10 Shares of Global Trade: 1990s EU+NAFTA+E&SE AsiaMercosurSACU+ROWTotal184.108.40.206.220.127.116.11.18.104.22.168.10.819.96.822.214.171.124.40.00.21.61.126.96.36.1992.325.9100.0
11 Composition of Trade Increased trade as share of GDP Largest increase in trade among OECD countriesIncreased trade in intermediate inputsImport content of exports increasedInternational segmentation of productionIncreased trade in new productsTrends challenge standard trade theory and analysis of gains from trade
12 Intra-regional trade/GDP, 2002 SR[JH’S NOTES FROM PREVIOUS PRESENTATION]East Asia.There is clearly a high level of intra-regional trade, compared to other regions.Source: World Bank, Global Economic Prospects 2005, p. 43
13 Regional Trade Agreements RTA: a group of countries liberalize trade among themselves, but not with the rest of the world.Stages of regional integration agreements:Preferential trade areas (PTA)Free Trade Areas (FTA)Customs Unions (CU)Common MarketMonetary UnionEconomic Union
14 Implications of Trends The formation of blocs pre-dated any explicit regional trade agreement (RTA)Three kinds of RTA:Bloc creation: EU, NAFTA, MercosurBloc expansion: EU expansion, CAFTAMarket access: EPAs, AGOA, FTAA, bilateral agreements
15 Shallow and Deep Integration Early RTAs and GATT/WTO rounds facilitated shallow (or negative) integration:Reduction of border trade barriersNew RTAs all involve elements of “deep” or “positive” integrationPolicies and institution “behind the border” that facilitate increased trade
16 Regionalism: 1990s Dramatic increase in RTAs in the 1990s NAFTA, Mercosur, SADC, ASEAN, CAFTA, FTAA, EPAsCharacteristics of new RTAs:Motivation to use regional integration as a means of insertion into the world economyElements of deep integrationAgreements tend to be both South-South, and North-SouthU.S. Special Trade Representative Zoellick has described the U.S. pursuit of regionalism as a strategy to achieve short-term economic goals, help break the logjam in multilateral negotiations.The EU has pursued regionalism aggressively as a means of encouraging investment and competition.
18 Gains From RTAsMany studies of actual and potential RTAs of various kindsVirtually all benefit the members (trade creating)Better if there is at least one large and/or rich country to “anchor” the RTASmall countries gain proportionately moreBilateral agreements are less beneficialFallacy of composition: hub-spoke system is not good for the spokes
19 Productivity gains and market integration Integration in global value-chainsFragmentation of production and scale economiesTrade in intermediates and new productsInter-firm and intra-firm coordinationQuality and SPSS standardsHigh profitability from niche productsTrade-productivity linksTechnology transferRole of FDI in market integration
20 SADC: Regional Integration Is the SADC region forming a trade bloc?Yes. Still early stage, with differing degrees of integration across the regionIs South Africa large enough and linked enough to anchor the bloc?Yes, given past decade of growthIs Mozambique ready for integration?Yes, with supportive policies
25 SADC FTA/Customs Union SADC FTA: much still to be negotiatedSADC customs union or SACU expansionProceed in stages: E.g., first, include Mozambique, Malawi, and ZambiaWhether it is SADC or SACU depends as much on politics as on economicsElements of deep integration are requiredMonetary union is much more remote
26 Southern Africa: Regional Organizations SADCC: Southern African Development Coordination ConferenceSADC: Southern African Development CommunityCBI: Cross-Border InitiativeCOMESA: Common Marker for Eastern and Southern AfricaRIFF: Regional Integration Facility Forum for Eastern and Southern AfricaSACU: Southern Africa Customs UnionCMA: Common Monetary AreaIOC: Indian Ocean CommissionEAC: East African CommunityPlus AGOA (US), EPAs (EU), and South Africa/EU FTA
27 Membership in RTAs Country SADCC SADC CBI COMESA RIFF SACU CMA IOC EAC AngolaXBotswanaDRCLesothoMadagascarMalawiMauritiusMozambiqueNamibia*SeychellesSouth AfricaSwazilandTanzaniaZambiaZimbabweSADCC Southern African Development Coordination ConferenceSADC Southern African Development CommunityCBI Cross-Border InitiativeCOMESA Common Marker for Eastern and Southern AfricaRIFF Regional Integration Facility Forum for Eastern and Southern AfricaSACU Southern Africa Customs UnionCMA Common Monetary AreaIOC Indian Ocean CommissionEAC East African Community
28 Policy Commitment Supportive policy environment is crucial Reduce or eliminate policies that inhibit tradeTariffs, quantitative controls, distorting taxesInstitute polices and create institutions that facilitate trade, especially exportsStandards/certificationInfrastructure/investmentRegional policy coordinationTrade negotiationsBusiness environment
29 Tax and Tariff SystemSupportive business environment requires a tax system that is:TransparentPredictableConsistentUniform with minimal distortionsEfficient administration is crucialResponsive bureaucracy
30 Trade Negotiations RTA/Customs Union Regional trade administration Phasing: sensitive sectorsRules of originDispute resolution mechanismsRegional trade administrationSACU and/or SADCCapacity for continuing negotiationsIntegration is an ongoing process
31 Trade NegotiationsNegotiating institution needs to manage tradeoffs between competing interestsIndustry/agriculture/labor ministries tend to favor existing industries, and hence to be protectionistNeed to reflect interests of potential exporters and public (e.g., consumers)Need for analytic support and organized advice from stakeholders
32 Coordination of Agreements Need to revise agreements as regional integration proceedsE.g., EPAs and EU-South Africa agreementsRegional institutionsCoordinate macro and monetary policyEstablish and enforce standards/normsDispute resolution and legal systems
33 Mozambique and Integration Problems and needsBusiness environment issuesNeed for infrastructure and financeRegional institutionsGovernment and private sector collaboration as process unfoldsReady to start. Cannot learn to swim if you will not go into the water.
34 Success Indicators Process: Results Establishment and evolution of regional institutions that facilitate tradeTax/tariff policy reform and administrationBusiness environmentResultsIncreased trade and growthStable macro policy environment
35 ReadingsIDS Asian Drivers Team (2006). “The Impact of Asian Drivers on the Developing World.” IDS Bulletin, Vol. 37, No. 1 (January), ppEvans, David, Raphael Kaplinsky, and Sherman Robinson (2006). “Deep and Shallow Integration in Asia: Towards a Holistic Account.” IDS Bulletin, Vol. 37, No. 1 (January), ppEvans, D. et al. (2006). Assessing Regional Trade Agreements with Developing Countries: Shallow and Deep Integration, Trade, Productivity and Economic Performance. Report to DFID under DFID Project No , University of Sussex, April.Rodrik, Dani (1999) The New Global Economy and Developing Countries: Making Openness Work, Overseas Development Council, Washington.World Bank Global Economic Prospects, 2005: Trade, Regionalism, and Development. Washington: World Bank.