Building capacity to help Africa trade better

The importance of infrastructure development under the Tripartite FTA


The importance of infrastructure development under the Tripartite FTA

Quick wins in infrastructure upgrading could be crucial for sustaining the political momentum required to undertake the more challenging aspects of the COMESA-EAC-SADC T-FTA agenda. Sean Woolfrey, tralac Researcher, discusses the importance of infrastructure development under the Tripartite FTA

The last few months have seen no let up in the momentum being exhibited in regionalism and regional integration processes in Africa. In addition to work under the frameworks of the continent’s various Regional Economic Communities (RECs), progress is being made on the COMESA-EAC-SADC Tripartite Free Trade Agreement (T-FTA), while the African Union (AU) and United Nations Economic Commission for Africa (UNECA) are championing the establishment of a Continental FTA encompassing all African countries.

Perhaps unsurprisingly this renewed momentum in regional processes has been met with scepticism from numerous commentators who point out that regionalism and regional integration processes are nothing new in the African context. Indeed, regionalism has been a feature of African attempts to promote political solidarity and structural transformation on the continent since at least the 1970s, and numerous regional plans and processes have been created down the years, including the Lagos Plan of Action, the Abuja Treaty and the creation of numerous RECs on the continent. For the most part, these initiatives have failed to bring about much needed economic development, and the question therefore remains: how are current regional integration processes different?

One of the reasons for thinking that current regional integration processes may be more successful in promoting economic development in Africa is that these initiatives appear to be taking a more comprehensive approach to economic integration and not simply focusing on a narrow market access agenda. This is best exemplified by the ‘developmental integration’ approach of the COMESA-EAC-SADC T-FTA, an approach which is based on addressing the three ‘pillars’ of market access, infrastructure development and industrialisation to improve supply side capacity. Such an approach seeks to leverage benefits from the complementarities involved in addressing these three related aspects of regional integration.

Previous tralac discussion notes have sought to emphasise the importance of the industrial development pillar, arguing that if African countries do not improve their capacity to produce goods and services, then regional integration process are unlikely to bring about economic development in Africa, which is the ultimate goal of regional economic integration on the continent. While industrial development is undoubtedly very important, improving the productive capacities of African countries through industrialisation is likely to be a slow and difficult process given all the challenges African economies face. Similarly, the traditional regional economic integration approach of creating a larger market through market access provisions under an FTA runs the risk of promoting uneven development within the FTA as relatively more industrialised countries or sub-regions within the FTA gain disproportionate benefits through industrial agglomeration effects and the greater capacity of that country or sub-region’s firms to take advantage of an expanded market.

Similarly, market access initiatives such as reductions in tariffs and the removal of non-tariff barriers are often of a quite abstract and intangible nature and are not very visible to the average economic actor. Indeed, anecdotal evidence from the implementation of the SADC FTA suggests that numerous economic actors within the region are either unaware of trade preferences available under the FTA or feel that the conditions attached to such preferences make them unattractive for actual use. Furthermore, it is unclear, even to analysts, to what degree the market access commitments under the SADC FTA have, in fact, been implemented by the various SADC states.

For these and other reasons, it may be that progress made under the infrastructure development pillar proves to be the key element in maintaining the political consensus driving current regional integration and cooperation under the T-FTA. While progress on market access remains somewhat intangible, and various political and economic difficulties involved in industrial development are likely to constrain progress on building supply side capacity, progress on infrastructure development is already being made and can provide the ‘quick wins’ which maintain political momentum for more difficult aspects of the regional integration process. The tangible nature of infrastructure development, such as the improvement of road surfaces as part of the North-South Corridor initiative, or the establishment of one-stop border posts, such as the one linking Zimbabwe and Zambia at Chirundu, is also likely to promote greater support for integration processes.

There are a number of further benefits associated with addressing infrastructure under regional integration agreements (RIAs). First, cooperation on infrastructure development is likely to prove the least politically controversial of the three integration pillars of the T-FTA, especially given past experience in Africa with regard to uneven development within RIAs and the determination of economies in the region to protect sensitive domestic industries. Second, infrastructure development and upgrading is vital for making the most of market access improvements and for lowering transaction costs so as to create an environment conducive for industrial development and structural transformation.

Third, unlike market access and industrial development provisions, infrastructure development is not discriminatory in the sense of benefiting T-FTA member states at the expense of non-members. A traditional criticism of RIAs, and particularly of so-called ‘south-south’ RIAs, is that their intra-regional trade bias often results in significant trade diversion rather than trade creation. This in turn benefits only certain countries and industries, and generally reduces regional welfare gains. Improvements in regional hard and soft infrastructure will undoubtedly facilitate intra-regional trade by overcoming many of the constraints that result in it often being more costly for an African firm to trade with countries in its own region than to trade with a country from Europe, North America or East Asia. Importantly, however, infrastructure improvements will also make trade with non-T-FTA member countries less costly, and will therefore help African countries integrate into the global economy, something that is crucial for their economic development. Consequently, it may be the case that infrastructure development is the key to the success of regional integration in Africa.



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