7. Trade, Growth, Poverty and Economic Integration in Africa

8/13/2019 7. Trade, Growth, Poverty and Economic Integration in Africa

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International Finance and Trade

EMBA - GSB

Trade, Growth, Poverty, Trade

Policies and Integration in Africa

Prepared by

Edson Mbedzi


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Outline The African Problem- Poverty and dimensions in Africa

Linkages between Trade, economic growth and poverty

reductionEvidences

Trade exports and Poverty reduction

Trade Policies and Poverty reduction

Economic Integration in Africa and its problems


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Poverty and Its dimensions

The main challenge - Poverty

12 countries have GNP/capita of less than US$ 500

Most of the people still living on less than US$1 a dayare in Sub-Saharan Africa and South Asia (Sala-i-Martin,2002; Collier and Dollar, 2002)

Multifaceted: income poverty- Per capita income ranges from USD 190-460 for Liberia,

Zimbabwe, Tanzania, Malawi and, USD 2 100-7900 for Egypt,Namibia and Morocco, Botswana, South Africa, Seychelles andGabon


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Poverty dimensions

The total population of the region is about 1 billion (2011 est.)-second largest after Asia - good market for trade

Projected to grow at an average of 1.7% per annum between2005-2015-one of the highest growths.

World total growth is projected at 1.2% for the same period.

Poverty in Africa is predominantly rural. More than 70% of thecontinents poor people live in rural areas and depend on

agriculture for food and livelihood

Sub-Saharan Africa-more than 218 million people live in extremepoverty.


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Poverty-Global Distribution

Poverty headcount ratio at $1.25 a day (PPP) (%of population)

East Asia & Pacific 14.3% 2008

Europe & Central Asia 0.5% 2008

Latin America & Caribbean 6.5% 2008

Middle East & North Africa 2.7% 2008

South Asia 36.0% 2008

Sub-Saharan Africa 47.5% 2008


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Poverty Global distribution

Poverty headcount ratio at $2 a day (PPP) (% ofpopulation)

East Asia & Pacific 33.2% 2008

Europe & Central Asia 2.2% 2008

Latin America & Caribbean 12.4% 2008

Middle East & North Africa 13.9% 2008

South Asia 70.9% 2008

Sub-Saharan Africa 69.2% 2008


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Growth Trends in AfricaEconomicGrouping

1980-90 1990-2000 1990-95 1995-2000 2000-04

Africa 2.4 2.5 1.0 3.4 4.0

North Africa 3.0 2.4 0.6 3.7 4.1

Sub-SaharanAfrica

2.1 2.5 1.2 3.2 4.0

Groups

1.8 -3.5 -8.1 -0.3 4.0

CEPGL (3) 1.8 -3.5 -8.1 -0.3 4.0

COMESA (20) 3.8 2.8 1.4 3.7 3.8

ECCAS (11) 2.2 0.7 -3.3 3.2 5.9

ECOWAS(15) 2.4 3.3 2.4 3.9 4.2

MRU (3) 0.3 3.1 0.6 4.9 2.5

SADC (14) 1.9 2.1 0.3 2.8 3.5

CEMAC(6) 1.9 2.1 -0.2 3.5 5.4

UMA (5) 2.2 1.8 -0.1 3.2 4.2

UEMOA (8) 2.8 3.6 2.0 4.2 3.2


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Reducing Poverty through growth

The ECA and the Commission for Africa are quite clearon the fact that addressing Africas poverty requiresmore rapid growth

According to the Commission on Africa report, themechanism for increased growth are:

More trade and aidneed for trade growth

An improvement in the investment climate

A doubling of expenditure on infrastructure

An emphasis on agriculture and on helping small enterprisesThus more guided FDI is needed.

The ECA emphasizes the promotion of trade and regionalintegration as a core element in fighting poverty.


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Trade and Growth

In addition to other factors, trade can be animportant source of economic growth

International trade can expand markets, facilitate competitionand disseminate knowledge, creating opportunities for growth,

poverty reduction and human development

Trade can also raise productivity and increase exposure to newtechnologies, which often spurs growth

Trade liberalization promotes higher economicgrowth in the longer term (Sachs-Warner 1995,Dollar and Kray, 2000)


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Trade and Growth

Trade and macroeconomic policies are highlylinked

Macroeconomic variables such as national income,employment, price level, aggregate investment andconsumption (savings) are affected by trade


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Trade and Growth

Imports: May be used as inputs in production-affects the

level of output and indirectly employment

Imports of consumer goods reflects choices ofconsumers and hence decisions to spend or save

Imports compete with domestic production andhence affect employment adversely if domestic

industries cannot compete


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Trade and Growth

The reverse causality from macroeconomic variables to tradeis also true.

Domestic growth will stimulate demand for imports

Changes in domestic price level will affectcompetitiveness

Trade is sensitive to macroeconomic policies

I t d i t t f i


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Is trade important for macroeconomicperformance?

Yes!!!!! Empirical evidence:

Most studies testify to the importance of trade foreconomic growth; Dollar and Kray, 2001; Burnside and Dollar, 1977;

Arteta, Eichengreen and Wyplosz, 2001; show that thedegree of trade openness is significant in explainingdifferences in economic growth of countries

Most models included trade elements as part ofmacroeconomic variables that co-determine theexplanation of growth performance and werestatistically significant

Macroeconomic conditions together with open tradepolicies are found by most economists as critical forexplaining faster economic growth


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Is Trade important for macroeconomic

performance? Rodigruez and Rodnik (1999) disagree on causality.-flow

of causation is not from trade and trade policy tomacroeconomic performance but the reverse.

Trade liberalisation may also impact on fiscal revenues incountries which are heavily dependent on tariffs as asource of government revenue (Ebrill et al., 1999).

In developing countries, budgetary revenues arestill heavily dependent on taxes imposed on

international trade. This could be problematic for countries with a

small domestic tax base, low efficiency of taxcollection or poor design of the tax regime


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RIAs and Poverty Reduction

Enhances the potential for sub-regionalspecialization and cooperation in a variety ofeconomic and social spheres;

The deepening of integration within a sub-regionmay minimize the potential for hostilities betweenneighbouring countries-toning down political rivalry.

National-level reforms and other economic policiesgain more credibility if closely coordinated andharmonized within regions.


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Trade Developments in Africa

International trade is a prominent economic activity in Africa

Merchandise trade in SSA as a share of GDP increased from38% to 58% between 1988-89 and 2010-2011.

Higher commodity prices, combined with increased exportvolumes resulted in a marked increase in the regionsexport value in 2010

The growth in export earnings sustained the growth ofimports which rose by more than 20% between 2003-2005. However, merchandise exports exceeded imports forthe fourth consecutive year.

Sh f Af i i W ld T d


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Share of Africa in World Trade1980 1985 1990 1995 2000 2003 2004

Region E X P O R T S

World 100 100 100 100 100 100 100

Developing Economies 29.5 25.4 24.3 27.6 31.6 32.1 33.5

North Africa 2.1 1.7 1.2 0.7 0.8 0.8 0.9

SSA 3.8 2.6 2.0 1.5 1.5 1.6 1.6

Developing Economies:

America

5.5 5.6 4.1 4.4 5.5 5.0 5.1

Developing Economies: Asia 18.0 15.6 16.9 21.0 23.8 24.7 25.8

Developing Economies

excluding China

28.6 24.1 22.5 24.7 27.8 26.2 27.1

I M P O R T S

World 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Developing economies 24.0 23.2 22.5 28.8 28.7 29.0 30.4

Developing Economies:

Africa

4.6 3.7 2.9 2.5 2.0 2.2 2.2

North Africa 1.4 1.6 1.2 0.9 0.7 0.7 0.7

SSA 3.2 2.1 1.6 1.6 1.2 1.5 1.4

Developing economies:

America

6.1 4.2 3.7 4.9 5.9 4.8 4.7

Developing economies: Asia 13.1 15.1 15.8 21.4 20.8 21.9 23.5

Developing economiesexcluding China

23.0 21.1 21.0 26.3 25.3 23.6 24.4


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Composition of Africas exports

Merchandise exports expanded by 6% in 2011

Mining rose by 24 %, manufactures by 22% and agricultureby 16%

Although the performance of manufactures and agriculturewere below mining, the rates exceeded the respective growthrates of world exports.

Despite the rapid rate of growth of manufactures, exportdependency on primary commodities remain striking

Commercial services was also outstanding in 2010 underlinedmainly by expansion of travel receipts


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i l d d i


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Mineral exports and Poverty ReductionPotentials

By far the greatest complain against mining is its inability togenerate employment (limited spillovers)

Though a net foreign exchange earner, the labour force isoften highly skilled and specialized.

The poor do not participate in the economic opportunities ofmining but bear the costs and the risks when a mine issituated in the community.

Solution: Encourage artisanal and small-scale mining Has the potential to employ men and women

Has the potential to generate resources for training and education

Enhancing local government capabilities.


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Agriculture Trade and Poverty reduction

Most African countries do not have good prospects inmining and tourism.

Mining and tourism may have weak linkages and highleakages.

Poverty is directly linked to agricultural productivity (Irz,

Xavierer et al; 2001).


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Agriculture Trade and Poverty reduction

If physical productivity increases, poverty will diminish because:

Agriculture is central to the livelihoods of the rural poor.

Even with rapid urbanization, more than 50% of the poor willbe in rural areas by 2005, and depend significantly onagriculture.

Agriculture provides two thirds of employment, half of exports,

and more than one third of Gross national Income For each point in growth of agricultural yield, the number of

those living on less than 1$ per day reduces by between 0.6 and1.2 %.

73% of the poor live in rural areas, and most depend onagriculture

Agriculture and agro-processing account for 30-40% of GDP indeveloping countries

General economic development requires prior growth and

productivity gains in agriculture.


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Agriculture and Poverty

Evidence: large body of literature on the impact ofagricultural productivity growth:

Irz et al, 2003

Hazell and Haddad, 2001

Dorosh and Haggblade, 2003-investment inagriculture generate the highest impacts on the poor

.


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But agricultural productivity in Africafaces severe problems.

Secular decline in terms of trade since the early 1980s due to

declines in export prices and wide fluctuation in real export

prices of primary commodities-coffee, cocoa, cotton, copper

etc.

Resulted in marginalization of the region in world trade-Africasshare of world agric exports declined substantially

Resource losses due to terms of trade declines have been amajor factor in the poor economic performance in the region


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What role for Trade Reforms?

Sustained trade reforms doubled growth in the agricultural sector(Michaely, Choksi, Papageorgiou)

Agricultural trade liberalisation gives much higher aggregate growtrate- 5.75 vs. 1.1% (Valdes).

Trade liberalisation- easing tariffs and other import restrictions, reducing oreliminating domestic supports and export subsidies-tends to boost economicgrowwth in the longer term.

SSA countries with large improvement in macro/trade policies hadhigher growth rate-3.5% vs. 0.3% for those with deterioration(World Bank)


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Trade reforms and poverty reduction

Huge evidence exists to show that global trade reforms under the WTO canhave big poverty reduction effects Developed countries by removing subsidies and improving market access can make

it more feasible for Africa to gain from reforms

African countries can also undertake reforms that would otherwise expose theireconomies to unfair competition

Welfare results are driven by improvements in the terms of trade (export pricesrising more than import prices) and the efficiency effects of the improvements inthe allocation of resources between different activities.


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Trade reforms and poverty reduction

Trade liberalization can enhance food security by

increasing rural growth and reducing rural poverty

Keeping food prices affordable

Improving access to imported agriculturaltechnology, mostly embedded in inputs

Providing cash to buy inputs. (Nash, 2005)


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Market access

Developed countries must make it easier for developing

countries to export to their markets by improving marketaccess through reducing tariffs and non-tariff barriers, andproviding duty-free and quota free access for all productsexported from LDCS.

Specifically, developed countries were suppose to end agriculturalexport subsidies by 2010 and substantially reduce tariffs againstdeveloping country agricultural exports.

African countries must develop their own trade reforms in

line with clear development plans


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Trade Protectionism

Tariffs : A tax on a good coming into a country.Increases the price of the good and makes it lesscompetitive.

Quotas: Physical restriction on the number of goodscoming into a country.

Non-Tariff Barriers (NTBs) : anything that is not tariffs or

quotas. NTBs such as regulations and legislation make itvery hard for foreign competitors to sell goods intoanother country.


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Trade Protectionism

The main method involved in NTBs is notto prevent trade but to make the cost of doing soprohibitive to the potential exporter

Examples include setting exacting standards on fuelemissions from cars, the documentation required to beable to sell drugs in different countries, the ingredientsin products some of which may be banned

in the destination country. Often difficult to prove.


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Reasons for Protectionism

Protect domestic industries

Protect domestic employment

Strategic industries reasons

Political pressures Protect culture?

Prevent Dumping selling goods in the destinationcountry below cost to break into that market


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Potential Benefits of Trade Liberalization

Promotes international specialisation and increases world output.

Promotes efficient use and allocation of world resources

Allows developing countries access to the heavily protectedmarkets of the developed world thus helping promotedevelopment

Facilitates the working of the international market system and theworking of price signals to ensure efficient allocation of resources,international competition and the associated benefits to all


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Keys of Global trade liberalization

However, resource rich nations soon took advantage of thisand imposed very high tariffs on goods

These countries took advantage of the absence of tradestandards and the non-existence of a governing authority tooversee world trade

Initiatives to create a world governing body for trade wasvigorously pursued.


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GATT & WTO


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GATT & WTO

GATT succeeded the failed ITO in 1947 and for 47 yearscharted the course of World Trade.

GATT helped establish a strong and prosperous worldtrading system through rounds of trade negotiations

GATT was not an independent third party global tradegoverning body but a set of rules. Nevertheless, it wasgood enough to support the rapidly growing multilateralworld trading system from 1949 to 1994

As early as the 1980s, there arose a call for the overhaul ofthe trading system due to;

An expanded and complex trading network system

Time consuming rounds of trade negotiations

WTO


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WTO

The need to establish the WTO came into existence duringthe last GATT trade round in Uruguay, 1994 as aninstitutional bodyto oversee world trade.

Marrakech agreement in Morocco gave birth formally to

WTO in January 1,1995

The WTO now has 157 (2012) members representing morethan 93 % of World trade


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Principles of operating the WTO System


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Principles of operating the WTO System

Five principles are of particular importance in understandingthe WTO:

Non-discrimination. Requires that a WTO membermust apply the same conditions on all trade with otherWTO members, i.e. "Grant someone a special favour and

you have to do the same for all other WTO members.

Reciprocity.

Binding and enforceable commitments.

Transparency.

Safety Valves.

African perspective on trade


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African perspective on tradeliberalization

The Uruguay round of the General Agreement on Tariffs and

Trade (GATT) led to the establishment of the World TradeOrganization (WTO), with the membership of the original123 GATT member-countries.

The current WTO membership stands at 157 countries, with32 Least-developed countries (LDCs).

African membership currently stand at 47


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The Doha Development Agenda (DDA)

The agenda for the present round of negotiations underWTO were set in Doha in 2001, during the Fourth WTOMinisterial Conference.

The Ministerial adopted the 'Doha Development Agenda'(DDA), which for the first time promised to address theinterests of developing countries, especially LDCs.

The Doha Declaration also states "special anddifferential treatment for developing countries shallbe an integral part of all elements of the negotiations.


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h


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Doha, Cancun, Hong Kong etc.

The General Council Decision of 1 August 2004 (also called the

July Package) and the Sixth Ministerial Conference held inHong Kong in 2005 sought to bring the DDA back in track.

The Hong Kong Ministerial agreed to complete the Doha Workprogramme and conclude negotiations launched in Doha by

2006. The DDA negotiations continued, albeit with dismalperformance.

But, on 24 July 2006, the DDA was suspended due to wide gapsthat remained between key players.


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Doha, Cancun, Hong Kong

It is important to revive WTO negotiations, as developedcountries are pushing developing countries for bilateralagreements with WTO plus commitments. These bilateralarrangements reduce the policy space created by the WTOand undermine the multilateral trading system.

It is important for African countries to understand thenegotiation issues under the WTO and establish anegotiation position that recognizes Africas LDC status andstrengthens her development goals.


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Major Negotiation Issues and Africas Interest

Major negotiation issues, of Africas interest, under DDA

are:

Agriculture (removal of agricultural subsidies),

Non-agriculture Market Access (NAMA),

Services

Trade Facilitation

Special & Differential Treatment (S&DT)

Duty Free Market Access to LDCs products.

Aid for Trade (Trade Related Technical Assistance)

Others include:

Democracy and Transparency

Public health

M j N ti ti I (I)


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Major Negotiation Issues (I)

A. Agriculture:

Mainstay of Africaseconomy (30% of GDP, 70% of employmentopportunities and most important sector for povertyalleviation).

Under WTO, the Agreement on Agriculture (AoA), providesinternational rules governing trade in agriculture sector.

As agriculture is directly related to food security and livelihoodissues, it has been a matter of heated debates.

Agriculture negotiations have been at the centre of WTOnegotiations, and a major source of discord between developedand developing countries and the suspension of the Doharound of negotiations.


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Agriculture

Agriculture negotiations are taking place in two majorissues: market access and domestic support.

Market access:

Reduction in tariffs has remained a contentious issue during

WTO negotiations. Developed countries have been pushing for tariff reductions,

seeking to access developing country markets while protectingtheir own agriculture industry through tariffs and subsidies.


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Agriculture A majority of developing countries want market access to

developed countries.

Developing countries are also unwilling to cut tariff rates atthe level demanded by the US and other developed

countries, as agriculture is closely linked to food andlivelihood issues.

It would be in Africas interest to first identify market

access barriers (both tariff and non-tariff barriers) it faceson its agro-exports in the international market, and thennegotiate to reduce or remove these barriers.


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N A i lt l M k t A (NAMA)


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Non-Agricultural Market Access (NAMA)

NAMA refers to all those products that are not coveredby the Agreement on Agriculture such as: manufacturingproducts, fuels and mining products, fish and fishproducts, and forestry products.

NAMA account for almost 90 per cent of the worldsmerchandise exports.

The methodology for tariff reduction is at the core ofNAMA negotiations.

.


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NAMA

Previously, tariffs were cut on a selective product-by-product basis through requests and offers madebetween member countries

However, subsequently WTO members decided to useformulas to cut tariffs across-the-board.

Member countries have realized that adopting a formulaapproach for tariff reductions provides transparency,efficiency, equity and predictability.


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Special and Differential Treatment (SDT)

Developing countries, particularly LDCs would be given lessonerous recourse in implementing the provisions of variousWTO agreements.

LDCs should hence be granted better market access, be

allowed greater flexibility in implementing trade rules, and beallowed to sign agreements with developed countries that donot require fullreciprocity.

SDT provisions were not mandatory. They depended on thepolitical will of the rich countries for implementation.

The position of African countries is that the non-implementation be reviewed, made mandatory and binding ondeveloped countries.


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Democracy and Transparency

Theoretically, WTO operates by consensus-all countries havethe right to negotiate on matters affecting them on tradeissues.

In practice, key decisions, including formulation of documents

presented as consensus positions, take place in smaller,informal meetings that are closed or manoeuvred andengineered by the developed countries

Even when meetings are open, African countries areunderrepresented-they may not be able to afford delegation

at such meetings.

The unspoken rule - absence or inability to raise validobjections is considered as consensus

Trade-related aspects of intellectual


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pproperty rights (TRIPS).

Patent rights resulted temporary monopolies, drugprices and high company profits

Hence Pharmaceutical industry maintains higher profits

relative to other industrial sectors

In 1994, WTO agreement on TRIPS mandated membercountries to bring their laws into accord with restrictivestandards that maximise the rights of patent holders.

Di if i t Wh h ld Af i


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Diversifying exports-Why should AfricaDiversify?

Vital for two reasons

(1) Export receipts are needed to finance imports ofconsumer, intermediate and capital goods

Receipts have been compromised

by falling trade shares for traditional products

Concentration on a few primary products with lowdemand elasticity


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Why Diversify?

(2) African economies are small- there can be no successfuldiversification drive based solely on domestic markets.

Exports, especially of industrial and non-traditional

products, will provide the best avenue for attractinghigh and productive investment

Vicious cycle of investment, high growth, increased

savings and high investment is only triggered bybroad and growing markets

Therefore there is need to integrate>


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Debate on Africas Diversification


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Debate on Africa s DiversificationPotential

The Resource based thesis Africa is richer in natural resources but poorer in

human capital-than any other region

Africa will find it hard to acquire a strong comparativeadvantage in processed primary exports and harderstill to develop manufactured exports

Counterarguments

Resource base of Africa weak

Unstable and overvalued currencies

Wh i Af i N ?


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Where is Africa Now?

Africa has made progress, but.

Decade of progress in Africa

Improved regional trade and growth

HIV/AIDS State vs Government debate-privatisation

Freer political systems

Less Conflicts

The Economists Top Growers 2010 2015


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The Economists Top Growers 2010-2015

Rank Country GDP Growth (%)1. CHINA 9.5

2. INDIA 8.2

3. ETHIOPIA 8.1

4. MOZAMBIQUE 7.75. TANZANIA 7.2

6. VIETNAM 7.2

7. CONGO 7.0

8. GHANA 7.09. ZAMBIA 6.9

10. NIGERIA 6.8

May 2000Aug 2002 June 2003


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December 2011


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Regional Trade and Economic Integration


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g g

Every continental region has at least one major integrationmovement.

Europe has the European Community (EC); Asia has theAssociation of South East Asian Nations (ASEAN), CentralAmerica has the Central American Common Market (CACM).

Africa has three major ones: the Southern AfricanDevelopment Community (SADC); the Economic Communityof West African States (ECOWAS); and the Common Market

for Eastern and Southern Africa (COMESA) among others.

Performance indicators of Trading Blocs


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g

Based on objectives and principles of the trading bloc, it isapparent that they encompass ultimate ideals of a free trade

area; such as :1) Customs union involves free trade among partners, but

also the establishment of a common external tariff with therest of the world.

2) common market is a customs union with free factormobility.

3) economic union involves the adoption of both commonexternal trade policies and the free movement of primary

factors of production as well as goods within the union.

4) Finally, total economic integration involves the jointpursuit of all macroeconomic functions by all member states.

Impediments to Integration andA hi f T di Bl i Af i


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Achievement of Trading Blocs in Africa(a)Dependence on a few, primary, exports

More than any other developing region, Africa depends onprimary commodities to generate the foreign exchangeneeded to buy imports.

For historical/colonial reasons, Africa's major export markets

are also identical, a fact which causes its own problems.

Primary commodities constitute an average of 82.6% of totalexport earnings for these countries, of which 59.4% are fromsingle commodities.

Creates BOP problems if production of the single commoditiesis disrupted, any slump in world commodity prices erodes theability of regional economies to maintain investment ininfrastructure.

Impediments to Integration andA hi t f T di Bl i Af i


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Achievement of Trading Blocs in Africa

(b) Underdevelopment of human capabilities

With a combined population of about 1 billion, African economies

are potentially rich in human resources.

People have been relatively neglected, badly educated and in poor

health, with their capacities frequently under-used.

The consequence is low labor productivity and lack of

competitiveness, despite very low wages.



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(c) Parochialism

Problems in Africa stem from failure, on the part of member-state governments, to internalize trading blocs agreements intheir national administrations and development plans.

In many of the member states cooperation does not go farbeyond the signing of treaties and protocols.

Moreover, some governments do not send to meetings thoseofficials who have the appropriate expertise on the issues to be

discussed.

Hence no action is taken to implement the decisions or to setaside funds for the implementation of programs adopted.



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Achievement of Trading Blocs in Africa(d)Excessive dependency of African States on the developed West

Many African nations generally still depend on the West for imports ofraw material-supplies and manufactured products, even in cases where

products of comparable quality may be available in member states.

This runs counter to the rationale for creating bigger markets tofacilitate the growth of viable production ventures.

This makes regional economies particularly vulnerable to foreignexchange availability.

As aresult, inter-sectoral and intra-sectoral linkages are bound to beweak, because firms buy their requirements from outside the regions,rather than from within.



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Achievement of Trading Blocs in Africa(e)Proliferation of regional groupings

Almost half of COMESA members are also members of SADC, andsome are also members of the Eastern African Community.

This may tend to weaken the integration process.

It leads to costly competition (even for attention and resources);conflict; inconsistencies in policy formulation and implementation;unnecessary duplication of functions and efforts; fragmentation ofmarkets and restriction in the growth potential of the sub-region.

SADC was formed in 1980 to reduce member countries' dependenceon the then apartheid South Africa. Since May 1994 South Africaapartheid is officially over, throwing into serious question SADC'slegal purpose, talks of merging SADC and COMESA have not yieldedany results.


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(f)Africa's debt burden

Africa, generally, has experienced mounting external indebtednessaccompanied by very high debt service ratios which have diverted a

significant portion of export earnings from development programs to

debt servicing.

Of the 9 countries in the world whose 1996 debt is unsustainable, 5 are

in COMESA: Zambia, Mozambique, Burundi, Zaire and Sudan.

These countries do not have the capacity to service existing debt from

export earnings, capital and aid flows without undue burden on theirpeople.



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(g) Transport problems

The transport infrastructure for intra-regional trade (including roads,rail systems, air and some shipping) is not only inadequate, but in

many cases non-existent.

Countries like Burundi, Comoros, Lesotho, Mauritius, Rwanda and

Somalia, for instance, have no railway systems.

Individual systems may also not always be fully compatible,

especially in terms of intermodal transfer of goods.

In some cases, parts of the network (especially in war-torn states such

as Sudan, Angola, DRC, Somalia and Burundi) need urgent

rehabilitation and upgrading.

Impediments to Integration andAchievement of Trading Blocs in Africa


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(h)Lack of information

Most African nations are traditionally linked to former colonizing

nations and, as a consequence, there is an acute lack of awareness of

what other African countries can offer to substitute for the products

currently being sourced from the developed countries.

Lack of information is also a direct result of inadequate economic

infrastructure in the regions, especially in telecommunications and

transportation facilities, directly hindering interaction among regional

countries.



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(j) War damage, Disease and Drought

Africa has the most distressing list of nations (of any African regional

grouping) that have effectively ceased to function as modern nation

states.

Burundi, Rwanda, Mozambique, Sudan, Ethiopia, Somalia, Angola

and DRC faced enormous and expensive reconstruction problems

from years of civil wars that have left them desperately short of skills

and infrastructure that will take a generation to rehabilitate.

They cannot, therefore, be expected to be equal and effective

participants in a regional economic grouping.

European Union (EU) Comparison


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The EU is an economic and political partnership between 27European countries that together cover much of the continent.

The EU is based on the rule of law. This means that everythingthat it does is founded on treaties, voluntarily anddemocratically agreed by all member countries.

These agreements set out the EU's goals in its many areas ofeconomic activity mainly:

1) The single market is the EU's main economic engine,

enabling most goods, services, money and people to movefreely.

2) Develop huge resource base to ensure that Europeans cancollectively draw maximum benefit.

EU Institutions


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There are 5 main institutions involved in EU legislation:

1. The Council of the European Union, which represents thegovernments of the individual member countries. The Presidency

of the Council is shared by the member states on a rotating basis.

2. The European Parliament, which represents the EUs citizens and

is directly elected by them;

3. The European Commission, which represents the interests of the

Union as a whole.

4. The Court of Justiceupholds the rule of European law.

5. The Court of Auditorschecks the financing of the EU's activities.

http://europa.eu/about-eu/institutions-bodies/council-eu/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/european-parliament/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/european-commission/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/court-justice/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/court-auditors/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/court-auditors/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/court-justice/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/european-commission/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/european-parliament/index_en.htmhttp://europa.eu/about-eu/institutions-bodies/council-eu/index_en.htm


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Together, these institutions produce through the "Ordinary Legislative

Procedure"the policies and laws that apply throughout the EU.

In principle, the Commission proposes new laws, and the Parliament

and Council adopt them.

The Commission and the member countries then implement them, and

the Commission ensures that the laws are properly applied and

implemented.
http://www.europarl.europa.eu/aboutparliament/en/0080a6d3d8/Ordinary-legislative-procedure.htmlhttp://www.europarl.europa.eu/aboutparliament/en/0080a6d3d8/Ordinary-legislative-procedure.htmlhttp://www.europarl.europa.eu/aboutparliament/en/0080a6d3d8/Ordinary-legislative-procedure.htmlhttp://www.europarl.europa.eu/aboutparliament/en/0080a6d3d8/Ordinary-legislative-procedure.html


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END

7. Trade, Growth, Poverty and Economic Integration in Africa

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Transcript of 7. Trade, Growth, Poverty and Economic Integration in Africa