Why Regionalism? A Look at the Costs and Benefits of Regional Trade Agreements in Africa

Abstract

Countries were involved in regional trade agreements (RTAs) long before the General Agreement on Tariffs and Trade (GATT) was established in 1947. In recent years, however, RTAs have proliferated, particularly in Africa. In this article, we examine the various reasons why African countries have chosen to engage in these agreements, particularly in light of the fact that they do not seem to be ‘trade creating’ in nature. As Jacob Viner made it popular in the 1950s, not all trade agreements lead to higher economic welfare for the nations engaging in them. In the case of African countries where there is a limited degree of variation in the goods that are produced, and infrastructure and trading systems are designed for intercontinental rather than intra-continental trade, RTAs may not necessarily lead to greater welfare. Our examination of RTAs does not yield a strong positive result that they are welfare-enhancing exercises. A greater care needs to be taken for future RTAs.