Key Statistics and Trends in Economic Integration: ACP Region
The Africa, Caribbean and Pacific Group of States (ACP) was established by the Georgetown Agreement in 1975 to negotiate and implement cooperation treaties with the European Union. Today, the group includes 79 member States from Sub-Saharan African, Caribbean and Pacific countries.
Its goals also went beyond the initial mandate by including achieving sustainable development, integrating member States to the world economy and strengthening cooperation among member States in trade, economics, politics and culture. This study maps the group’s trade and trade policy structure, and discusses challenges and opportunities of deep economic integration.
The ACP group has a fractured economic and trade structure as the member States are geographically dispersed around the world and possess different geographical and economic features. Heterogeneity of the level of economic development, local productive capacities, economic sizes and structures of member States as well as lack of a clear move at the ACP level for supra-regional economic integration often hinders development of intra-regional trade and economic links.
Many member states are highly dependent on primary goods exports and rely on few developed country markets for export revenues. Intra-ACP trade, however, has higher manufacturing and technology content and thus offers possibility to diversify export product basket and increase the domestic content of the ACP countries in more sophisticated products.
Tariffs and non-tariff measures (NTMs) remain obstacles in increasing trade growth of the member States along with other challenges in trade facilitation. Occasionally average tariff rates vary significantly among ACP regions. In general, agricultural products face higher tariff rates than industrial products. Intraregional trade also tends to face lower tariff rates than inter-regional trade. However, NTMs remains to be more important in affecting international trade flows than tariffs.
Maritime transport, which is the backbone of the world trade in merchandise goods, is not sufficiently efficient in many ACP countries to promote rapid trade growth among the member States. The region also performs low in e-commerce even compared to the developing countries’ average.
ACP countries' performance in business environment varies considerably across different indicators. Members often score better in starting a business but perform weak in enforcing contracts and trading across borders. Weaknesses in general business environment, along with other factors, impede FDI inflows and participation of member States to the global value chains. Per capita FDI inflows to the ACP countries are less than one fifth of the world and one twentieth of the developed countries average.
The labour productivity in ACP is about 24 per cent below the world average. While the productivity gap is the widest for the ACP Pacific region, Caribbean region performs well above the world average. Since 2009 ACP countries successfully increased their labour productivity, but the upturn remained below the world average and thus the gap has widened considerably since then.
The terms of trade (TOT) has deteriorated for natural resource dependent economies during the last 5 years, eroding the commodity price based surge in TOT at the beginning of the century. The recent appreciation of USD against many currencies also gave temporary price advantages to many ACP countries in the export markets.
The report is structured into two parts. The first part briefly summarizes the history of the ACP group and presents an overview of ACP economies in the world economy and some challenges that member States face. The second part provides illustrative statistics on ACP countries’ trade in goods and services during the last decade. The section includes various indicators of trade structure, services trade and investment flows, trade facilitation, tariffs and non-tariff measures as well as international competitiveness. While the section presents some of the most commonly used trade indicators for the ACP group as a whole, some other figures compare the structure and performance of three geographical regions of the ACP: Africa, Caribbean and Pacific.
Opportunities for Trade in the Region
Economic sizes of the three geographical regions of ACP countries are very diverse. With an estimated population of 1.1 billion ACP Africa is the largest region accounting for more than 95 per cent of the group’s total in 2017. Caribbean and Pacific are smaller in comparison with an estimated population of about 40 and 12 million respectively. Similarly, with 1.5 trillion combined GDP, African countries account for more than 85.2 per cent of the ACP group's total GDP in 2016. Africa is followed by Caribbean ($237 billion) and then by Pacific ($33 billion).
Moreover, African countries are the biggest trader (exports plus imports) of the group by accounting for about 85.3 per cent of the ACP's merchandise trade flows in 2016. In contrast, Caribbean and Pacific countries' exports are about 12.5 per cent and 2.3 per cent of the total respectively.
Intra-ACP trade accounts for 17.9 per cent of the total trade (exports plus imports) in 2016, relatively low compared to established regional trade blocks. For example, intra-regional trade accounts for 61.7 per cent and 40.3 per cent in the European Union and North American Free Trade Area. Nevertheless, aggregate figure hides the heterogeneity of trade flows and trade concentrations within subregions of the ACP.
As it is originally conceived as a block to negotiate trade agreements with the European Union, intra-ACP trade appears to have a fractured geography in three regional trade zones: Africa, Caribbean and Pacific. While ACP accounts for 19.4 per cent and 10.6 per cent of the ACP Africa's and Caribbean's trade respectively, it only captures 2.8 per cent of ACP Pacific’s trade flows. For the latter group of countries, geographical dispersion and weak domestic productive capacity inhibit trade expansion.
Fractured trade structure is visible when intra-ACP trade by region is studied. A significant share of intra-ACP trade is done among the members of the same geographical region while trade flows among the regions are weak. On average, about 70.6 per cent of the trade flows of the Caribbean and 81.6 per cent of the Pacific regions are with the countries in their respective region. For African countries, this figure goes over 98 per cent.
Despite the fractured trade structure, intra-ACP trade is gradually gaining importance for member States over the course of two decades. The rise may be mainly due to a generally increasing share of developing countries in world trade than deliberate and concerted efforts of ACP countries to strengthen their economic ties and integration.