Benefits of Free Trade Areas to Developing Countries. a Case for the Zimbabwe

Topics: International trade, Free trade area, Free trade Pages: 16 (4534 words) Published: April 25, 2013
An investigation of the impact of Free Trade Agreements(FTA) and their advantages and disadvantages on emerging economies. A case for the Zimbabwean economy. Introduction
One of the major developments of the last two decades that international trade has experienced (apart from the advent of electronic commerce) has been the dramatic increase in regional trade agreements (RTAs). Between 1948 and 1994 there were only 124 RTA notifications whereas between 1995 and 2008 this figure more than tripled, with an additional 300 notifications (WTO 2009).

The African Continent has not escaped the proliferation of regional trade agreements in the existing global trade regime. The formation of RTAs in Africa has mainly been championed by what are commonly known as Regional Economic Communities (RECs) as the continent moves towards the formation of the African Economic Community (AEC) that was established by the Abuja Treaty of 1991. Almost all the RECs have RTAs in the form of free trade. To date, COMESA has already launched its own customs union and ECOWAS is preparing to do the same. ECCAS and SADC each have their respective free trade areas and both are planning to launch their customs unions. Although the CEN-SAD is currently at the stage of a free trade zone it has not yet elaborated a distinct road map to strengthen integration amongst its Member States. The EAC has also reached the stage of a customs union which was launched in January 2005. Zimbabwe in particular has joined several of these trade agreements and among them are some Free Trade Areas (FTAs). At the moment there are negotiations which if are successful may see Zimbabwe joining the Southern African Customs Union (SACU).

Despite this development, not all Member States of RECs have signed up to these agreements because the principle of ‘variable geometry’ has been widely applied. Whilst this may be a major challenge to the rapid evolution of FTAs to customs unions within the RECs, it grants countries the opportunity to implement the regional integration agenda at their own pace. The RECs in Africa are characterised by a multiplicity of membership (statistics of multiplicity). For example Zimbabwe is both a member of SADC and COMESA. As a result, there is a cross-membership of RTAs in Africa. However, there is a new development, especially in the Eastern and Southern African region where COMESA, SADC and EAC are in the process of forming a single FTA block.

Another important characteristic of RECs in Africa is their multi-prong approach to regional integration. Thus, apart from the trade issues, RECs in Africa are also pursuing other agendas such as socio-economic development, peace and security, agriculture and environmental conservation.

This paper investigates some of the major effects, advantages and disadvantages on emerging economies, specifically on the Zimbabwean economy.

Background to the Study
Zimbabwe has one of the most diversified economic structures within Africa. This diversity impacts on the extent of issues with which Zimbabwe needs to be concerned in international trade negotiations. In turn this calls for a heavier involvement in such negotiations than would be required by many other less diversified developing economies. Zimbabwe has enjoyed a good reputation by developing country standards; however, recent developments in the economy have undermined that image.The most important sector within the economy is Agriculture, followed by mining, manufacturing and construction.

The agricultural sector is the most important revenue earner for the country. Although agriculture encompasses no more than 15% of GDP, it is responsible for 40% of total export earnings. It is also the largest employment sector, with more than 50% of the labour force accrued within this sector. As such, it is not difficult to see that any agreement that affects agriculture has a significant effect to the economy. The most important commodities in...
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