LECTURE 2

Regional Cooperation and

Integration
INTRODUCTION
 This lecture seeks to introduce undergraduate students
to current processes, decision-making procedures and
challenges associated with regional integration in Africa.
It also seeks to familiarize them with the impact of
regional cooperation and integration on trade,
investment and security management on the continent.
 What is regional Cooperation and integration
The terms regional integration and cooperation are
commonly used to describe the processes that lead to
greater regional economic interdependence, for
example a stronger co-movement of business cycles,
increased transmission of macro shocks, increasing
intraregional trade and investment or substitutability of
financial products across the region.
 Regional Integration is a process in which
neighbouring states enter into an agreement in order to
upgrade cooperation through common institutions and
rules.
 Regional integration initiatives, according to Van
Langenhove, should fulfil at least eight important
functions:
 the strengthening of trade integration in the region
 the creation of an appropriate enabling environment
for private sector development
 the development of infrastructure programmes in
support of economic growth and regional integration
 the development of strong public sector institutions
and good governance;
 contribution to peace and security in the region

 the building of environment programmes at the regional

level
 the strengthening of the region’s interaction with other
regions of the world
Examples of RI, North American Free Trade Area for
Canada, Mexico and USA (1989) Mexico joined in 1994,
EU, COMESA, SADC, Arab Customs Union (ACU),
Association of Southeast Asia Nations (ASEAN) formed
in 1967, Asia Pacific Economic Cooperation Forum
(APEC) 1989
THEORIES OF REGIONAL COOPERATION AND
INTEGRATION
Classical Theory of Customs Union
The theory maintains that, Regional integration
processes move in stages: from the
shallowest to the deepest, namely:
 Customs Union: common tariffs against non-
members and free trade among members only.
The participant countries set up common external
trade policy, but in some cases they use
different import quotas. Common competition
policy is also helpful to
avoid competition deficiency.
 Common Market: free movement of goods, services,
capital and labor among members only. In EAC for
example Common market has been in force since 2010.
Underlying the EAC Common Market are operational
principles of the Community, namely:
 Non-discrimination of nationals of other Partner States on
grounds of nationality;
 Equal treatment to nationals of other Partner States;
 Ensure transparency in matters concerning the other
Partner States; and
 Share information for the smooth implementation of the
Protocol.
 Monetary Union: single currency, one monetary policy
and one capital market among members only. It is there
to facilitate the issue of common market (trade and
exchange)
 Political Federation: one supranational political body,
one army and one federal legislature.
THEORIES OF REGIONAL INTEGRATION
CONT…

Variable Geometry Principle: The theory allows

participating countries to move at different paces
toward a common objective e.g. in the EU some
countries are at Monetary Union stage, others at
the Common Market stage such as UK while others
at the Customs Union State such as Turkey.
Theory posits that regional integration should serve
the engine of development (it takes care of Africa’s
small, land-locked and fragmented economies,
national resources spread across borders and
isolated markets). The theory makes four basic
assumptions:
 That participating countries should be located in a
contiguous region i.e. neighboring countries to reap
economic benefits.
 That participating countries should have similar
levels of economic development and similar sizes.
 That participating countries agree to raise a
common tariff against products of non-members
and free trade among members.
Expected economic outcomes for participating
members:
 Widening of markets for goods and services
produced by member countries.
 Promotion rational division of labor among
participating countries.
 Promotion of coordinated industrial planning for
high cost activities such as petrochemicals, iron
and steel and fertilizers.
 Creating internal mechanisms to help development
laggards through “Compensatory Financing
Schemes”.
WHY COUNTRIES PARTICIPATE IN REGIONAL
COOPERATION AND INTEGRATION

 Regional integration schemes seek to pool efforts by

coordinating and harmonizing development efforts
through inter-government bodies/ Secretariats.
 The Secretariat provides a common framework for
national behavior i.e. common policies.
 The Secretariat serves as joint facility for coordinating
national policies on agreed issue areas
 The Secretariat provides Regional integration schemes
seek to pool efforts by coordinating and harmonizing
development efforts through inter-government bodies/
Secretariats.
 The Secretariat provides a common framework for
national behavior i.e. common policies.
 The Secretariat serves as joint facility for coordinating
national policies on agreed issue areas
 Basing on its scope, regional integration and
cooperation's provides a room for countries’ economic,
political to security policies, systems and procedures for
mutual benefits.
 Economics arguments: portrays the harnessing the
economies of scale as the engine of economic grow and
provides positive incentives to managing cross-border
resources for mutual benefits…rivers, lakes, oceans and
exploiting regional synergies etc.
 Political arguments: portrays regionalism as the best
means of promoting the positive political norms of
democracy, human rights, rule of law and political
inclusion; and enhancing regional bargaining power vs
other extra-regional actors
 Security arguments: portrays regionalism as best
mechanisms of addressing common security threats
such as terrorism, climate change etc and building
mutual trust, security confidence; enhancing political
cooperation and reducing regional security rivalries.
 Cultural arguments: portrays regionalisms of the best
mechanism of cultivating regional collective
consciousness, fighting against cultural chauvinism,
and promoting and cerebrating regional togetherness.
 READ THE BOOK BY Walter Mattli (1999). The Logic
of Regional Integration: Europe and Beyond
WHY COUNTRIES JOIN TO THE RI
GLOBAL TRENDS OF REGIONAL COOPERATION AND
INTEGRATION SCHEMES
 A trend means, general tendency, movement or direction
(Encarta Dictionary 2009).
 The regional cooperation and integration schemes has been
changing overtime in terms of themes and mode of
cooperation/integrations. E.g in Europe during 1822 Prussia
established custom union with Hesse-Darmstadt followed by
Bavaria Wurttemberg Customs union, German monetary
union, etc
 Similarly, during 1960’s the main target for integration in
African continent was to fight against colonial domination,
neo-colonialism and building of independent economy for
post-colonial African countries.
 Recently the global agenda of regional cooperation and
integration is on globalization where issues such as global
democracy, global security, multilateral cooperation, etc are
given an impetus.
 Developments such as trade and capital account
liberalization, as well as technological innovation in
transport and telecommunications, have increased the
international exchange of factors of production and final
products. What is less often recognized is that the
process of ‘globalisation’ has been accompanied by the
strengthening of economic and financial linkages within
geographic regions. Indeed the world economy is
simultaneously becoming more ‘regionalized’ and more
‘globalized’. The trend towards regional integration has
been supported in many areas by regional policy
initiatives, particularly in the field of trade. The result is a
proliferation of regional agreements that vary widely in
breadth and depth.
 Different paces in integration processes. For example by
looking at Commonwealth of Independent States (CIS)
after the collapse of Soviet Union the main target was to
create a common market for goods, services, labour and
capital. But the integration activities so far have been
more pronounced at the sub-regional level, such as
among Russia, Ukraine, Belarus and Kazakhstan.
These regional policy initiatives, overall, have not
brought about tangible results, since countries have not
yet implemented the steps required for the creation of a
common market
 The similar case can be evidenced to EU where some
countries are at Monetary Union stage, others at the
Common Market stage such as UK while others at the
Customs Union State such as Turkey.
 The trend of joining and dropping from the integration.
For example recently Britain has dropped from the EU,
Southern Sudan joined the EAC
 Structural changes and institutional development. For
example, South-East and East Asia, the key catalytic
event to propel regional cooperation has been the Asian
financial crisis of 1997-98. Part of the focus today is on
forming the types of institutions that would best serve
the interests of the region as a whole as much as the
interests of the individual economies. Currently, two
organisations stand out: ASEAN, the Association of
Southeast Asian Nations, and APEC, the Asia-Pacific
Economic Cooperation
 For the case of EU initial impetus for European
integration was a catalytic event, in the European
case the two world wars. The first efforts at building
a common European “house”
 In fact, much of the objective of European
integration over the past fifty years can be
understood as en effort to ensure that a military
conflict will ever again originate in Europe.
 But as with many integration processes, the
European experience gradually evolved into
something much larger with well-established
executive, legislative and judiciary branches. This
has led to introduction of common currency i.e Euro
in January, 1999.
 Recently, there is a trend of multiregional
integrations working together (Troika).