2.4 Regionalism and multilateralism
2.4.2 The relationship between regional integration and multilateralism
The disappointment that WTO Member States experienced regarding the benefits that could be derived from the WTO process triggered a keen interest in regional initiatives. This has seen regional integration becoming a complement rather than an alternative to the multilateral trading system.178 Regional integration does not seek to either compete with or to replace the multilateral trading system; instead, it supplements the WTO by authorising preferential tariff treatment as an exception to the MFN principle.
Regional groupings are regarded as a vehicle for smaller countries to enjoy greater participation in international negotiations as they can rely on the combined market share and political power. Regionalism is necessary for survival in the new global economy, African States needs to integrate sub-regional markets, promote sustainable development, increase production and build their competitiveness to participate meaningfully in the multilateral trading system. Collective bargaining power is particularly relevant for Africa which consists
177 It reads: ‘This Agreement shall not prevent any of its Members from being a party to or entering into an agreement liberalizing trade in services between or among the parties to such an agreement, provided that such an agreement: provides for the absence or elimination of substantially all discrimination, in the sense of Article XVII, between or among the parties, in the sectors covered under subparagraph (a), through:
(i) elimination of existing discriminatory measures, and/or (ii) prohibition of new or more discriminatory measures,
either at the entry into force of that agreement or on the basis of a reasonable time-frame, except for measures permitted under Articles XI, XII, XIV and XIV bis…’: WTO The Legal Texts 289.
178 Tussies ‘Regionalism: Providing a substance to multilateralism?’ in Shaw & Soderbaum (eds) Theories of new regionalism (2003) 115, hereafter Tussies ‘Regionalism: Providing a substance to multilateralism?
of poor and fragmented countries.179 It enables them to coordinate and develop common positions and this may contribute to better negotiation outcomes.180
Former United Nations (UN,) Secretary-General, Annan observed in his final report to the UN General Assembly that ‘globalisation is not a tide that lifts all boats’ implying that globalisation is not the solution or answer to the problems faced by all countries.181 He argued that even those who benefit from multilateralism feel threatened by it.182 The Seattle WTO protests in 1999 were a watershed in the history of global economic governance.183 The breakdown in the negotiations resulted in protests and the WTO ministerial meeting had to be abandoned as protestors representing opposition to the WTO liberalisation agenda disrupted the meeting. The protests revealed a broad and diverse opposition to policies that are skewed toward western and corporate interests.184 This was the first time developing countries wanted the international agreements to be reviewed so as to make them more equitable. Their demands resulted in divisions among the WTO Member States that led to the breakdown of talks in Seattle.
Since the Seattle protests, the WTO has been subjected to public scrutiny to such an extent that public participation is now a feature of the WTO.185 The IMF and World Bank meetings have also attracted controversy and violent protests in the past due to the non-capitalist movement.186 The protests and public participation have resulted in developed countries
179 Africa consists of small countries and the majority are least developed countries. Small populations and low incomes per capita combine to produce small domestic markets. The challenge of smallness is worsened by landlockedness and weak institutions: Hartzenberg ‘Africa needs a deeper integration agenda’ Trade Law Centre for Southern Africa available at
http://www.wto.org/english/res_e/publications_e/wtr11_forum_e/wtr11_5july11_e.htm (accessed 23 November 2012). See also UNECA Assessing regional integration in Africa I 10.
180 Kritzinger-van Niekerk ‘Regional integration: Concepts, advantages, disadvantages and lessons of experience’ (May, 2005) available http://www.sarpn.org
/documents/d0001249/P1416-RI-concepts_May2005.pdf (accessed 15 February 2012)
181 Makinda & Okumu The African Union: Challenges of globalisation, security and governance (2008) 3, hereafter Makinda & Okumu The African Union.
182 Makinda & Okumu The African Union 3. Developed countries would probably feel threatened as they no longer easily get concessions since the Seattle experience, where there were protests against the multilateral trading system mostly by nationals from developing countries.
183 Mcguire ‘What happened to the influence of business? Corporations and organised labour in the WTO’ in Narlikar, Daunton & Stern (eds) The Oxford Handbook on the World Trade Organisation (2012) 321, hereafter Mcguire ‘What happened to the influence of business? Corporations and organised labour in the WTO’.
184 Smith ‘Globalising resistance: The battle of Seattle and the future of social movements’ in Smith & Johnston (eds) Globalisation and resistance: Transnational dimensions of social movements (2002) 208.
185 Mcguire ‘What happened to the influence of business? Corporations and organised labour in the WTO’ 332.
186 Orr ‘The struggle against capitalist globalisation: The world protests against the WTO’ in Berberoglu (ed) Globalisation and Change: The transformation of global capitalism’ (2005) 105. Since the Seattle protests, State repression on protests has become more coordinated but also violent: BBC News UK ‘The spirit of Seattle’ (1 May 2011) available at http://news.bbc.co.uk/2/hi/uk_news/1305060.stm (accessed 19 July 2012).
being threatened by multilateralism following the realisation that they are no longer going to control the global economic landscape as they did in the past. Regionalism is becoming an option that is being used worldwide to counterbalance the negative effects of multilateralism.
Multilateral trading rules provide regional groupings with the necessary foundation, particularly on the highly controversial issues where they require external safety nets.187 Multilateralism in its turn relies on the ‘safety net’ provided by regional agreements that allows trade liberalisation to advance gradually, literally ‘bartering the pains of liberalisation with the gains of market access and export growth’.188 Regional integration shields African countries from the pressures of the global economy,189 by increasing bargaining power, enhancing cooperation and increasing returns on investments.190 It also reinforces the multilateral system where regional and multilateral rules converge.191 Regional integration helps give substance to multilateralism.
Supporters of multilateralism argue that regionalism is a stumbling block to multilateralism, while regionalists claim that the GATT is the ‘General Agreement to Talk and Talk’, whereas regionalism proceeds quicker in liberalising trade.192 Whether this is true or not remains moot, but it cannot be disputed that regionalism offers its own advantages, some of which have been discussed.193 Winters correctly argues that the EU is the only regional integration arrangement that is both big enough to affect the multilateral system and long-lived enough to have identifiable results. He contends that the lesson that seems to stand out is that an act of regionalism does not necessarily lead to the collapse of the multilateral system.194 The advent of the EU appears to have actually aided multilateralism.195
Regionalism may promote multilateralism in a number of ways. First, it facilitates technological development, infrastructure development, foreign investment and improves the
187 Regional groupings become external safety nets meaning that; firstly they are a means of protection from disappointments or effects of the multilateral system. Secondly, any concessions that are not obtained at the multilateral level are then negotiated in regional agreements. The United States has for example been able to obtain intellectual property of its liking, bypassing multilaterally agreed upon WTO standards and
procedures through regional agreements particularly through the Economic Partnership Agreements.
188 Tussies ‘Regionalism: Providing a substance to multilateralism?’ in Shaw & Soderbaum (eds) Theories of new regionalism (2003) 114, hereafter Tussies ‘Regionalism: Providing a substance to multilateralism?’ 115.
189 Gibb (1998) 36(2) The Journal of Modern African Studies 298.
190 UNECA Assessing regional integration in Africa I: 11.
191 Tussies ‘Regionalism: Providing a substance to multilateralism?’ 115.
192 Bhagwati ‘Regionalism and multilateralism: An overview’ in Bhagwati, Krishna & Panagariya (eds) Trading blocs: Alternative approaches to analyzing preferential trade agreements (1999) 22.
193 See chapter 2 part 2.1.
194 Winters ‘Regionalism vs multilateralism’ 34.
195 Winters ‘Regionalism vs multilateralism?’ 7.
manner in which a region may exploit natural resources.196 Second, it creates larger political economy units that can bargain more effectively in the multilateral institutions: there is no doubt that the region needs to build the capacity to compete in the multilateral system as competition is increasing following the admission of China in the WTO. By strengthening regional integration which is a form of regionalism, Africa would move towards being an essential part of the global economy.197 As it stands, African countries make little impact in the WTO and WIPO due to them being small and fragmented.198
The above discussion indicates that regionalism is not in competition with multilateralism but it rather thrives in the policy spaces left by multilateral commitments.199 One cannot ignore the fact that markets are so deeply intertwined that no unit can afford to rely solely on intra-regional trade to the exclusion of inter-intra-regional trade: 200no State would want to substitute regional for global trade because both are important for development.201 African countries should, on one hand, promote regional integration to enlarge markets and exploit economies of scale. On the other hand they should participate fully in the WTO process to benefit from market access and gain safeguards against unfair protectionist measures’202to which the imbalance of power their small size exposes them.
Tussie correctly submits that regionalism reflects that countries are choosing to forge ahead faster or further than the multilateral system.203 This reveals that the relationship between regionalism and multilateralism is one of mutual need as regional trade arrangements do not undermine the multilateral trading system but rather serve as building blocks to multilateral trade liberalisation.204 A study carried out by Herz and Wagner supports this view as the
196 The full implementation of regional arrangements has the potential to strengthen the multilateral system:
Gibb (1998) 36 The Journal of Modern African Studies 295 and Mashayekhi et al (2005) 21.
197 Regionalism is a desirable evolution that has the potential to support the multilateral trading system: Preeg
‘The US leadership role in world trade: Past, present and future’ (1992) The Washington Quarterly 15.
198 WTO ‘Africa should trade more with Africa to secure future growth’ available at
http://www.wto.org/english/news_e/news12_e/ddg_12apr12_e.htm (accessed 16 November 2013.
199 Tussies ‘Regionalism: Providing a substance to multilateralism?’ 112.
200 Regional trade agreements (RTAs) are an integral part of international trade, they operate alongside global multilateral agreements under the WTO. RTAs have increased significantly in number and prominence with 303 having been notified to the GATT/WTO in May 2004, of which 208 are currently in force: Deputy Director-General of the WTO ‘Remarks by Mr. Francisco Thompson-Flores’ in Mashayekhi & Ito (eds) Multilateralism and regionalism: The new interface (2005) 23 available at
http://www.unctad.org/en/docs/ditctncd20047_en.pdf (accessed 12 February 2012).
201 UNECA Assessing regional integration in Africa I 23.
202 UNECA Assessing regional integration in Africa I 23.
203 Tussies ‘Regionalism: Providing a substance to multilateralism?’ 114.
204 Herz & Wagner ‘Multilateralism versus regionalism’ (January 2010) available at http://www.degit.ifw-kiel.de/papers/degit_15/c015_043.pdf (accessed 19 July 2012).
results showed that RTAs are buildings blocks of, and thus contribute to, the multilateral trading system.205
2.5 Obstacles to regional economic integration in Africa and mechanisms for overcoming them.
Regional integration has not progressed in Africa due to various reasons. The reasons are, inter alia, lack of implementation of commitments, lack of political commitment, political instability, weak infrastructure, problems of distributing benefits derived from regional integration and institutional challenges.