1 Dr Toussaint Houeninvo National School of Applied Economics and Management University of Abomey Calavi (Benin) Impact of Regional Integration on Trade and Firm Performance in West Africa: The Case of Benin UNCTAD Workshop on Trade and Poverty Dar es Salam, November 19-23, 2007

2 Presentation Outline 1-The Country at a glance, the Research Question and objective of the study 2- The chosen data and methods 3- Main findings of the research and the questions raised

3 1-The Country at a glance, the research question and the objective of the study Benin is a small country within West African Economic and Monetary Union (WAEMU) The country population size estimated at 8.7 million as of today was 5.8 million in 2000 when the study has been initiated At geographical level the country size is km2 It is a Least Developed Country. As a founding member of the WAEMU Regional Trading Block, Benin signed the treaty establishing the WAEMU in 1994 and adopted a Common External Tariff in January 2000 There has been a big debate arising mainly from private sector and civil society stakeholders on any benefit of Benin membership as a small member country Hence the research question: Can a small country benefit from a RTA Such a question put policy makers (at national and regional) level under fire on the issue of implementation of RTAs.

4 1-The Country at a glance, the research question and the objective of the study (cont..) The objective of the study (initiated in 2000) was to evaluate the impact of the relatively newly formed WAEMU on Benin through the main preferential treatment of the Union named Preferential Community Tax (PCT). Since 1996 WAEMU member countries have decided to remove all non-tariff barriers (NTB) and reduce progressively tariff barriers among themselves in order to boost intra-community trade. The schedule of tariff reductions within the framework of PCT (applied to industrial products) is as follow: 30% between July 1st 1996 and June 30th 1997; 60% between July 1st 1997 and December 31st 1998; 80% between January 1st 1999 and December 31st 1999 and 100% since January 2000

5 2- Chosen data and methods The « before » and « after » approach to assess the impact of PCT Hence performance indicators “before” and “after” signing the RTA have been compared to measure impact The Treaty being signed in 1994 and PCT introduced in 1996, has been considered pre-RTA and post-RTA. Then we used 4 different methods Elasticity of intra and extra trade (import demand to GDP) “before” and “after” RTA to see if there is trade creation or trade diversion (Balassa 1967): Also degree of overall openness: intra and extra regional, X and M ( de Melo et al 1993) Degree of openness at disaggregate level following the 4 product categories scheme of WAEMU: “Crude products”, arts and crafts, qualified industrial products and non qualified industrial products Value added and labor productivity of qualified and non qualified firms (competitiveness indicators based on Firm survey)

6 3- Main findings of the research and questions it raised Despite the small size of its economy, Benin has the ability to benefit from WAEMU regional integration system particularly in the areas of two of the four WAEMU categories products: arts and craft and qualified industrial products. If the analysis has stopped at aggregate level one might conclude that Regional Integration did not benefit Benin. Furthermore disaggregate analysis indicates opportunities for business activities Value-added and labor productivity are higher in PCT qualified firms than non qualified ones. There is a low participation of the firms of the country in the Preferential tax program of the Union and this is due to information asymmetry.

7 3- Main findings of the research and questions it raised (end) Questions raised regarding policy implication and further research needed Information disclosure and implementation of RTA Regional statistical registration and monitoring investment in infrastructure necessary for the enhancement and the normalisation of production Implementation of good competition policy in order to increase trade in practice following tariff reduction and preferential treatment scheme and transfer price decrease benefits to consumers. Create a better investment climate to increase employment and reduce poverty

8 Thank you