mozambique and regional integration in southern africa sherman robinson institute of development...
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Mozambique and Regional Integration in Southern Africa
Sherman Robinson
Institute of Development Studies
University of Sussex
November 2007
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Outline
• Evolution of trade blocs: 1960s-1990s
• Composition of trade
• Regional Trade Agreements– Shallow and deep integration
• SADC/SACU and Mozambique
• Policy support for SADC regional integration
Trade Blocs: 1960s
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Trade Blocs: 1970s
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Trade Blocs: 1980s
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Trade Blocs: 1990s
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Export Shares: 1990s
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EU+ NAFTA+ E&SE Asia Mercosur SACU+ ROW Total
EU+ 73.5 9.3 10.8 1.2 0.6 4.5 100.0
NAFTA+ 19.3 49.4 24.1 2.5 0.4 4.2 100.0
E&SE Asia 17.9 25.0 51.2 0.9 0.5 4.4 100.0
Mercosur 27.5 20.9 16.3 22.7 0.9 11.7 100.0
SACU+ 41.5 11.9 26.8 2.0 8.1 9.7 100.0
ROW 32.1 21.2 35.5 2.2 0.9 8.0 100.0
Shares of Global Trade: 1990s
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EU+ NAFTA+ E&SE Asia Mercosur SACU+ ROW Total
EU+ 33.6 4.2 4.9 0.6 0.3 2.1 45.8
NAFTA+ 3.8 9.8 4.8 0.5 0.1 0.8 19.9
E&SE Asia 4.9 6.8 13.9 0.3 0.1 1.2 27.2
Mercosur 0.4 0.3 0.3 0.4 0.0 0.2 1.6
SACU+ 0.2 0.1 0.2 0.0 0.0 0.1 0.6
ROW 1.6 1.1 1.8 0.1 0.0 0.4 5.1
Total 44.6 22.3 25.9 1.8 0.6 4.8 100.0
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Composition of Trade
• Increased trade as share of GDP– Largest increase in trade among OECD countries
• Increased trade in intermediate inputs– Import content of exports increased– International segmentation of production
• Increased trade in new products• Trends challenge standard trade theory and
analysis of gains from trade
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Intra-regional trade/GDP, 2002
0
5
10
15
20
25
30
Per
cen
t
East Asia Pacific
Latin America andCarribean
South Asia
Sub-Saharan Africa
Source: World Bank, Global Economic Prospects 2005, p. 43
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Implications of Trends
• The formation of blocs pre-dated any explicit regional trade agreement (RTA)
• Three kinds of RTA:– Bloc creation: EU, NAFTA, Mercosur– Bloc expansion: EU expansion, CAFTA– Market access: EPAs, AGOA, FTAA,
bilateral agreements
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Shallow and Deep Integration
• Early RTAs and GATT/WTO rounds facilitated shallow (or negative) integration: – Reduction of border trade barriers
• New RTAs all involve elements of “deep” or “positive” integration– Policies and institution “behind the border” that
facilitate increased trade
Gains From RTAs
• Many studies of actual and potential RTAs of various kinds– Virtually all benefit the members (trade creating)– Better if there is at least one large and/or rich
country to “anchor” the RTA– Small countries gain proportionately more
• Bilateral agreements are less beneficial– Fallacy of composition: hub-spoke system is not
good for the spokes18
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Productivity gains and market integration
• Integration in global value-chains– Fragmentation of production and scale economies
• Trade in intermediates and new products
– Inter-firm and intra-firm coordination• Quality and SPSS standards
– High profitability from niche products
• Trade-productivity links– Technology transfer
– Role of FDI in market integration
SADC: Regional Integration
• Is the SADC region forming a trade bloc?– Yes. Still early stage, with differing degrees of
integration across the region
• Is South Africa large enough and linked enough to anchor the bloc?– Yes, given past decade of growth
• Is Mozambique ready for integration?– Yes, with supportive policies
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SADC: Real GDP
Angola
Botswana
Democratic Republic of Congo
Lesotho
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Seychelles
South Africa
Swaziland
Tanzania
Zambia
Zimbabwe
Angola
Botswana
Democratic Republic of Congo
Lesotho
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Seychelles
South Africa
Swaziland
Tanzania
Zambia
Zimbabwe
GDP for SADC Countries
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0
10
20
30
40
50
60
70
80
Angola
Botsw
ana
Dem
ocratic Republic of C
ongo
Lesotho
Madagascar
Malaw
i
Mauritius
Mozam
bique
Nam
ibia
Seychelles
South Africa
Swaziland
Tanzania
Zam
bia
Zim
babwe
Sectoral Value Added
Agriculture
Industry
Services
Sectoral Value Added
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Average Contributions to Intra SADC Imports (%)
Botswana
Lethoto
MalawiMauritius
Namibia
Sawizland
South Africa
Tanzania
Mozambique
Botswana
Lethoto
Malawi
Mauritius
Namibia
Sawizland
South Africa
Tanzania
Mozambique
Shares of Intra-SADC Imports
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Shares of Intra-SADC ExportsAverage Contributions to Intra SADC Exports (%)
BotswanaLethoto
MalawiMauritius
Namibia
Sawizland
South Africa
Tanzania
Mozambique
Botswana
Lethoto
Malawi
Mauritius
Namibia
Sawizland
South Africa
Tanzania
Mozambique
SADC FTA/Customs Union
• SADC FTA: much still to be negotiated
• SADC customs union or SACU expansion– Proceed in stages: E.g., first, include
Mozambique, Malawi, and Zambia– Whether it is SADC or SACU depends as
much on politics as on economics
• Elements of deep integration are required– Monetary union is much more remote
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Southern Africa: Regional Organizations
• SADCC: Southern African Development Coordination Conference
• SADC: Southern African Development Community
• CBI: Cross-Border Initiative
• COMESA: Common Marker for Eastern and Southern Africa
• RIFF: Regional Integration Facility Forum for Eastern and Southern Africa
• SACU: Southern Africa Customs Union
• CMA: Common Monetary Area
• IOC: Indian Ocean Commission
• EAC: East African Community
• Plus AGOA (US), EPAs (EU), and South Africa/EU FTA
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Membership in RTAs
Country SADCC SADC CBI COMESA RIFF SACU CMA IOC EAC
Angola X X X
Botswana X X X
DRC X X
Lesotho X X X X
Madagascar X X X X
Malawi X X X X
Mauritius X X X X X
Mozambique X X X
Namibia X X X * X
Seychelles * X X X X
South Africa X X X
Swaziland X X X X X X X
Tanzania X X X * X X
Zambia X X X X X
Zimbabwe X X X X X
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Policy Commitment
• Supportive policy environment is crucial– Reduce or eliminate policies that inhibit trade
• Tariffs, quantitative controls, distorting taxes
– Institute polices and create institutions that facilitate trade, especially exports
• Standards/certification• Infrastructure/investment• Regional policy coordination• Trade negotiations• Business environment
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Tax and Tariff System
• Supportive business environment requires a tax system that is: – Transparent– Predictable– Consistent– Uniform with minimal distortions
• Efficient administration is crucial– Responsive bureaucracy
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Trade Negotiations
• RTA/Customs Union– Phasing: sensitive sectors– Rules of origin– Dispute resolution mechanisms
• Regional trade administration– SACU and/or SADC
• Capacity for continuing negotiations– Integration is an ongoing process
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Trade Negotiations
• Negotiating institution needs to manage tradeoffs between competing interests– Industry/agriculture/labor ministries tend to favor
existing industries, and hence to be protectionist– Need to reflect interests of potential exporters
and public (e.g., consumers)
• Need for analytic support and organized advice from stakeholders
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Coordination of Agreements
• Need to revise agreements as regional integration proceeds– E.g., EPAs and EU-South Africa agreements
• Regional institutions– Coordinate macro and monetary policy– Establish and enforce standards/norms– Dispute resolution and legal systems
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Mozambique and Integration
• Problems and needs– Business environment issues– Need for infrastructure and finance– Regional institutions
• Government and private sector collaboration as process unfolds– Ready to start. Cannot learn to swim if you
will not go into the water. 33
Success Indicators
• Process:– Establishment and evolution of regional
institutions that facilitate trade– Tax/tariff policy reform and administration– Business environment
• Results– Increased trade and growth– Stable macro policy environment
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