The impact of the economic partnership agreement for regional integration in the Southern African custom union member states

Abstract

The Cotonou Agreement introduces new fundamental principles with respect to trade between the European Union and African, Caribbean and Pacific (ACP) countries relative to the Lome Convention: in particular non-reciprocal preferential market access for ACP economies will only last until 1 January 2008. After that date, it will be replaced by a string of Economic Partnership Agreements (EPA) meant to progressively liberalise trade in a reciprocal way. The progressive removal of barriers to trade is expected to result in the establishment of Free Trade Agreements between the EU and ACP regional groups in accordance with the relevant WTO rules and help further existing regional integration efforts among the ACP. Most discussions of economic development in Africa focus on regional integration as an important element. From the first post-colonial meetings, African leaders emphasised regional integration as a key element of their strategies. In the most recent African plan for economic development, the New Partnership for Africa's Development (NEPAD), regional and sub regional approaches to development are again a key element. The plan sees the small size of countries, low incomes, and consequently limited markets as a limit to economies of scale, thus denying attractive returns to investors and in so doing constraining the diversification of production and exports. This is the key reason for pooling resources in order to enhance regional economic integration. The decision by Botswana, Lesotho and Swaziland to sign the interim EPA came in the result of SACU's failure to negotiate as a bloc with a view to sign the EPA. In this research, the following statistical techniques were applied: t-test, f-test, regression analysis and its forecasts model for seven Southern African Development Community- Economic Partnership Agreement (SADC EPA) group trading with the European Union, is used to simulate the opportunities and benefits of EPAs for countries of the SADC region. Simulation results show that EPAs with the EU are welfare-enhancing for SADC overall, leading also to substantive increases in real GDP. For most countries further gains may arise from intra-SADC liberalization.