REGIONAL INTEGRATION AND EPAs ACP-EU Trade Relations: The Challenges of EPAs EPAs Conference 12 October 2006

Scheme of Presentation The dilemma of achieving balance from the EPAs principles. The reality of current African regional integration and perceptions at national level. Empirical results justifying need for balance between some EPAs objectives. Recommendations on how EPAs could use regional integration to achieve their developmental objective.

Introduction Strengthening regional integration is identified as a key principle in the EPAs negotiations. EPAs capacity to serve as development tools depends on their ability to build regional markets. The question then is how can the principle of building regional markets be balanced with other EPAs principles to have desired outcomes?

What Motivates Current Regional Integration Efforts? There are various reasons for this: Political and strategic reasons – 50%. Economic interests – 35%. Geography which is a key consideration in the Abuja Treaty – 21% of countries surveyed.

Importance of Different RECs Protocols Frequency of citation as being important at national level Trade 80 Transport 72 Communication Peace and security 64 Free movement of goods/services/factors 60 Energy Agriculture Macroeconomic policy convergence 56 Industry 52 Other 4

How is Regional Integration Perceived at National Level?

EPAs and intra-SSA trade diversion Regional integration is to be a pillar of EPAs. Intra-regional trade shrink significantly by as much as 18%. Situation likely to be worsened by kind of specialisation to occur. Trade diversion (US$ mln) FTA -787 (-2619) Full reciprocity -559 (-2109) Asymmetry (20%) -532 (-1752) Asymmetry (40%) -415 (-1043)

What if regional integration is deepened first? Welfare US$270 mln ToT + 0.34% Regional trade US$2383 mln GDP Value + 0.42% Quantified potential benefits of regional integration on SSA. The benefits seem to be real. However, they do not fully offset the effects of EPAs. Hence, the need for proper sequencing

Total inter-African export losses (PE results) Overall and excluding intra-RECs losses, full liberalisation EPAs would cost over 13 million US$ to intra-African trade

EPAs Sequencing Crucial to Africa’s integration Sequencing of the EPAs implementation will be critical Early implementation should first focus on removing intra-Africa trade barriers. Then focus on unrestricted market access to the EU to utilise supply capacities and diversity from free intra-Africa trade. Phased dismantlement of SSA tariffs on EU.

EPAs Sequencing Crucial to Africa’s Integration Reinforcement of regional integration is a pre-requisite to African countries benefiting from EPAs. Africa must hasten regional integration processes to build and consolidate supply capacity before opening up to EU. Regional integration requires time and resources. Flexibility necessary for this to happen.

In conclusion and from negotiations perspective… Identification of sensitive products must take into account existing and potential intra-African trade, both within and between RECs. Important to implement liberalisation with EU in a progressive way and to finalise and operationalise regional integration in Africa. Need for strong support for regional integration (infrastructures, institutional building). Towards a Continental economic zone? Overlapping of RECs is clearly a problem and accelerating inter-RECs integration probably a solution. Hence need for EPAs transition to look at the need to be harmonised with AU’s African integration agenda.