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Economic Integration is a Challenge: Can Variable Geometry help?


Economic Integration is a Challenge: Can Variable Geometry help?

Economic Integration is a Challenge: Can Variable Geometry help?

Trade Liberalisation and economic integration are a process. When sovereign states embark on the road to form Free Trade Areas (FTAs) and customs unions (CUs) they must agree on the extent of their commitments and the pace of trade liberalisation. They may opt for gradualism, but certain implementation challenges cannot be avoided. One of them is that a CU has a Common External Tariff (CET) and that Member States lose policy space over the use of the import tariff. This means that trade agreements with third parties require collective tariff offers. Since the REC Member States are at different levels of economic development and prioritise national development policies, they often disagree on matters that should be dealt with collectively.

Variable geometry has become an accepted principle on how to tackle the challenges associated with African countries’ unique and different needs. To explain some aspects around the operationalisation of this concept in REC activities, an advisory opinion rendered by the East African Community (EAC) Court of Justice is briefly discussed. In 2008, the Council of the EAC requested an advisory opinion form this Court as to the meaning and implications of the EAC Treaty provision on variable geometry “which allows for progression in co-operation among groups within the Community for wider integration schemes in various fields and at different speeds”.[1] The Council wanted to learn more about the application of variable geometry in a particular context, namely vis-à-vis the requirement for consensus in decision-making, and whether the consensus requirement implies unanimity of the Partner States.

The Court found that “the principle of variable geometry, as its definition suggests, is a strategy of implementation of Community decisions and not a decision-making tool in itself…. The Court is of the opinion, therefore, that the principle of variable geometry can comfortably apply, and was intended, to guide the integration process and we find no reason or possibility for it to conflict with the requirement for consensus in decision-making.”

It did warn that “variable geometry should be resorted to as an exception, not as the rule, as indeed institutionalised flexibility might lead to break-up of the Community or its transformation into “a mere free trade area”. It is the Court’s opinion, and we so advise, therefore, that for avoidance of internal conflict and a possible emergence of mistrust among the Partner States… decisions should be taken with the above two aspects in mind and simultaneous implementation thereof need not be forced upon an unready Partner just as refusal or delay of implementation thereof need not be used to block a ready Partner or Partners. Simultaneous implementation is impracticable in some circumstances and Partner States cannot be expected to operate within such strait jacket or one size fits all situations. Variable geometry is, therefore, intended, and actually allows, those Partner States who cannot implement a particular decision simultaneously or immediately to implement it at a suitable certain future time or simply at a different speed while at the same time allowing those who are able to implement immediately to do so.

A key issue is that the specificities of the application of the principle of variable geometry must be consistent with necessary predictability and transparency – agreement on the longer time frames of, and sequencing for implementation by different groups of members is required. The emphasis on ‘certain future time’ is key, and this is no absolution from obligations! Monitoring is essential – as it is for all obligations.

The implementation of the Court’s opinion will not be easy. If variable geometry does not absolve Members from the obligation to respect their obligations, there should be criteria for monitoring their progress. And what happens when the Member States disagree? The deepening of integration will require sacrifices from the Members of a REC in respect of national policy space and how sovereignty is understood. Deep integration is also a political enterprise. The formal establishment of a CU or Common Market within a REC will demonstrate political unity, but the price may often be too high to make it work as an enforceable set of legal commitments.

There are sound reasons why individual Member States are reluctant to accept obligations curtailing policy space. The integration of economies at very different levels of economic development is complex and costly. The needs of developing nations require an incremental process. Thirty-three of the world’s forty-six Least Developed Countries (LDCs) are on the African continent. Many of them are land-locked, have inadequate infrastructure, and struggle to diversify their domestic economies. Where does this discussion tell us about deeper integration on the African continent?

  • African regional integration is necessary. Small, landlocked economies need access to bigger markets. One of the selling points of the AfCFTA is that it attracts attention of global investors as a result of the market access opportunities that may arise.

  • The RECs have been around for some time. They are endorsed with the legitimacy of their long and close association with continental integration endeavours.

  • Variable geometry brings a unique flexibility and pragmatism. This keeps everyone on board.

  • There are limits to how far the variable geometry escape clause can be pushed. If it becomes pervasive and systemic, the integrity of the bigger enterprise will be in danger. This may also affect external trade relations. If Tanzania (an LDC) objects to Kenya’s plans to conclude a trade deal with the US (an important trading partner) because it undermines the EAC’s CET, but the latter is already characterised by several variable geometry “exceptions”, the benefits of belonging to a CU become uncertain. Variable geometry and “derogations” should be conditional and timebound.

[1] Application No. 1 of 2008.

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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