In recent years there has been increased attention, once more, on regional
integration and its potential contribution to African economic development.
However, there are very different emphases and perspectives. On the one hand,
regional integration is essentially viewed as removing tariff and non-tariff barriers
to trade; in essence, a second-best to unilateral liberalisation. It is also
advocated as part of ‘defragmenting Africa’ – overcoming the legacy of colonial
borders – adding the reduction (or even removal) of border controls to the
agenda of tariff liberalisation. Other perspectives emphasise the constructive
measures required for more meaningful and deeper integration, ranging from
investments in improved transport infrastructure to developing effective institutional
arrangements. This can include provisions for collaboration on a regional
industrial policy, to build capabilities and regional value chains.
A key aspect in the different perspectives is the extent to which natural markets
and the behaviour of firms are understood as regional in scope. As firms
are internationalised – including through ownership relations, strategic partnerships
and distribution arrangements – a regional perspective to firm decision
making, such as regarding investment and location of production, is necessary.
Given scale economies and relatively small national markets, firms make decisions
across countries. However, when trade barriers are raised, firms can protect
their market power within countries, which would otherwise be undermined by
competition at a regional level.