1. Mozambique and Regional Integration in Southern Africa
Sherman Robinson
Institute of Development Studies
University of Sussex
November 2007

2. 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

3. Trade Blocs: 1960s

4. Export Shares: 1960s Europe + N America + Asia-UK Asia-US Total
75.4
14.2
8.2
2.3
100
N America +
37.5
44.5
8.3
9.7
100
Asia-UK
48.8
12.7
20.6
18.0
100
Asia-US
23.0
37.3
19.5
20.2
100

5. Shares of World Trade: 1960s
Europe +
N America +
Asia-UK
Asia-US
Total
Europe +
39.7
7.5
4.3
1.2
52.7
N America +
11.2
13.3
2.5
2.9
29.9
Asia-UK
5.0
1.3
2.1
1.9
10.3
Asia-US
1.6
2.6
1.4
1.4
7.1
Total
57.6
24.7
10.3
7.4
100

6. Trade Blocs: 1970s

7. Trade Blocs: 1980s

8. Trade Blocs: 1990s

9. Export Shares: 1990s
EU+
NAFTA+
E&SE Asia
Mercosur
SACU+
ROW
Total
73.5
9.3
10.8
1.2
0.6
4.5
100.0
19.3
49.4
24.1
2.5
0.4
4.2
17.9
25.0
51.2
0.9
0.5
4.4
27.5
20.9
16.3
22.7
11.7
41.5
11.9
26.8
2.0
8.1
9.7
32.1
21.2
35.5
2.2
8.0

10. Shares of Global Trade: 1990s
EU+
NAFTA+
E&SE Asia
Mercosur
SACU+
ROW
Total
33.6
4.2
4.9
0.6
0.3
2.1
45.8
3.8
9.8
4.8
0.5
0.1
0.8
19.9
6.8
13.9
1.2
27.2
0.4
0.0
0.2
1.6
1.1
1.8
5.1
44.6
22.3
25.9
100.0

11. 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

12. Intra-regional trade/GDP, 2002SR
[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 Market
Monetary Union
Economic 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, Mercosur
Bloc expansion: EU expansion, CAFTA
Market 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 barriers
New RTAs all involve elements of “deep” or “positive” integration
Policies 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, EPAs
Characteristics of new RTAs:
Motivation to use regional integration as a means of insertion into the world economy
Elements of deep integration
Agreements tend to be both South-South, and North-South
U.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.

17. RTA formation
Source: World Trade Organization

18. 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 spokes

19. 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

20. 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

21. GDP for SADC Countries

22. Sectoral Value Added

23. Shares of Intra-SADC Imports

24. Shares of Intra-SADC Exports

25. 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

26. 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

27. Membership in RTAs Country SADCC SADC CBI COMESA RIFF SACU CMA IOC EAC
Angola X
Botswana
DRC
Lesotho
Madagascar
Malawi
Mauritius
Mozambique
Namibia *
Seychelles
South Africa
Swaziland
Tanzania
Zambia
Zimbabwe
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

28. 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

29. 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

30. Trade Negotiations RTA/Customs Union Regional trade administration
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

31. 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

32. 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

33. 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.

34. Success Indicators Process: Results
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

35. Readings
IDS Asian Drivers Team (2006). “The Impact of Asian Drivers on the Developing World.” IDS Bulletin, Vol. 37, No. 1 (January), pp
Evans, David, Raphael Kaplinsky, and Sherman Robinson (2006). “Deep and Shallow Integration in Asia: Towards a Holistic Account.” IDS Bulletin, Vol. 37, No. 1 (January), pp
Evans, 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.