Presentation on ASSESSMENT OF REGIONAL INTEGRATION IN AFRICA (ARIA V) :

Towards an African Common Market

Ad Hoc Expert Group Meeting cum Workshop on Supporting the Establishment of inter-REC Free Trade Areas and the Establishment of Harmonized FTA regimes among RECs 31 May - 1 June 2011 Addis Ababa, Ethiopia

Background and Context

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Assessing Regional Integration in Africa (ARIA

) is a jointly produced flagship publication of the AUC, AfDB and ECA • The first ARIA completed in May 2004 focused on a comprehensive assessment of the status of regional integration in Africa.

– ARIA II examined and made recommendations on the issue of rationalization of multiple integration groupings in Africa and their attendant overlapping memberships. – ARIA III addressed macro-economic policy convergence, monetary and financial integration in RECs. – ARIA IV focused on the issue of enhancing intra-African trade, which continues to remain a key challenge in Africa’s integration process.

• ARIA V is to provide an analytical research publication that defines frameworks for African Governments, the African Union and the Regional Economic Communities, towards accelerating the establishment of the African Common Market

Background and Context (cont)

• In line with the Abuja Treaty of 1991which establishes the African Economic Community, Member States are now vigorously pursuing an integration agenda as a collective development and transformation strategy.

• The Abuja Treaty lays 6 stages at which the integration agenda is to be pursued ultimately leading to the African Economic Community (AEC).

• The 6 th stage is the creation of an African Common Market (ACM), embracing all economies of Africa.

Abuja Treaty

• In line with the Abuja Treaty of 1991which establishes the African Economic Community, Member States are now vigorously pursuing an integration agenda as a collective development and transformation strategy.

• The Abuja Treaty lays 6 stages at which the integration agenda is to be pursued ultimately leading to the African Economic Community (AEC).

• The 6 th stage is the creation of an African Common Market (ACM), embracing all economies of Africa.

Abuja Treaty

ARIA V : Rationale

• African Ministers of Trade at their meeting in Kigali in November 2010 recommended the need for Africa to fast-track the creation of a continental Free Trade Area • It is to help the RECs move in unison towards these goals that ARIA V has been conceived considering that the pace of REC progress is not uniform, and given the overlaps of RECs and their membership • Fast-tracking a continental FTA will be germane for a rapid attainment of a continental customs union, which would in turn, speed up the process of the African Common Market

The case for creating a common market

• Features of a Common Market consist of what have been called the “four freedoms”: – Free movement of persons – Free movement of goods – Free movement of services – Free movement of capital • The basic rationale for economic integration among African economies is a dynamic one, with domestic markets of most African countries being too small to allow for an efficient industrialization process • The establishment of a protected regional market is seen as an effective alternative to reduce the costs of industrialization and justified by the infant industry argument for protection

The case for creating a common market (cont)

• Developing countries may consider industrialization as a rational social choice because it can give rise to substantial external economies & lead to an acceleration of economic growth.

• Given the social preference for industrialization, countries’ sacrifice for the establishment of a customs union, lowers the costs of realizing the social preference for industrialization via import substitution, increasing the welfare and contributing to the countries’ development.

• Policies of economic integration amongst member States can, therefore, be justified, even if the standard conditions for static trade creation do not exist.

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The case for creating a common market (cont)

Another reason for the creation of a regional common market is the small size of national economies – the limited size of these national markets constraints economic development and therefore market integration has the potential of easing such constraints For the economies of African countries, an intraregional division of labour within a common market is expected to be more consistent with the comparative advantages of member countries without exposing their economies to the competition in world markets The creation of a common market is fundamental to deepen Africa’s continental integration agenda, as Member States promote a harmonious development of economic activities

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Common Market Fundamentals

Eliminate tariff, non-tariff and technical barriers to trade Ease restrictions on cross-border movement of persons as well as adopt an integrated border management system Abolish restrictions on movement of labour and harmonise labour policies, programmes, legislation, social services, as well as provide for social security benefits and establish common standards, and adopt a common employment policies Abolish restrictions on the right of establishment and residence of nationals of other member states in their countries; Abolish restrictions on movement of services and service suppliers, harmonise standards to ensure acceptability of services traded; and Abolish restrictions on free movement of capital, and in this regard ensure convertibility

Conclusion

• ARIA V will help accelerate the process towards the establishment of the African Common Market by Ease restrictions on cross border movement of persons as well as adopt an integrated border management system – Fast tracking The establishment of a Continental Free Trade Area as recommended by the 6th Ordinary Session of the Conference of African Ministers of Trade in Kigali on 2 November 2010. – Promoting accelerated free movement of people and labour, right of residence and establishment, and cross-border mobility of capital and investments within RECs in particular and Africa in general. and – Promote the harmonization of regulations and laws governing factor mobility in Africa.

ARIA V Chapters (1 & 2)

• Chapter 1: Introduction

– To set the background and context of ARIA V

• Chapter 2: Overview of Regional Integration in Africa

– To take stock of what is being done on the ground in terms of regional integration in all sectoral areas, incorporating an assessment situating the progress in each REC towards accomplishing the various stages of the Treaty Establishing the African Economic Community (Abuja Treaty)

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ARIA V Chapters (3 & 4)

Chapter 3: Theory and Practice of a Common Market – To lay out the theoretical foundation for the formation of a Common Market. A good understanding of the theory and practice would provide clarity to the creation of the common market and a context for the rest of the Chapters. – To include a dedicated section to highlight and draw lessons from Common Market policies and experiences outside Africa (EU, ASEAN, MERCOSUR) Chapter 4: State of movement of persons and right of establishment in Africa – To assess the current situation with respect to free movement of persons/labour within the RECs and across the continent as a whole, probing reasons why countries are not implementing protocols on this matter, and putting forward recommendations to address the lack of implementation, particularly in the context of fast tracking a continental free trade area, and accelerating the continental customs union and the African Common Market.

– To clearly identify actions to ease visa restrictions and at best abolish visas for Africans travelling within the continent

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ARIA V Chapters (5 & 6)

Chapter 5: State of movement of investments and capital in Africa – To assess the current situation with respect to cross-border movement of investments and capital within the RECs and across the continent as a whole, probing reasons why countries are not implementing protocols if, any, on this matter, and putting forward recommendations to address the lack of implementation, particularly in the context of fast-tracking a continental free trade area, and accelerating the continental customs union and the African Common Market.To include a dedicated section to highlight and draw lessons from Common Market policies and experiences outside Africa Chapter 6: State of movement of goods and services in Africa – Identify key bottlenecks to movement of goods and services, other than infrastructure, the infrastructural issues and challenges to movement of goods and services in the context of the accelerated Continental Union and Common Market, and propose concrete practical solutions to addressing the challenges

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ARIA V Chapters(7-10)

Chapter 7: Framework for fast-tracking an African continental Free Trade Area – Develop a Framework fast tracking a Continental Free Trade Area, taking into account current and planned FTAs at the sub-regional levels Chapter 8: Framework for accelerating the establishment of a Continental Customs Union – Develop a Framework for accelerating the establishment of a Continental Customs Union, including proposals on an Africa-wide common external tariff Chapter 9: Framework for accelerating the African Common Market – Develop a Framework for accelerating the establishment of the African Common Market, clearly highlighting the sequenced and logical linkages with the African Continental Free Trade Area and Continental Customs Union Chapter 10: Governance, Legal and Institutional Structure of the African Common Market – Develop the attendant legal, institutional, governance, political and financial implications for accelerating the establishment of the African Common Market, and the preceding Continental Free Trade Area and Customs Union.

Thank You