Evaluation and Lessons from Theory ———— 40 Ex-ante The existence of high barriers to intra- and…

Evaluation and Lessons from Theory ———— 40 Ex-ante The existence of high barriers to intra- and extra-regional trade, geographical proximity and a shared belief of the benefits of regionalism seemed to favor the ECOWAS project. But conditions which have benefited EU integration – complementary in production structures, similar levels of income, a willingness to cooperate rooted in historical experience, a political structure which allows national interests to be overridden or used for the common purpose – have been more or less absent in the case of ECOWAS. It is somewhat hard to imagine how a significant growth in intra-regional trade could be created. In order to complete a project as comprehensive as a regional integration scheme experts, diplomatic skills and most important; political will are needed. The ECOWAS-region lacks many of these resources. Moreover, the states are often run by rent-seeking elites with short-run goals. Democracy, where it exists, is threatened by, among other things, poverty and a lack of political rights. It is an open question, whether democracy is necessary for successful economic integration. However, the environment for integration could be better and the incentives for integration are, according to theory, low. There are several other organizations within the ECOWAS. The over-lapping membership in these various organizations is mostly a problematic element that undermines cohesion. The members do not pay enough attention to ECOWAS-work. They are also tied to the EU‘s Lomé-convention. They were already in this trading block before the establishment of the ECOWAS. The African economies export raw materials and tropical products and import capital goods and manufactured consumer goods. This pattern of trade; the complementary between African and European economies obstructs intra-regional trade in ECOWAS, strengthens a one-sided dependency and undermines the ECOWAS states’ incentives to adopt regional strategies. To that can be added that nine percent, almost one tenth, of the budgets in Sub-Saharan Africa consists of aid. The average for all LDCS is three percent.193 Ex-post The results of cooperation in ECOWAS is far from impressing. There exists no CET, labor cannot move freely within ECOWAS and fiscal and monetary harmonization are ambitious objectives whose realization will not be possible for a very long time. These have been the main objectives of ECOWAS since it was founded. Some projects have been implemented but they have not affected trade liberalization much. An often cited reason for the failure of intra-regional trade to develop in ECOWAS is the absence of currency convertibility. Another reason is that governments often try to keep out imports from other member countries as a way to counter balances of payments problems. Intra-regional trade figures are therefore very low in comparison with Asia and Central America. The structural features of the West African economics, the pursuit of the import-substitution policies and the economic differences that produce an uneven distribution of benefits and costs of integration have so far prevented any serious and meaningful intra-trade integration. So, if intra-regional trade is an appropriate indicator of integration, it can be concluded that ECOWAS more or less has failed. But as de Melo and Panagariya194 point out, when product differentiation and intraindustry trade is possible, countries with similar factor endowments (like the members of ECOWAS) can still trade with each other. Traditionally, a difference in states’ factor endowments turns them into natural trading partners. The members of ECOWAS are thus not natural trading partners, which leads to a lack of trade creation. Governments have allowed interstate jealousies and suspicions to inhibit cooperation. The contributions to and outlays from the FCCD fund that was supposed to mitigate the negative consequences of integration create repeated controversies. Tariff revenues are so important for the national budgets that there is little chance of successful liberalization. A necessary condition for successful integration is that a member either has something to gain by competition or gets 193Svedberg, 1995, p.295 194de Melo & Panagariya, 1993, p.252 ———— Evaluation and Lessons from Theory ———— 41 compensated for a loss. This condition is not fulfilled in ECOWAS. There is, as mentioned above, a skewed distribution of benefits and costs. There has also been a lack of commitment by member governments. There is a reluctance to implement policies at the national level and the members often do not pay their membership fees. Also the national links to the secretariat, the center of the organization, are in many cases weak. The historical fact that the countries have regained their independence only recently makes it difficult for them to surrender sovereignty to a supra-national body. But a slow policy change, a step-by-step abandoning of past import-substitution policies and the adoption of structural adjustment schemes and export-oriented policies, can accelerate the pace of integration and hopefully, speed up economic development. Although recent changes on the world political scene are likely to promote the move in Africa towards democracy and reduce political conflicts, complete trade and factor integration is no more likely in the near future than it is today. There seems to be consensus that ECOWAS is in fact, a poor candidate for trade integration but a promising one for cooperation. 5.4 Evaluation of the applicability of the theoretical framework It is evident that the Balassa stages and models of gradual, linear integration is not always correct. There is no doubt that most regional groupings have a hard time achieving even a FTA. This fact is obvious from the case studies. The European Union is today the only grouping that has more or less followed the Balassa’s stages. In contrast, the monetary union in the Franc Zone has existed without effective integration of goods and markets for factors of production. In theory however, monetary integration is one of the last stages. Nonetheless, when analyzing regional schemes of integration there is a need for a classification scheme that reviews the classic stages leading to complete integration regardless of whether they are applicable to conditions in LDCs. The two development strategies, import substitution and export orientation, were also presented in chapter three. There are two reasons for this. First, they are the two development strategies employed in the three organizations analyzed in the case study. It is therefore it is important to have these strategies in mind when studying regional groupings. Secondly, import substitution was a part of the Latin American structuralist paradigm of the 1950s alongside of the customs union theory reviewed below. Today the debate is moving beyond the dichotomy between import substitution based and export oriented industrialization. The former strategy is sometimes seen as an important step in the development of the latter as it was in the case of East Asian economic development. Customs union theory In the 1950s, classic customs union theory was frequently employed along with import substitution theory as a part of the Latin American structuralist paradigm. The central concepts in the theory are, according to Blomqvist; trade creation and trade diversion. These concepts are still interesting and not dependent on whether the country under consideration is found in an LDC context or not. In the initial phase of integration it is interesting to know whether the new trade flows and patterns will increase welfare, that is when high-cost domestic production will be replaced by lower-cost partner countries, or will reduce welfare through the replacement of lower-cost imports from third countries with higher-cost imports from partner countries. The first phenomenon is trade creation and the second is usually called trade diversion. They emerge as intra-regional trade tariffs are lowered. Knowing that integration will give rise to trade creation is a strong incentive
for integration. The concepts trade creation / trade diversion are rather economic in their nature but they are commonly used in political economic studies of regionalism. The theory of preconditions and barriers This theory has been the most important theoretical building block in this essay. The theory has succeeded in pointing to the relevant motives for and barriers to integration and it is based on the concepts of trade creation and