Transcript Trading Blocs and Developing Countries GEP05 Chapter 2

Mozambique and Regional
Integration in Southern Africa
Sherman Robinson
Institute of Development Studies
University of Sussex
November 2007
Outline
• Evolution of trade blocs: 1960s-1990s
• Composition of trade
• Regional Trade Agreements
– Shallow and deep integration
• SADC/SACU and Mozambique
• Policy support for SADC regional
integration
2
Trade Blocs: 1960s
3
Trade Blocs: 1970s
6
Trade Blocs: 1980s
7
Trade Blocs: 1990s
8
Export Shares: 1990s
EU+
NAFTA+
E&SE Asia Mercosur SACU+
ROW
Total
EU+
73.5
9.3
10.8
1.2
0.6
4.5
100.0
NAFTA+
19.3
49.4
24.1
2.5
0.4
4.2
100.0
E&SE Asia
17.9
25.0
51.2
0.9
0.5
4.4
100.0
Mercosur
27.5
20.9
16.3
22.7
0.9 11.7
100.0
SACU+
41.5
11.9
26.8
2.0
8.1
9.7
100.0
ROW
32.1
21.2
35.5
2.2
0.9
8.0
100.0
9
Shares of Global Trade: 1990s
EU+
EU+
NAFTA+
E&SE Asia Mercosur SACU+
ROW
Total
33.6
4.2
4.9
0.6
0.3
2.1
45.8
NAFTA+
3.8
9.8
4.8
0.5
0.1
0.8
19.9
E&SE Asia
4.9
6.8
13.9
0.3
0.1
1.2
27.2
Mercosur
0.4
0.3
0.3
0.4
0.0
0.2
1.6
SACU+
0.2
0.1
0.2
0.0
0.0
0.1
0.6
ROW
1.6
1.1
1.8
0.1
0.0
0.4
5.1
Total
44.6
22.3
25.9
1.8
0.6
4.8
100.0
10
Composition of Trade
• Increased trade as share of GDP
– Largest increase in trade among OECD countries
• Increased trade in intermediate inputs
– Import content of exports increased
– International segmentation of production
• Increased trade in new products
• Trends challenge standard trade theory and
analysis of gains from trade
11
Intra-regional trade/GDP, 2002
30
Per cent
25
20
East Asia Pacific
Latin America and
Carribean
South Asia
Sub-Saharan Africa
15
10
5
0
Source: World Bank, Global Economic Prospects 2005, p. 43
12
Implications of Trends
• The formation of blocs pre-dated any
explicit regional trade agreement (RTA)
• Three kinds of RTA:
– Bloc creation: EU, NAFTA, Mercosur
– Bloc expansion: EU expansion, CAFTA
– Market access: EPAs, AGOA, FTAA,
bilateral agreements
14
Shallow and Deep Integration
• Early RTAs and GATT/WTO rounds
facilitated shallow (or negative) integration:
– Reduction of border trade barriers
• New RTAs all involve elements of “deep” or
“positive” integration
– Policies and institution “behind the border” that
facilitate increased trade
15
Gains From RTAs
• Many studies of actual and potential RTAs
of various kinds
– Virtually all benefit the members (trade creating)
– Better if there is at least one large and/or rich
country to “anchor” the RTA
– Small countries gain proportionately more
• Bilateral agreements are less beneficial
– Fallacy of composition: hub-spoke system is not
good for the spokes
18
Productivity gains and market
integration
• Integration in global value-chains
– Fragmentation of production and scale economies
• Trade in intermediates and new products
– Inter-firm and intra-firm coordination
• Quality and SPSS standards
– High profitability from niche products
• Trade-productivity links
– Technology transfer
– Role of FDI in market integration
19
SADC: Regional Integration
• Is the SADC region forming a trade bloc?
– Yes. Still early stage, with differing degrees of
integration across the region
• Is South Africa large enough and linked
enough to anchor the bloc?
– Yes, given past decade of growth
• Is Mozambique ready for integration?
– Yes, with supportive policies
20
GDP for SADC Countries
SADC: Real GDP
Botswana
Democratic Republic of Congo
Zimbabwe
Lesotho
Zambia
Angola
T anzania
Madagascar
Malawi
Swaziland
Mauritius
Angola
Botswana
Mozambique
Democratic Republic of Congo
Namibia
Lesotho
Seychelles
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Seychelles
South Africa
Swaziland
T anzania
Zambia
Zimbabwe
South Africa
21
Sectoral Value Added
Sectoral Value Added
80
70
60
50
40
30
Services
10
Zimbabwe
Zambia
Tanzania
Swaziland
South Africa
Seychelles
Namibia
Mozambique
Mauritius
Malawi
Madagascar
Lesotho
22
Democratic Republic of Congo
Botswana
Angola
0
Agriculture
Industry
20
Shares of Intra-SADC Imports
Average Contributions to Intra SADC Imports (%)
Mozambique
T anzania
South Africa
Botswana
Botswana
Lethoto
Malawi
Mauritius
Namibia
Sawizland
Sawizland
South Africa
Tanzania
Mozambique
Lethoto
Namibia
Malawi
Mauritius
23
Shares of Intra-SADC Exports
Average Contributions to Intra SADC Exports (%)
M ozambique
Tanzania
Botswana
Lethoto
MMalawi
auritius
Namibia
Botswana
Lethoto
Malawi
Mauritius
Namibia
Sawizland
Sawizland
South Africa
Tanzania
South Africa
Mozambique
24
SADC FTA/Customs Union
• SADC FTA: much still to be negotiated
• SADC customs union or SACU expansion
– Proceed in stages: E.g., first, include
Mozambique, Malawi, and Zambia
– Whether it is SADC or SACU depends as
much on politics as on economics
• Elements of deep integration are required
– Monetary union is much more remote
25
Southern Africa:
Regional Organizations
•
•
•
•
•
•
•
•
•
•
SADCC: Southern African Development Coordination Conference
SADC: Southern African Development Community
CBI: Cross-Border Initiative
COMESA: Common Marker for Eastern and Southern Africa
RIFF: Regional Integration Facility Forum for Eastern and Southern
Africa
SACU: Southern Africa Customs Union
CMA: Common Monetary Area
IOC: Indian Ocean Commission
EAC: East African Community
Plus AGOA (US), EPAs (EU), and South Africa/EU FTA
26
Membership in RTAs
Country
SADCC
SADC
Angola
X
X
Botswana
X
X
DRC
Lesotho
CBI
RIFF
SACU
CMA
IOC
EAC
X
X
X
X
COMESA
X
X
X
Madagascar
X
X
X
Malawi
X
X
X
X
Mauritius
X
X
X
X
Mozambique
X
X
X
Namibia
X
X
X
*
Seychelles
*
X
X
South Africa
X
X
X
X
X
X
Swaziland
X
X
X
X
X
Tanzania
X
X
X
*
X
Zambia
X
X
X
X
X
Zimbabwe
X
X
X
X
X
X
X
X
X
X
X
27
Policy Commitment
• Supportive policy environment is crucial
– Reduce or eliminate policies that inhibit trade
• Tariffs, quantitative controls, distorting taxes
– Institute polices and create institutions that
facilitate trade, especially exports
•
•
•
•
•
Standards/certification
Infrastructure/investment
Regional policy coordination
Trade negotiations
Business environment
28
Tax and Tariff System
• Supportive business environment
requires a tax system that is:
– Transparent
– Predictable
– Consistent
– Uniform with minimal distortions
• Efficient administration is crucial
– Responsive bureaucracy
29
Trade Negotiations
• RTA/Customs Union
– Phasing: sensitive sectors
– Rules of origin
– Dispute resolution mechanisms
• Regional trade administration
– SACU and/or SADC
• Capacity for continuing negotiations
– Integration is an ongoing process
30
Trade Negotiations
• Negotiating institution needs to manage
tradeoffs between competing interests
– Industry/agriculture/labor ministries tend to favor
existing industries, and hence to be protectionist
– Need to reflect interests of potential exporters
and public (e.g., consumers)
• Need for analytic support and organized
advice from stakeholders
31
Coordination of Agreements
• Need to revise agreements as regional
integration proceeds
– E.g., EPAs and EU-South Africa agreements
• Regional institutions
– Coordinate macro and monetary policy
– Establish and enforce standards/norms
– Dispute resolution and legal systems
32
Mozambique and Integration
• Problems and needs
– Business environment issues
– Need for infrastructure and finance
– Regional institutions
• Government and private sector
collaboration as process unfolds
– Ready to start. Cannot learn to swim if you
will not go into the water.
33
Success Indicators
• Process:
– Establishment and evolution of regional
institutions that facilitate trade
– Tax/tariff policy reform and administration
– Business environment
• Results
– Increased trade and growth
– Stable macro policy environment
34