Economic Development in Africa Report 2009

Strengthening Regional Economic Intregration for Africa’s Development

image of Economic Development in Africa Report 2009

The Report focuses on ways of strengthening regional economic integration for Africa’s development. It complements existing institutional analyses of regional integration in Africa with an economic analysis of trade in goods and services, migration and investment, and surveys recent trends in these flows and assesses the potential for increasing them in ways that will support economic development. The report finds that - when designed and implemented within a broader development strategy regional integration could help improve competitiveness and serve as a launching pad for African economies’ effective participation in the global economy.

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Experience with regional integration in Africa: Challenges and opportunities

Two major theoretical motivations for the formation of trade blocs are the allocation effect and the accumulation (or growth) effect of free trade within a regional bloc (Baldwin, 1997). With respect to the allocation effect, economic theory shows that, in a competitive economy, the demand for a good directs productive resources to the production of that good. Hence, demand is an important signal between consumers and producers. Given that the imposition of tariff and non-tariff barriers between countries interferes with this signal, the removal of such trade barriers in the context of regional integration is thought to increase efficiency in resource allocation.

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