need for Economic Integration

When discussing the importance of intraregional trade in Africa, economists refer in particular to the theory of comparative advantage. The theory states that countries engaged in international trade specialize in goods they can more efficiently produce (i.e. at a lower opportunity cost) than other countries.

Current data indicates that raw commodities and natural resources account for eightythree percent of African exports. This means African countries have a comparative advantage over key trade partners, the European Union (EU), and China in resource extraction. At the same time, these trade partners have a comparative advantage in producing finished and processed goods; African nations, consequently, import large quantities of consumer goods from them.

The resulting economic system is often dubbed "neocolonialist" for its startling resemblance to the economic frameworks enforced by imperial powers in the early twentieth century. Africa functions as a supplier of raw materials and a market for finished products. Its economies possess an unhealthy dependence on resource extraction and lack the industrial development and valueadded mechanisms required for sustained growth.

Bolstering intraregional and intra-African trade is perhaps the ideal way to achieve the much-needed diversification of the African economy. While trading with each other, African nations would no longer possess a comparative advantage in the production of primary goods. This would incentivize the growth of other sectors and aid in the development of industry, providing African countries with more stable paths to prosperity.

There is also considerable empirical proof to support this conclusion. Recent data from the African Development Bank showed that sixty-seven percent of intra-African exports between 2005 and 2010 consisted of manufactured or value-added products. For exports to the EU, the figure was thirty-two percent; for US exports eighteen percent; and for exports to China a mere fourteen percent. With this in mind, the importance of intra-African trade for export diversification in the continent appears to be an incontrovertible reality (see Graph 1).

The Need for Economic Integration

Convinced of the benefits of regional integration, the members of the African Union signed the Abuja Treaty in 1991. The treaty laid out a roadmap for the establishment of the African Economic Community AEC), with harmonized economic policies and laws. More importantly, the treaty recognized eight Regional Economic Communities (RECs) to serve as building blocks in this process, which integrated and coalesced into the AEC.

The treaty also set clear targets for achieving different levels of integration. It predicted individual RECs would form free trade areas and customs unions by 2017. The treaty believed this would lead to the establishment of a continental customs union by 2019, a common market by 2023, and eventually, a monetary union by 2028.

Despite the countries' initial enthusiasm, the project suffered from deeply apathetic implementation. …

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