African integration: an analytical approach
tralac has recently capitalised upon the pre-release version 9.2 of the GTAP database, and the recent excellent data sets from the World Bank and others publishing quality data on trade barriers across the African continent, by undertaking a series of simulations examining regional integration and intra-African trade barrier reductions. The results for tariff elimination on intra-African trade are promising, but the real news is in confirming that these barriers are not as significant as the various trade-related barriers outside of tariffs.
Especially impressive results were forecast by simulating a modest 20% reduction in the costs associated with that particular African problem of transit time delays at customs, terminals and internal land transportation. These gains are significantly above both just intra-African tariff elimination and what may be thought of as the more traditional non-tariff barriers that we modelled individually and separately. Although we have not modelled a combined ‘big bang’ approach to tariff elimination, non-tariff barrier reductions and time in transit cost reductions, the final combined outcome from all three are likely to be cumulative and generate very large gains to Africa. The overall results from time in transit costs especially support the current emphasis on projects such as the WTO infrastructural supports to Africa.
Our simulations for an FTA with a selected group of African countries show that this is very much a second-best option, and the inclusion of most of the significant economies in Africa generates the best results. Only in the event of a failure to progress integration across the continent with all or most African countries should partial integration be pursued.
The policy implications from our research are clear: while cooperation will enhance the gains, much of the benefits will result from unilateral actions and regional cooperation that does not need the long and drawn our processes associated with FTA negotiations. However, against this background, the concept of ‘governance’ must be emphasised, as must the crucial importance of a rules-based structure. In addition, provided African countries are willing to play their part, there seems to be global funds available for these reforms.
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