SECTION 2: GENESIS AND EVOLUTION OF THE ECOWAS
Even during the continental phase of development of pan-Africanism in the 1950s and 1960s, African leaders had realised that after independence, regional co-operation would be essential for the maximisation of the continent’s vast potentialities, and resources. The UN Economic Commission for Africa
(ECA), established in April 1958, inspired by economic development in Latin America in the 1950s, (in turn modelled upon Western European experience of free trade) insisted on functional economic co-operation among African countries as part of the overall strategy towards achieving industrial development on the continent. In fact, the ECA acted as a catalyst in the movements that led to the formation of integrations in West, East, South and North Africa by sponsoring in 1965-66 a series of meetings in each of the 4 regions, to stimulate the governments concerned to practical measures of economic co-operation. ECA believed that integration measures like liberalisation of international trade, adoption of a common tariff for member countries of a regional body, and the co-ordination of investment policies, theoretically would make the regionalisation of import substitution policies more viable. As earlier noted, the main objectives of ECOWAS were the eventual elimination of all tariffs and barriers between members, the establishment of a customs union, unified fiscal policy and co-ordinated regional policies in the transport, communication, energy and other infrastructural facilities.
Unlike ASEAN which has been primarily a state to state relationship par excellence, over the years ECOWAS members have developed an increasingly intensive web of relations with developed countries characterised by what can be likened to the structural imperialism relationship. The facts are, to say the least, very depressing when we look at the structure of community trade and ECOWAS trade with other regions (see table 4). ECOWAS trade amounts to approximately 11% of the sub-region’s total trade with the world. According to the ECOWAS Handbook of International Trade, 1998 data, intra-community trade stood at $1,813m for total imports and $2,539m for total exports. Compare this with the region’s import from, and export to, Europe of $7,525m and $8,114m respectively for 1997. Thus, the intra-regional trade, level of investment, and industrial development remains much undeveloped. To a certain extent this has created dichotomy in ECOWAS co-operation. The leading industrial states in the region – Nigeria, Senegal, Côte d’Ivoire, and Ghana – believe that they are important enough to secure a better deal if they pursue their cause as individual countries rather than as a group (see table 5). Many of them feel that they will be better served individually if they link up with developed countries (see tables 6 a-d); and the last group of these – landlocked countries (Niger, Burkina Faso and Mali) – are merely frustrated because they are rather too small to make any significant impact in the global arena. The extractive industries contributed 82 percent of the GDP in most of the ECOWAS States. (See tables 7 on ECOWAS Exports of principal items).
Within the sector, agriculture predominates in Benin, Burkina Faso, Côte d’Ivoire, the Gambia, Ghana, Guinea, Guinea-Bissau, Mali, Niger, Nigeria, Senegal, Sierra-Leone, and Togo. 14
The regional trade is dominated by Nigeria, Ghana, Côte d’Ivoire and Senegal. Nigeria’s export to other West African States has been mainly crude oil and refined oil. Important West African and African states destinations in 1985 - 1995 included Côte d’Ivoire, Mali, Mauritania, Niger, Ghana, Burkina Faso, Gabon and Tanzania. Ghana’s total amount of goods exported in 1999 stood at 2.4m metric tonnes, mainly cocoa beans, sawn timber, aluminium, coffee, yam, all of which accounted for 53% of the country’s total exports. While most of the imports, which accounted for trade amounting to 6.3m metric tonnes in 1999, came from UK, the North Continent, the Far East and Africa. Imports of African origin dominated the trade, amounting to 2.6m metric tonnes, of which crude oil and petroleum products recorded 1.3 and 0.9m metric tonnes respectively.15
Others include grains, coke, sugar, chemicals and rice. This is particularly important because as will be shown later in this study, Nigeria’s generosity cut across the UEMOA or ECOWAS blocs. The upsurge in oil revenue, which accounted for 95% of Nigerian export earning in the 70’s indirectly ruined the agricultural sector but the boom went a long way to boost her foreign policy posture in West African sub-region.
It is against this current background that we examine the ability of the ‘intra-regional trade’ in the sub-region.
ECOWAS established on May 28, 1975 was mandated by its Treaty to:
- eliminate, between member states, custom duties and other charges of equivalent effects on imports and exports:
- eliminate quantitative and administrative restrictions on trade among members:
- establish a common tariff structure and commercial policy towards non-member countries:
- eliminate obstacles restricting the free movement of persons, services and capital between member states:
- harmonise agricultural policies and promote common projects in the member states notably in the fields of marketing, research and agro-industrial enterprises:
- evolve a common policy in, and jointly develop, the transport, communication, energy and other infrastructural facilities:
- harmonise economic, industrial and monetary policies of members, as well as eliminate disparities in the levels of their development; and
- establish a fund for co-operation, compensation and development.
Under the theoretical framework for economic integration, the implementation of the above is expressed as follows: a & b imply the establishment of a free trade area; c is a custom union; d - a common market and a functioning of e - g is an economic union.
ECOWAS is still some way from being a common market because free movement of labour remains a distant and difficult aspect. But it has come a long way. Most trade within ECOWAS is already tariff-free. Free movement of designated goods, reduction of custom duties and ECOWAS passport / travelling documents have also been adopted. The three provisions of the Protocol came into force respectively in 1980, 1986 and 1989. Two major ECOWAS events were the decision of the summit of 1980 to establish a Free Trade Area
(FTA) for unprocessed agricultural products and the signing of the Protocol on Non-Aggression and Mutual Defence Assistance of 1981. A common traveller’s cheque entered into circulation, a veritable asset for intra-regional trade promotion and, at the same time, a major step towards the realisation of a single monetary zone.
Though a bold and imaginative step towards meaningful regional economic integration came with the advent of
ECOWAS, lack of potential for increased trade within West African states is frequently mentioned as an explanation of the lack of success of
ECOWAS. There is an important qualification to be made at the outset, as there is evidence that the potential for
intra-ECOWAS trade is greater than is usually thought. The calculated statistics are for recorded or official trade. It is known that for many West African countries a sizeable volume of unrecorded or unofficial trade (80%) is done through the informal sector. 16
As regards the potential for intra-regional trade in sub-Saharan Africa, an interesting analysis was outlined in the World Bank’s Long-Term Perspective Study on Africa (1989). Official trade among sub-Saharan African countries was estimated at around US$ 4 billion or 6% of the total, which amounted to US$ 65 billion.17
GAINS FROM ECONOMIC INTEGRATION
Using the Jacob Viner hypothesis, 18
the effectiveness of any economic integration such as ECOWAS is seen in terms of its relative size of gains owing to trade creation and losses from trade diversion. However, the determination of the exact incidence of gain to loss depends on the type of integration as well as on the pre-union trading positions of participating members. Trade creation arises when a member country replaces goods produced domestically at a relatively high cost before the integration, with goods imported from another member country within the union at a relatively lower cost. However, trade diversion or suppression occurs when low-cost goods previously imported from the outside world are replaced by a higher cost import from a member country within the union.
On the supply side, ECOWAS enterprises (both small and large) are likely to enjoy more efficient allocation and management of available regional resources among members based on each country’s comparative advantage. The consequent enhanced efficiency within the region would further stimulate production for export into the outside world. On the side of the consumers within the region, the lower prices (arising from allocating production to the cheapest per unit cost location of a product within the region), and the greater variety of consumables is capable of increasing the general welfare of citizens within the sub-region. The consumer will, however, lose some welfare by not buying from the cheapest supplier in the world, as regionalisation will inevitably divert their consumption to the cheapest producer within the ECOWAS sub-region.
OBSTACLES AGAINST ECOWAS
ECOWAS faced problems similar to other regional groupings. Mauritania withdrew from the group in late December 2000 and dramatic changes in the sub-region and external processes hampered the growth of ECOWAS. Although its main objective is to promote economic integration of the sub-region, it has spent the last 10 years resolving political and social conflicts in some of its member countries such as Liberia, Sierra Leone, Guinea Bissau and Niger. Nonetheless, since ECOWAS was established in 1975, West Africa has witnessed tremendous, far-reaching changes. On the political scene, the principles of democracy, free and fair elections, good governance and respect of human rights have gained wide acceptance. At the economic level, states are relinquishing their stranglehold on the major enterprises, whose management once was the sole preserve of government. Privatisation is the order of the day as the countries prepare to meet the challenges of globalisation to avoid being marginalised within the economic order. Paradoxically, twenty-five years after its inception, ECOWAS finds itself confronted with the same developmental challenges and problems: corruption, mismanagement, low investment rate, falling prices of raw materials on the world market, foreign debt, and the burden of structural adjustment.
Perhaps, in determining the benefits of the level of economic integration among ECOWAS countries, the following questions are relevant: Is the geographical proximity of members of any importance? Is it desirable for members to be similar in terms of the types of commodities they produce as well as income levels? If two countries (like Nigeria and Ghana) are already members of an economic integration programme, what are the implications for both of them if new arrangements are involved? 19
What are implications for countries left out? Is it desirable to make exceptions to the WTO provision that makes it mandatory for any preferential free trade agreement to eliminate trade barriers on substantially all the trade between the members? How have the ECOWAS economies been performing and maintaining their positions as regards foreign direct investment (FDI)? While I have not attempted to provide answers to these practical questions, some obstacles to the realisation of ECOWAS objectives are briefly highlighted.
First, and the most obvious, is that for intra-ECOWAS trade to be mutually beneficial in line with economic integration postulations, the potential incidence of trade among the member countries should be substantial. Cross border communication and information technology are expected to play a vital role in this quest. It is to the credit of ECOWAS that it has adopted a protocol that has made it possible for community citizens to move freely throughout the West African sub-region without need for entry visa. In addition, the fast track approach, elimination of rigid border formalities and modernisation of border procedures through the digitisation of passports and construction of the Trans-Coastal (from Lagos to Nouakchott) and the
Trans-Sahelian highways (from Dakar to N’Djamena), a total of 90,000km of road and 11,000km interconnecting roads to open up land-locked countries. 20
Investment partners are also being invited to participate in the construction of a railway line between Lagos and Accra. However, long after political independence, many of the West African countries still run systems established in the colonial era, and as such still maintain more links and trading relations with former colonial powers in Europe than with neighbouring West African countries with whom they signed the ECOWAS Treaty. Thus, the level of poor infrastructure linkages among member nations tend to worsen whatever trade initiatives that are embarked upon. It is hoped that the connection of West African countries capitals by automatic telefax links (Intercom 1 and 11) funded by the ECOWAS Fund would ease some of these problems. 21
Secondly, the larger the area constituting an economic union in terms of population, income and geographical spread, the greater the potential benefits to participating members. Most members of ECOWAS are wretchedly impoverished and depend heavily on grants from Overseas Development Assistance (ODA) and IMF, as well as other donor countries outside West Africa. It is unfortunate that many of the operating companies in the sub-region are owned by former imperialist capitalist classes headquartered in the developed countries. So, when agreements are concluded among the member countries of ECOWAS, the dominance of the Trans-National Corporations (TNCs) reduces the effective implementation of such agreements. These TNCs would only co-operate if such agreements will benefit their interests (foreign interests).
Thirdly, in relation to the second point, the more the economies of participating members are tied to or influenced by foreign governments, the less the benefits of economic integration accruing to citizens of member countries. There are nine different currencies in the sub-region with seven of the 16 countries having a common currency tied to France. The French speaking West African countries maintain a very strong monetary union via the
CFA-franc through the Union Economique et Monétaire l’Ouest Africaine (UEMOA) 22
that constitutes a threat to the monetary union of the entire ECOWAS community. Until the currency barrier is dismantled, the prospect for increased
intra-ECOWAS trade cannot be realised. However, with the harmonisation of ECOWAS and UEMOA programmes in order to avoid overlapping and a duplication of efforts, especially those requiring trade liberalisation as well as the macroeconomic convergence, the aim is to achieve a single monetary zone by 2004.
Fourthly, the more competitive the productive structure of member nations going into economic integration, the more likely it would be for the most efficient producer within the region to capture the enlarged market. That is, if ECOWAS countries are competitive in their production of similar goods, there will be many opportunities for the substitution of the commodities of one country for another and consequently leading to more trade creation than diversion. On the other hand, when community members are complementary to each other (producing similar commodities), intra-union substitution would be difficult as re-allocation of production between high- and low-cost producers will be rare. So, while elimination of the tariff wall will increase trade among complementary union members, trade creation would not occur and a considerable amount of trade diversion might occur through substitution of low-cost external producers with high-cost internal producers. This was why Viner was quick to point out that a regional integration was more desirable ‘the less the degree of complementarity – or the greater the degree of rivalry.’ 23
Whether competitive or complementary, exportable and importable potentials are very low among member nations of
ECOWAS.
Fifthly, for ECOWAS policy programmes to benefit its members, there should not be high degrees of unequal development among ECOWAS states. If large disparities between member nations exist, some are bound to gain at the expense of the others as many industries will be relocated (as specialisation occurs among participating countries) on the basis of comparative advantage in production; foreign direct investment may be more attracted to some countries than the rest; factors of production may be attracted from less efficient firms to more efficient ones; and marginal-producing firms may be forced to reduce costs or leave the industry. Such rationalisation may lead to polarisation of opportunities if not safeguarded; and the allegiance of the weaker economies within the ECOWAS sub-region may be shaky, unless compensatory measures are taken such as the provision of capital by an established regional development bank; or common exchange rates; and fiscal redistribution policies within the region. ECOWAS has envisaged the possibility of such imbalances in gain and losses from the outset by making provision for the Fund for Co-operation, Compensation and Development.
Finally, the success of any economic integration programme depends on whether the benefits from trade creation are substantial enough to outweigh the side effects of trade diversion, particularly measured in terms of foregone revenue from custom duties. Within the West African sub-region, revenue derived from import and export duties account for a substantial figure in annual budgets. It follows therefore, that unless an opportunity is created to adequately cater for revenue loss arising from dismantling of custom duties, the loyalty towards the common market is in doubt. The problem becomes more pathetic because of the dwindling fortunes of member countries in the sub-region. The OAU Secretary General, Salim A. Salim (1997) supported this claim when he stated that: ‘there is nothing to congratulate African countries for having numerous regional integrations when there are serious financial constraints facing members of these institutions. In fact, the financial burdens of some of them are so heavy and unbearable that many of them depend on external funds for implementing their programmes. 24
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