Economic Community of West African States (ECOWAS)
The Economic Community of West African States (ECOWAS), also known simply as the community, is a regional trade organization comprising countries in the West African region. As of late 2007, Benin, Burkina Faso, Cape Verde, Coˆte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo (after Mauritania withdrew in 1999) are members. The aims and objectives of the community are to promote trade, cooperation, and self-reliance in West Africa and to assist in the creation of the African Economic Community (AEC).
Origin and Background
Like other regional economic groups in Africa, the community was formed based on the pan-African vision of economic integration, which gained prominence during the late 1950s and early 1960s. It was believed that the small and fragmented postcolonial national markets would constitute an obstacle to the economic development of Africa.The pan-African solutionwas to create a single common market for the continent. The pan-African approach to integration was a ‘‘bottom-up’’ process that would begin at the regional levels (central, east, north, south, and thewest) and evolve into a continentwide commonmarket by welding the regional organizations together. It was against this background that the community was created to overcome the isolation of the small West African countries following the colonial and postindependence nationalism periods.
The communitywas created by treaty in 1975 as a preferential trade area for the transformation of the West African region. The original plan for the community was to establish a free trade area by 1980 followed by a customs union by 2000, and an economic and monetary union by 2005. Owing to a number of factors, however, including internal sociopolitical and economic instability in member countries, poor coordination of macroeconomic policies at the regional level, weaknesses in the operational procedures of the community’s institutions, and lack of commitment on the part of member countries to implement the community’s priority programs, implementation of the integration programs has proceeded very slowly.
The ECOWAS Treaty was revised in 1993 to expedite the process of economic integration and to increase political cooperation in the region. The revised treaty articulates comprehensive cooperation and integration programs, including trade promotion and liberalization; the provision of better roads and telecommunications infrastructure; and the development of agriculture, industry, and the energy sector. The implementation of the trade liberalization programs was planned to occur in three stages. The first involves the full liberalization of trade in unprocessed goods and traditional handicrafts. The second entails a phased liberalization of trade in industrial products whereby the most advanced member countries (Nigeria, Ghana, and Coˆte d’Ivoire) were to remove all trade barriers in a period of six years, middle-group countries (Benin, Guinea, Liberia, Sierra Leone, and Togo) within eight years, and third-group countries within ten years.The third stage concerns the establishment of a common external tariff.
In order to accelerate the regional integration process, the revised treaty allows for a double-track (fast-track) approach to economic integration whereby a group of countries can take measures to accelerate integrationamong themselves.The revised treaty also assigned to the community the additional responsibility of preventing and settling regional conflicts.
Various institutions have been formed to facilitate the achievement of the broad aims and objectives of the community. These institutions include the decision- making organs responsible for the smooth functioning of the community, the Mediation and Security Council (formaintaining peace and security in the region), and the Fund for Cooperation, Compensation, and Development (which provides development capital). The decision-making organs include the Authority of Heads of State and Government (i.e., the supreme policy organ), responsible for the general direction and control of the community; the Council of Ministers, responsible for making decisions on programs and the functioning and development of the community; the Parliament (without legislative powers), which acts in a consultative and advisory capacity; the Economic and Social Council, which plays an advisory role; the Court of Justice, which interprets the provisions of the ECOWAS Treaty and settles disputes among member states that are referred to it; and the Executive Secretariat, responsible for the smooth functioning of the community and for the implementation of the decisions of the supreme policy organ. The community also has specialized technical commissions that prepare projects and programs for consideration by the Council of Ministers on all key sectors of the economy.
Themember states of the communityhave diverse backgrounds. Their heritages vary from Anglophone to Francophone states and to independent Liberia. The region consists of mainly two geographical zones the Sahelian, semiarid, largely landlocked zone, and a more humid, forested coastal zone. Nigeria is a dominant economy in the region, accounting for more than half of the population and gross domestic product (GDP) of the region.Most of the other states are small in size (less than 5 percent) in terms of population and GDP. The region’s resource endowments consist mainly of crude oil (in Nigeria) and agricultural products such as cocoa beans, coffee, and yams. The per capita GDP varies widely across the region. For example, in 2004, itwas U.S. $141 for Liberia and U.S. $1,979 for Cape Verde. In the same year, the UN Development Program ranked only Cape Verde and Ghana as medium human development countries and the rest as low human development countries.
Key Elements and Procedures
Since the early 1990s, there has been some progress toward the establishment of a free trade area and a common market. For instance, visa and entry-permit requirements for ECOWAS nationals have been abolished and an ECOWAS passport has been adopted. In addition, ten countries (Benin,Gambia,Ghana,Guinea,Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo) have removed barriers on trade in unprocessed goods and three (Benin, Gambia, and Sierra Leone) have eliminated barriers on trade in industrial products. All member countries have abolished monetary nontariff barriers. Nonmonetary nontariff barriers still exist, however. A common external tariff was scheduled to be in place by the end of 2007.
In 1994, eight of the countries (Benin, Burkina Faso, Coˆte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo) took advantage of the doubletrack innovation and came together to create a customs union and a monetary zone called the West AfricanEconomicandMonetaryUnion(WAEMU). The WAEMU member states implemented a common external tariff in 1998 and have started to harmonize their policies in various fields. WAEMU has generally been perceived as successful. Intra- WAEMU trade as a share of the region’s total world trade increased from about 10 percent in 1994 to about 16 percent in 2000. Also, the average annual GDP growth rate for the WAEMU subregion has been higher than that of sub-Saharan Africa as a whole. Six other countries of the community, Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone, have followed suit and embarked on an initiative to form a second monetary zone with the aim to merge with theWAEMU and eventually create a single monetary zone for the ECOWAS region.
Until now, the community has operated as a preferential trade area. The member states apply tariff preferences under the common preferential tariff on goods originating fromthe community and charge national tariff rates on goods originating from nonmember countries. Member countries use the community’s rules of origin to determine the tariff rate to levy on imported products. Products are deemed to originate from the community if (1) they are wholly obtained within a member state, (2) they have undergone sufficient processing in a member state (usually 40 percent value added), (3) 60 percent of the raw material used to manufacture the product comes from member states, or (4) they are local products or traditional handicrafts. Normally, a certificate of origin is not required for local products and traditional handicrafts of ECOWAS origin. For any other product, however, an importer who seeks to benefit from the preferential treatment must provide a certificate of origin.
Impact on Member States
Regional economic integration agreements can be beneficial to member countries in both the static (short-run) and the dynamic (long-run) sense. In his analysis of static effects, Jacob Viner (1950) observed that while regional economic integration represents a movement toward free trade on the part of member countries (leading to trade creation), it can also lead to diversion of trade from low-cost nonmember sources that face tariffs to a high-cost member source that no longer faces tariffs. In the short run, member states can benefit as long as the trade creation effects exceed the trade diversion effects. Using the gravity framework, Jacob W. Musila (2005) estimated the two static effects for ECOWAS and found that trade creation exceeds the trade diversion effects. Therefore, member countries of the ECOWAS organization can be expected to obtain net gains in welfare. Ce´line Carre´re (2004) also found that the formation of ECOWAS is associated with the increase in intra- ECOWAS trade and that the currency union, WAEMU, has helped to reduce trade diversion effects. The performance of intra-ECOWAS trade shows that its share in the region’s total world trade increased from 2.4 percent in 1975 to more than 10 percent in the 1990s. During the period 1994 98, owing to the improvement of performance in the WAEMU zone, the share of intra-ECOWAS trade increased slightly but steadily from 10.7 to 11.9 percent.
The dynamic benefits of a regional integration occur through well-known channels, namely, increased efficiency through specialization, economies of scale, or increased trade and investment. Like static effects, however, the net impact of dynamic effects is not obvious. In the case of ECOWAS, exports comprise a limited range of agricultural commodities (only Nigeria is a net oil exporter), andmanufactured goods are imported mainly from nonmember countries. Such pattern of trade can be a hindrance to long-term economic growth of the region since agriculturalproducts aremore prone todeterioration in terms of trade. Indeed, the sluggish growth that characterized the ECOWAS region in the late 1990s was partly attributed to the sharp fall in cocoa prices. Augustin Fosu (1990) finds evidence that supports the view that exporting primary commodities does not significantly improve a country’s long-term economic growth rate. Antonio Spilimbergo (2000) shows that the importation of manufactured goods from rich countries (the North) by poor countries (the South) may not guarantee economic growth in the South. The learning-by-importing models, however, suggest that imports of high-technology goods can result in the transfer of technology which, in turn, stimulates domestic innovation and economic growth in the importing country.
Relation with External Actors
The relation between ECOWAS and external actors in the world economy varies from region to region. ECOWAS and otherAfrican regional blocs seek to augment and deepen economic integration in their respective regions with a view to forming an AECthatwill enable Africa to be in a stronger position when negotiating trade matters with other regional organizations such as the European Union (EU), the South American regional economic organization Mercosur, and the North American Free Trade Area. ECOWAS does not have overlappingmemberships,which have been seen as an obstacle to market enlargement in some African regional integrations.
On the other hand, the relation between ECOWAS and non-African trade blocs is viewed by some analysts to be an impediment to regional integration. Jeffrey D. Lewis, Sherman Robinson, and Karen Thierfelder (2003) have argued that North-South trade is more attractive to most African countries than South-South trade because of the structure of their economies or colonial heritage. Indeed, ECOWAS member states trade with the EU and the United Statesmore thanwithone another.This trade is set to increase evenmore following the opening up of the EU and U.S. markets under the Everythingbut- Arms and the African Growth andOpportunity Act initiatives, respectively.Thismaywork to further reduce the relative importance of intra-ECOWAS trade. In addition, the World Trade Organization provisionthat substantially reduces quotas and duties on goods originating from the world’s poorest countries will also increase the region’s trade with non-ECOWAS countries and further reduce the advantages that the community offers to its member states. The very processes of global trade liberalization and cooperation with non-African trade blocs have contributed to the evolution of ECOWAS, however. To reduce transaction costs, the EU, for example, prefers developing countries to negotiate as one group (instead of as numerous individual countries). Furthermore, the success of the EU also inspires the evolution of ECOWAS. Indeed, the ECOWAS institutional design is fashioned after the EU.
See also customs unions; free trade area; regionalism; rules of origin
JACOB W. MUSILA