1. Addis Ababa, 22 September 2016 Jan Vanheukelom
POLITICAL ECONOMY OF CONTINENTAL INTEGRATION – PERIA AND THE CFTA
Conceptual framework and issues
Addis Ababa, 22 September 2016
Jan Vanheukelom

2. STRUCTURE By way of introduction … the PERIA framework
Ten key PERIA observations & examples
So what? Overall implications for CFTA related questions
- PERIA - FIRST PE STUDY OF REGIONAL ORGANISATIONS

3. 1. By way of introduction
“lack of staff”, “lack of powers to enforce decisions”, and “dreadfully slow decision- making procedure” meant the treaty was “not being applied”
“When it comes to elevating form over substance, and confusing a proliferation of meetings and acronyms for a deepening of ties, [this regional organisation] is the master”

4. “lack of staff”, “lack of powers to enforce decisions”, and “dreadfully slow decision- making procedure” meant the treaty was “not being applied”
The Economist on European integration, 1982
“When it comes to elevating form over substance, and confusing a proliferation of meetings and acronyms for a deepening of ties, [this regional organisation] is the master”
The Economist on ASEAN, 3 Sept

5. These quotes illustrate that regional integration is:
A “universal” challenge
A complex challenge
Five reasons why the PERIA analytical framework is relevant for a “deep reflection to bring about the CFTA”
Some say that trade and tariffs are among the more difficult challenges in RI

6. The political economy analytical framework
1. The five lens framework helps unpack and explain the complexities and challenges of regional integration
Foundational & structural factors
Institutions - formal & informal rules of the game
Actors and agency – power, interests, incentives and ideas
Sector or issue specific characteristics
External factors that shape the incentive environment - financial and other
The How - Builds on WB, EU, AfDB approach…
Within countries and between countries…?
Winners and losers; power to push or undermine; ability to muster groups; the role of FFs, institutional forms in doing so, and the influence of specific characteristics and external influences;
Centrifugal and centripetal forces
PERIA developed a framework and methodology to unpack the complexities and challenges of regional integration

7. 3. It does so by identifying key drivers and obstacles in:
2. The framework helps explain why things are as they are - rather than speculating about ideal type models
3. It does so by identifying key drivers and obstacles in:
Shaping regional agendas: policy decisions, commitments, agreements, protocols, etc…
AND putting in place the implementation arrangements for these agendas
PERIA:
How to cut through complexity?
Look beyond the normative (how things ought to be) – why are things as they are?
Move beyond the usual explicators of lack of: “political will” and “capacity”

8. 4. It helps explain the following riddles:
Why is there such a wide gap between agreed policy agenda and implementation?
Why do certain agenda items get implemented?
Why is there so much agenda overload with regional organisations?
5. The PERIA framework and findings echo the concepts and findings of the work from Andrews et al (see concept note reference to the Problem Driven Iterative Adaptation)
CAPABILITY TRAPS
OVERAMBITIOUS AGENDAS: PREMATURE LOAD-BEARING AND UNNECESSARY ENGAGEMENT STRESS
POSITIVE DEVISATION AND EXPERIMENTATION -

9. 10 Key observations about drivers & constraints
Foundational & structural factors...
Foundational and structural factors continue to shape the environment in which African continental and regional organisations define and implement their agendas.
AU: historical background, inclusive and large membership (54 members), geography (15 LLCs)
ECOWAS - franco-anglo colonial and linguistic heritage, trade Sahel and coastal countries, P&S
IGAD – response to common climate challenges, facilitated cooperation on conflicts
Trade Complementarity Index: EC 42 in 1962, SADC 11, COMESA 12, .. (similar production outputs)
All countries: High levels of dependence on exports of primary products
All about shaping and framing incentives!!!
Path dependency - Geog, History, Economic, Conflicts…
FFs & SFs likely to have a deeply embedded influence on current interests & incentives;
Especially between countries
Differences in economic differentiation or complementarity in economic structures – hence low levels of intraregional trade
Create disincentives for the iplementation of regional trade policies – losers through trade diversion (9)
Prevalence of Informal trade – affects the nature of trade relations – may be more intrested in status quo – limiting the role that institutions targeted at formal trade can play in leveraging existing trade flows to promote greater economic integration

10. THE STRUCTURAL LENS: IMPLICATIONS FOR CFTA
Deep rooted structural features are hard to overcome –
They cannot be wished away but require appropriate set of home grown institutions that help overcome related infrastructure, regulatory and other challenges

11. 10 Key observations
2. Formal and informal institutions – the issue of form and function
WYSINWYG…
While regional organisations adopt the institutional forms to foster regional cooperation or integration, these do not always serve the stated functions.
AU: formal budget institutions in place – yet poor functionality
AUC: formal RBM system – yet poor transparency and accountability functions
Regional Courts: form and function
WHY? There are strong incentives for reformers to make Regional Organisations and their policies look good rather than make them perform better.
Isomorphic mimicry - Incentives to adopt complex institutional forms,
Often donor-led -
Less incentives or structures to sanction to fulfill function - so don’t manage to work through incentvies (discussed below)
May also relate to sector characteristics, discussed later
GAP: as pointed out by AU Audit (2007), the AUC Chairperson and the Strategy:
All ROs have packed agendas, impressive formal mandates, agreements on member state contributions..
In general: reform processes tend to make ROs look better rather than make them perform better
And such reforms further deepen the implementation gap
Most RECs: forms of FTAs and CUs in place - no cost to non-implementation
All ROs: agenda inflation , impressive formal mandates, agreements on member state
All ROs: inter-governmentalism is the name of the game
Such reforms often further deepen the implementation gap – agenda inflation
Exception: peace and security, Transfrontier Conservation Areas, etc..
Approved AU budget in 2014 = 426 m, available budget is 287 m, able to spend 212 m,
In general there are many formal institutional structures in place - to make decisions, draft protocols, divide labour, draft and implement budgets, interpret mandates, facilitate cooperation, resolve conflicts between the multiple stakeholders, audit processes, etc. The AU and the five RECs all have an apex body that takes decisions, ministerial councils for sectoral policy preparation, with some even having regional parliaments and courts. Yet these ‘best practice’ institutional and organisational forms (often resembling the forms of EU institutions) often do not exercise their desired functions.
The key functions of monitoring, budgeting, to raise transparency and accountability, and functions enabling power sharing, with checks and balances, and arbitration are weak and insufficiently mutually reinforcing to encourage implementation of decisions. Hence many decisions that are taken at the apex level of the Heads of State and Government are not implemented.
All regional organisations have institutional forms to oversee public financial management (budget planning and execution, audit institutions etc.). Yet, as the AU case illustrates, budget processes are fragmented as there are two unpredictable sources of finance: member state contributions and donor funding.
The gap between form and function is especially visible in regional trade policies. Market integration is now a core part of the agenda of all African RECs and AU. However, in most RECs, the use by member states of a variety of non-tariff barriers, internal taxes and lists of ‘sensitive’ goods excluded from trade liberalisation mean that established formal trade integration institutions such as customs unions do not function as they should. (10)

13. THE INSTITUTIONAL LENS: IMPLICATIONS FOR CFTA
Regional trade agreements, Custom Unions, etc. – even with best-practice institutional forms may not function as projected
Consider during the design/negotiation phase those political economy actors and factors that encourage signaling (widening gap between form and function) rather then implementation
Such considerations may help tailor the negotiation phase and help design feasible adjustment measures

14. 10 Key observations 3. Actors – member states and signalling
Member states may signal their support for regional organisations or regional programmes even when implementation is not a political priority.
PIDA, CAADP, gender, etc.…
Signalling - solidarity, logic, MONEY -
May create space
? Why signalling support:
Shared histories, solidarity, ideology, external pressures or incentives; gain political capital and legitimacy without additional costs
South Africa: deeper regional integration vs. the regional bully syndrome (NDP)

15. 10 Key observations 4. Actors – national political elites
Ruling elites define ‘national’ interests – and this influences whether, when and how countries implement regional agendas.
SADC industrial policy - South Africa and Zimbabwe
National level analysis is still underdeveloped: Therkildsen - Tanzania
New work on political settlement, low and open access orders, prominent analysis to composition of ruling elites and how to gain and hold on to power
Etc…
Northern Corridor Countries Initiatiev: Rwanda, Uganda and Kenya
Lamu Port South Sudan Ethiopia - LAPSSET corridor – Kenya, South Sudan, Ethiopia
COMESA: 19 members
Implementation of regional cooperation and integration takes place when in line with key ‘national interests’ as defined by ruling elites.
EAC – economic integration: smaller groups => more easily aligned interests
IGAD - peace mediation vs FTA
ECOWAS food security: Nigeria and Burkina Faso
EAC: smaller groups => more easily aligned interests
SAPP: narrower set of issues => easier alignment

16. 10 Key observations 5. Actors – swing states (regional ‘hegemons’)
Swing states are able to influence the shape and scope of the regional agendas as well as what gets prioritised for implementation.
Ethiopia in AU, EAPP, IGAD,.. and in a range of policy areas or sectors
Nigeria in ECOWAS P&S - CdI
Kenya on transport issues in EAC
South Africa informal talks on CFTA with Egypt, Kenya, Nigeria
HOW? Using reputational, diplomatic, economic, political, financial channels – and strength of a range of institutions… (21)
Focusing on continental integration, Davies said he had been having informal dialogue with the trade ministers of Kenya, Egypt and Nigeria on how to add impetus to the process of uniting Africa in a free-trade area. The SACU was involved in negotiations on tariff schedules with the EAC and Egypt and had set itself the target of developing tariff schedules — the guts of a continental free trade agreement — by the end of this year. SA also hoped to conclude a motor industry agreement with Nigeria. The aim is for SA to support Nigeria’s motor industry and in return be allowed to supply inputs and completely built-up units.

17. 10 Key observations 6. Actors – individual leadership
Individual personalities and quality of leadership – political and bureaucratic - within regional organisations tend to shape the functioning of the organisation.
From OAU to AU – Gadhafi, Obasanjo, Mbeki, ..
Heads of State and Government have decision power across RECs
SAPP – technical and bureaucratic leadership
SADC Transfrontier Conservation Areas – political and civilian leadership

18. 10 Key observations 7. Actors - private sector & civil society actors
The diversity of private sector and civil society interests – and the diversity of political contexts – affect how business & CSOs engage with national governments and ROs
SADC – Rules of Origin: SA organised labour and business community – COMESA/EAC – TFTA – CFTA
Transfrontier Conservation Areas - Peace Parks Foundation
SADC Gender Protocol Alliance
PIDA – (late) private sector engagement
ECOWAS: rice and livestock (see also next point)
Peter Draper:
EAC and COMESA adopt a generic approach to the rules of origin
SADC follow the list-approach – derived largely from the EU model – (negotiations are conducted on a sector and product-specific basis – atkes longer to conclude than the liberal COMEAS/EAC approaches
TFTA is modelled on a list rules approach (rather than a generic approach to the ROO –
Political salience
Why go regional?
IMPLICATIONS:
Careful assessment who matters and why
Go for early and effective engagement rather than hard to realise “inclusivity” – not every actor has a stake

19. THE ACTOR LENS: IMPLICATIONS FOR CFTA
It is important to analyse and understand the regional swing states that will push (or resist) the CFTA.
This involves identifying the benefits regional swing states prioritise in different phases of CFTA, the interest they may have in building coalitions, and the type of influence they have on other countries, AU and CFTA process
Not every non-state actor has a stake in CFTA – and their interests in the CFTA process and outcome differ substantially. Hence the need to identify effective non-state actors for dialogue and cooperation.
Engage in a timely and qualitative manner with key non-state stakeholders – if not involved in design, no commitment to implementation (or financing)
How can CFTA (design and implementation) respond to their ‘national’ interests?
Are the hegemon interests in support or contradication of other countries interest?
Don’t sacrifice effectiveness for “inclusivity” : careful assessment of key actors in order to find out who “matters” and why (not every actor has a stake)
Example: if the private sector is key for trade, investment, financing (of infrastructure) or the implementation of CFTA or other agreements – they need to be involved upstream in the process of negotiations

20. 10 Key observations 8. Sectoral features
The political interests and incentives of political elites vary substantially according to the sector and affect policy choices and choice of implementation arrangements.
P&S: immediate costs or threats, clear benefits, negative externalities and regional spill-overs
Trade: less immediate and harder to calculate costs and benefits, future potential
Rice and livestock value chains: national versus cross-country interests
WHY?
Costs and benefits to political elites in other sectors than peace and security may be harder to identify or calculate
Political salience
Why go regional?
Costs and benefits to political elites in other sectors than peace and security may be harder to identify or calculate.
Implication: carefully distinguish sector and sub-sector characteristics

21. THE SECTOR LENS: IMPLICATIONS FOR CFTA
Not all sector or sub-sector issues in the CFTA negotiations and implementation phase are equally politically salient for national political elites and leaders
Trade covers a wide range of sub-sectors and issues – hence the importance to prioritise those challenges/problems with political buy-in or the potential for political coalition building
Again, this consideration is key for assessing the roles and potential of hegemons.

22. 10 Key observations 9. External factors
The quality and volume of donor support and regional trade deals such as those with EU shape the incentive environment for national and regional actors.
Quantity of aid: All ROs – except ECOWAS - depend heavily on donors
Quality of aid: preferences, conditionalities, fragmentation, predictability
Risk 1: reduce transparency, accountability and ownership by key regional stakeholders – negative impact on institutional development
Risk 2: donors move from supporting regional processes to driving them – agenda overload
External partners tend to prioritise – and hence further strengthen – support for powerful actors: - EU and TDCA; EPAs; …
All heavily dependent on donors - ECOWAS partial exception
+’ve - e.g. AU & other peace operations;
Rising quality but low coordination, fragmented, uncertainty
Conditions/targeting risk from supporting to driving
Agenda inflation & signalling e.g. EAC social sectors
COMESA RISM - partial success, donor discontent…
Opportunity 1: support regional programmes, problem solving, institutional development
Opportunity 2: targeted support to strengthening regional organisations and institutions (AU)

23. THE LENS OF EXTERNAL FACTORS: IMPLICATIONS FOR EXTERNAL PARTNERS IN CFTA PROCESS
Prioritise institutional strengthening, yet..
Avoid best practice models and overemphasis on institutional forms and incentivizing empty signaling
Interpret and apply principles of good donorship: harmonisation, alignment, MA, ..
Refrain from driving the process - stay at arms length

24. 10 Key observations 10. Critical junctures
Critical junctures such as natural disasters and major political events/crises can trigger progress but also block regional organisations and dynamics.
From OAU to AU, end of Cold War, etc.
SAPP: drought, post-apartheid
ECOWAS: 2008 food crisis and CAADP

25. THE LENS OF CRITICAL JUNCTURES: IMPLICATIONS FOR CFTA
Critical junctures may result in shifts in opportunities, in the incentive environment, in the power distribution, in awareness about costs and benefits of particular policy options, ..
And hence such changes may create opportunities for coalition building behind particular continental trade options
So factor in the need for adaptation to contingency and critical junctures: Plan for sailboats, not trains (Kleinfeld, 2015)

26. So what? Overall implications of PERIA
The implications of these findings can be summarised in the following ABC for reformers, policy makers, negotiators and partners:
Ambition: rightsize the level of ambition, go for “good fit” – adapt to political traction and technical feasibility
Brokerage: pay attention to the need for multi-stakeholder and multi-level facilitation and brokerage during negotiations and implementation, with particular attention to:
* To winners and losers, drivers and blockers, in particular the swing states
* To the potential for coalition building around specific problem areas or shared challenges
* To institutional development and capacities to sustain implementation, to solve problem, resolve disputes, etc.
Champions: factor in the roles and influence at different levels of state and non-state champions
Ambitions - - be clear on aspirations vs problem-solving;
- be clear on the VA of a regional approach? (and to whom!)
- aim for function, manageable groups,
- with realistic measures of what is feasible over the medium to long-term success
- given path dependency and political traction
Brokerage - - link the regional and national levels for key countries;
- engage and facilitate public-private-CSO demand for regional processes
- based on identified interests and coalitions
Champions - - identify and support champion countries/individuals, coalitions
- at the political and technical levels,
- in regional and national organisations,
- in public, private sectors & civil society

27. So what? Overall implications for CFTA
The PE analysis matters for both the CFTA negotiations as for the implementation
In fact, the nature of these negotiations and the quality of the participation will affect the agreed agenda and the degree and quality of implementation
Example: Consider during the design/negotiation phase those political economy actors and factors that encourage signaling (widening gap between form and function) rather then implementation
In other words: If a regional agenda is not owned by MS or does not represent key interests of these MS – especially the hegemons and key private sector stakeholders - it will not or poorly be implemented
PERIA provides evidence that implementation failures can be partly traced to design flaws and negotiation dynamics
Therefore, it will be important for the CFTA implementation process to also work backward and re-engineer from envisaged outcomes to what this implies for the negotiation process

28. High level political signals in support of an agenda cannot be taken at face value
And clever, best-practice institutional designs don’t guarantee implementation
Hence the relevance of the ABC for the CFTA process
And the importance of PE analysis to provide insights on technical and political feasibility of envisaged reforms
Factor in the need for adaptation to contingency and critical junctures: Plan for sailboats, not trains (Kleinfeld, 2015)

29. Thank you for your attention

30. Options?
Even once you decide on policy objectives, what margins of manouvre are there?
Alter? Very hard for FFs. Tip the balance? Boost demand? Compensate?
Change own incentives?
Adapt? Tricky! Function not form? Follow interests? Build on informal?
Individuals? Iterative adaptation? Within/between MS traction?
Avoid? Maybe easier, by-passing for same outcome? Build on Sub- regional groupings? Political legitimacy?
Await? Can you wait? Long-term thinking & preparing?

31. GENERAL IMPLICATIONS BEYOND ARIA
Thinking outside of the box of Regional Organisations
Identifying (sub)sectors with clear incentives and aligned interests
Building on national and regional champions
That may involve regional swing states, charismatic leaders, and non-state interests
With the potential to broaden coalitions
Beyond technocratic solutions, strong political savvynes, strong context knowledge
Consider interests, incentives, of key stakeholders at national level
Distinguish roles in terms of political legitimacy – more practical roles – problem solving?
strong political analysis,
insight and detailed understanding of regional contexts, and
flexibility and adaptability in program design and implementation.