The Coordination Problem in Regional Integration

Abstract

A catch-22 situation or coordination failure between the slow creation of well-integrated regional markets and low economic diversification (plus sophistication and specialization) is unfolding in Africa. Ubiquitous trade barriers translate into a paradoxical tariff pattern by which African neighbours are treated worse than remote trade partners. In the face of widespread irregularities and high trade costs, ‘trade facilitation’ has become an important technical approach to easing trade with the support of donor agencies. This chapter examines the systemic potential and limits of trade facilitation programmes. As a general alternative to institution-heavy, imperfect integration along the trodden linear path, ‘light integration’ is suggested in parts of the economic literature. The extent to which light integration can avoid the pitfalls of the classical approach is investigated. Dynamic effects are invoked as the last line of defence for the classical model of economic unions but remain contested, as trade research cannot empirically identify them in South-South RECs. The chapter concludes by asking what kind of new economic policy is required to effectively realize such dynamic effects. The answer is given in Part II.