Building capacity to help Africa trade better

REC Integration Approaches and their Implications


REC Integration Approaches and their Implications

REC Integration Approaches and their Implications

The traditional approach to economic integration in Africa has become increasingly complex. It lacks focus and feasibility. It might be time to take a hard look at the evidence and revisit the design choices made during the 1990s.

The Regional Economic Communities (RECs) pursue a linear approach to economic integration. They begin with Free Trade Areas (FTAs) and then proceed to customs unions (CUs) and common markets.[1] Some have agreed to form a Monetary Union and ultimately a Political Federation.[2] There are often deadlines for achieving these goals. This is also the design which underpins the formation of the African Economic Community (AEC) provided for in the Abuja Treaty of 1991.

When the economies of REC Members display wide discrepancies, this approach will result in uneven and diluted outcomes. Some of the RECs are not yet FTAs[3] and variable geometry is generally accepted and practiced. It allows Member States to implement obligations at different speeds, and to deviate from timeframes. Some seem to accept more explicit qualifications of obligations. Article 75 of the East African Community (EAC) Treaty says the EAC CU shall include “the application of the principle of asymmetry,” which means “the principle which addresses variances in the implementation of measures in an economic integration process for purposes of achieving a common objective”.

The stepwise approach may signal commitment to deeper economic integration in a former guise but is it the ideal one? Are the Member States able and willing to implement the associated obligations? The RECs are now also the building blocks of the AfCFTA, but are they on the right track?

Two specific challenges must be met. In terms of substance, the benefits of new generation FTAs should be considered. They are comprehensive, better placed to deal with the challenges of the day, and approach matters differently. They do not live under the strait jacket of progressing to the next level and becoming CUs. Trade in goods can be fully liberalised under an FTA. CUs are cumbersome to administer and undermines policy flexibility. New generation FTAs include trade in services (via specific Protocols) but then for those sectors that are priorities and logical candidates for tackling specific regional needs. The ambitious GATS approach is not necessary. The gains from liberalising the transport sector, for example, will be massive and bring many much-needed trade facilitation benefits in Africa. A sectoral services approach makes it easier to strive for regulatory harmonisation; instead of the present REC methodology that emphasises Members’ “right to regulate” and only “cooperation” when investment, competition and intellectual property rights are at stake.

In terms of governance, the RECs should up their game and implement mutually agreed obligations. Again, this may require a more realistic approach; that they base their integration efforts on FTAs only. Policy space over many trade related issues (such as negotiating third party agreements) will be retained. Had the EAC not been declared a CU, Kenya would have escaped much of the criticism (and court cases) for its recent initiative to negotiate a bilateral trade deal with the United States.

The RECs have developed what could be termed their own “survival strategies”, necessitated by the demand to keep grand integration schemes alive. REC Councils (consisting of representatives of the participating Governments) adopt ad hoc internal “solutions” such as derogations,[4] stay of application,[5] derogations or waivers.[6] The result is fragmentation. The linear integration process seems to have generated another belief: more is better, and economic integration is a common good. Overlapping membership of the RECs is pervasive and causes uncertainty about legal obligations and benefits. This affects importers, exporters, and investors too.

Deep integration of the type envisaged by the RECs needs common institutions with teeth. This is not politically feasible. African governments treasure their sovereignty and prefer member-driven arrangements, where decisions are taken on the basis of consensus. In practice this often means agreement on the lowest common denominator and allowing more variable geometry outcomes.

New generation FTAs are comprehensive and bespoke instruments. They include, in addition to tariff schedules and disciplines on trade in goods for specific services sectors, provisions on investment (without investor-state-dispute-settlement clauses), competition, intellectual property rights, standards, remedies, technical assistance and e-commerce. Trade facilitation, the digitisation of customs procedures and related clearance procedures are tackled as priority needs. There is a renewed emphasis on compliance, bespoke institutional arrangements, inclusivity, disciplines on sustainability, and for collective responses regarding public health and energy issues.

Some RECs have done well in terms of laying the groundwork for liberalising trade in goods and for customs administration. But new disciplines must now be agreed and implemented to meet the challenges of the time. There is an additional factor; the AfCFTA is not a self-executing arrangement, it depends on the State Parties and the RECs for fulfilling its promise. It needs RECs in the form of well-focused FTAs.

[1] The Southern African Customs Union (SACU) is the exception, it began as a customs union but was launched as part of British colonial policies more than a century ago. SACU is also not a recognised REC.

[2] See, for example, Art 5 EAC Treaty.

[3] AMU, ECCA, CENSAD and IGAD have not trade arrangements in place. Details available at: https://www.tralac.org/resources/infographics/15002-afcfta-negotiations-the-current-state-of-rec-liberalisation-and-intra-rec-trade.html

[4] Art 3 of the SADC Protocol on Trade.

[5] WTO Trade Policy Review: East African Community https://www.tralac.org/resources/by-region/eac.html#wto

[6] Examples are Art 3(c) of the SADC Protocol on Trade, the stay of implementation arrangement in the East African Community (EAC) and provisions allowing waivers; as in Art 15 of the AfCFTA Agreement.

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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