Knowing Your Trade Blocs From Your Trade Blocks
Business Day, South Africa
Knowing Your Trade Blocs From Your Trade Blocks
by Riaan De Lange And Reyno Seymore
1 December 2008
Johannesburg - On a daily basis we are exposed to a myriad of acronyms. A large number of these refer to some form of regional economic integration such as CMA, COMESA, FTA, IDZ, SACU and SADC, to name a few.
These different acronyms are also associated with different stages of economic integration. In recent years there has been a definite move by the majority of countries in the world to align themselves economically with their neighbours through the creation of trade blocs (not trade blocks) of one sort or the other.
It is quite evident that a movement is currently afoot where these trade blocs are engaging in discussions with each other to pursue further economic integration.
As a consequence, a trend is developing where regional trade blocs are competing with each other on a multilateral basis, rather than individual countries competing with each other on a bi-lateral basis.
With the increasing prominence of regional economic integration, are you able to name the seven (7) forms of economic integration, and in addition, also the five stages of economic integration? Before you contemplate reading the next column consider this. If you are not able to distinguish between the forms and stages of economic integration, how can you even contemplate doing business in a country that is a signatory to a form of economic integration?
In our experience the incorrect use of the various forms of economic integration in the general media is quite prevalent, which attributes to even more misunderstanding. In an effort to remedy this, and to gain a better understanding of the forms of economic integration and their respective characteristics the following table has been devised:
In order to gain a better understanding of each the discussion has been related to an example where possible in the South African or Southern African context.
Free Trade Zone: This relates to designated areas established within a single customs authority or country. In SA legislation has been introduced in respect of Industrial Development Zones (IDZ). The IDZ differs from the Export Processing Zones (EPZs) in a number of ways, most notably in respect of the labour dispensation.
Free Trade Area: SA is a signatory to three FTAs, namely the SA-European Union Free Trade Agreement, the Southern African Development Community (SADC) FTA, and the Southern African Customs Union (Sacu)-European Free Trade Area (EFTA) FTA.
Customs Union: SA is a member of the oldest Customs Union on record — Sacu. The five-member customs union includes Botswana, Lesotho, Namibia and Swaziland (BLNS countries).
Common Market: In southern Africa there exists the Common Market for Eastern and Southern Africa (Comesa) of which SA is not a member.
Economic Union: The next stage in the economic integration process is the Economic Union whose acronym EU should not be confused with that of the European Union.
This form of economic integration implies that the member countries give up some of their soverentity in pursuit of economic unity.
In the instance of SA we are one of the four-member countries of the Common Monetary Area (CMA). The other members being Lesotho, Namibia and Swaziland. The agreement entails that the currencies in these countries are pegged against the rand.
Political Union: This is the ultimate from of economic integration in that the soverentity of member countries is resident in that of the union. An example of such a union is the former Union of Soviet Socialist Republics (USSR), until its disintegration in 1991. The establishment of a European parliament is a first step in the road towards the formation of a European Political Union.
