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  • Print publication year: 2011
  • Online publication date: July 2011

1 - Africa's economic integration – an introductory overview

Summary

Economic integration is defined ‘as the elimination of economic frontiers between two or more economies’. In this regard, an economic frontier represents a demarcation – often the geographical boundaries of a state – into which the flow of goods, labour and capital is restricted. Economic integration involves the removal of obstacles to trans-boundary economic activities which occur in the fields of trade, movement of labour, services and the flow of capital. Economists have identified various stages in the process of economic integration. According to Bela Balassa, economic integration passes through five stages, namely: ‘a free trade area, a customs union, a common market, an economic union, and complete economic integration’. In a free-trade area, tariffs and quantitative restrictions on trade between the participating countries are abolished, but each country retains its own tariffs against non-members. Establishing a customs union involves, besides the suppression of discrimination in the field of commodity movements within the union, the equalization of tariffs in trade with non-member countries. A common market is a higher form of economic integration. In a common market, both restrictions on trade and factor movements are abolished. An economic union combines the suppression of restrictions on commodity and factor movements with some degree of harmonization of national economic policies to remove discrimination due to the disparities in these policies. Finally, total economic integration presupposes the unification of monetary, fiscal, social and countercyclical policies and requires the setting-up of a supranational authority, the decisions of which are binding on member states.