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GTAP Resource #1964

"Some Space for Success: Egypt as Part of an Eastern and Southern African Regional Trade Agreement"
by Afifi, Tamer

Egypt became a member of the World Trade Organization (WTO) in June, 1995. Its keenness to enhance its trade with other countries was marked by joining several Regional Trade Agreements (RTAs), such as the Common Market for Eastern and Southern Africa (COMESA), which was established in the year 1994.

COMESA is intended to take the form of a customs union (was originally planned for the year 2004) as a phase leading to an economic and monetary union by the year 2025.

The first objective of this paper is to assess the economic potential of COMESA. Secondly, the paper runs a comparison between the provisions of the agreement and the current status of implementation. It focuses on the institutional factors that might be a strong reason for the agreement being behind schedule. Finally, the paper suggests some policy implications for properly implementing COMESA. The main focus of the paper is on Egypt who was the twentieth country to join the agreement, before some others withdrew or froze their membership. However, what applies to Egypt should to a great extent apply to its African neighbor countries and members of COMESA, since the institutional characteristics are in most of the cases very similar.

As a first step, the paper demonstrates the important provisions of COMESA that are not completely implemented or are behind schedule, such as the elimination of tariffs and negative lists; Non-Tariff Barriers (NTBs) and trade remedies; the concept of originating products and rules of origin; trade facilitation; dispute settlements; customs; beyond-the-border measures (trade-related domestic regulations); competition policy and competition law; Intellectual Property Rights (IPR) and government procurement.
One methodology used in the paper relies on the Revealed Comparative Advantage (RCA) calculations for the member countries of COMESA, based on the trade creation/diversion criteria set by Salvatore (1983); he expects an RTA to be rather trade creating, if the economies of the members are competitive rather than complementary, the pre-FTA trade among the members is great, the geographic distance between the members is short, the size of the FTA is great, the pre-FTA trade barriers between the members are significant and the FTA trade barriers with the rest of the world are insignificant.

The paper also includes a gravity regression model that detects the impact of some institutional variables, such as government effectiveness, rule of law and control of corruption on the trade flows between the COMESA countries pair wise. Further control variables, such as the income level of the different member countries, the geographic distance between them, common languages, colonial relationships, common borders, landlocked and island countries…..etc. are included in the model.

In the econometric analysis, it is expected that there would be a significant positive relationship between high institutional quality and trade flows among the COMESA countries.

Another complementary methodology used in the paper is descriptive; it is based on interviews with Egyptian government officials in the Customs Authority, Ministry of Foreign Trade and Industry, and the Federation of Egyptian Industries, as well as local producers, importers and exporters in the Egyptian market. The purpose behind these interviews is to find out their general opinion about COMESA, the benefits they expect from it, and the problems they face when attempting to implement this agreement, such as bad transportation, weak infrastructure, lack of information and transparency, and further institutional and bureaucratic problems.

Finally, the paper argues that -from a pure theoretical economic point of view- COMESA is a promising agreement with a high potential for its member countries, but the relative success of some other RTAs as compared to COMESA can be referred to the better institutions that are still missing in COMESA. Accordingly, it is not impossible to create a sound economic integration between the African countries, as long as certain institutional conditions -also mentioned in this paper- are fulfilled.

Resource Details (Export Citation) GTAP Keywords
Category: 2006 Conference Paper
Status: Published
By/In: Presented at the 9th Annual Conference on Global Economic Analysis, Addis Ababa, Ethiopia
Created: Afifi, T. (4/20/2006)
Updated: Afifi, T. (4/30/2006)
Visits: 2,695
No keywords have been specified.

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