The introduction of Africa in the world market started since the 15th century, could not in many respects be considered as a positive venture. Africa’s backwardness compared to the rest of the world(developed countries, newly industrialised countries and emerging countries) which is a paradox due to its enormous resources and potential, clearly demonstrate that Africa remain the great loser of the international economic order. A situation worsened when considered the policies undertaken by developed countries: the creation of regional and non regional trade blocs, the protection of domestic markets through quotas.
According to Gunnar Myrdal, the underdevelopped countries ‘way of handling their commercial policy will be one of the most significant factors in determining whether they will fail or succeed in their drive for economic development’ This assertion has the merit of addressing trade as the dominant economic activity possible in Africa and other Third World countries. It therefore takes into account the fact that African countries could not live in isolation and retrenched the fact that the growing competition in the production and distribution of goods and services will render these countries more vulnerable each day if nothing is done. As a consequence a reflection needs to be conducted as concerns industrialisation and trade for effective development in a context of liberalized market.
A DISTORTED AND UNFAIR ECONOMIC ORDER
The former American ^president Bill Clinton observed ‘globalisation is a fact not a policy option’ This implies globalisation is more than a mere creation of human being rather the consequence of ever increasing contacts among individuals, peoples and communities. The failure and collapse of the communist model and its abandon by pioneers countries like China and Russia are evidences the liberal economic order was inevitable.
The discussion over a need to reform the present economic order is as old as the deterioration of the terms of trade. On the one hand LDCs, as a result of an international division of labour dating from the colonial experience produce goods in the form of raw materials. They have no control over operations like the transportation, transit and distribution of these resources, thus they can’t determine the prices of these commodities. On the other hand developed countries sell these products once manufactured with such a high added value that there is an enormous gap between the commodity sold by underdeveloped countries and the manufactured product sold to the same countries. Nearly half of third world countries earn more than 50 percent of their exports revenue from one single primary commodity, such as cocoa, coffee or bananas. These countries are now confined in production structure of low value added activities. Not only are third world countries trapped to deal in a single commodity, but they are also depending on a few if not a single foreign market for supply of manufactured products and trade of their primary commodities.
In Africa about 340 millions people that’s half of the continent population live on less than a US dollar a day, the mortality rate of children under 5 is 140 per 1000, while life expectancy at birth is only 54 years. Only 58 percent of the overall African population has access to safe water.
As contained in NEPAD document ‘Africa’s place in the global community is defined by the fact that the continent is an indispensable resource base that served humanity for so many centuries.’ The underpinning theory of the current economic order is to large extent classical and neoclassical trade theories. According to them, all countries would gain in participating in international trade. Free trade maximises global output by permitting each country to specialise in what it does best. According to the IMF, outward oriented trade policies are conducive to faster growth for they promote competition, encourage learning-by-doing, improve access to trade opportunities and raise efficiency of resource allocation. In order not to miss this turning of history and thereby remain loser, Africa and other LDCs should undergo a deep reflection so as to gain advantages of globalisation. A challenge which can not be delayed or neglected in a context of high risk for these countries to miss the few opportunities they already had: the protection of recent inventions and the rush of multinational corporations in the LDCs markets of goods and services are evident dangers. The simple liberal approach to trade is not consistent with the historical experience of many developing countries. First the theory of trade so applauded by some is built on assumptions that are violated in most international markets.
Much of world trade is in oligopolistic industries such as cars, chemicals, electronics and steel. The increasing importance of multinational corporations is a clear indication that imperfect competition matters. On this point Krugman(1987) states ‘the insights of new models incorporating imperfect competition, learning and economies of scale has reduced the doctrine of free trade from an optimal first best strategy to a reasonable rule of thumb.
Our aim in conducting this analysis is to demonstrate regional economic integration and a more effective South-South cooperation among countries could enable third world countries to not fall prey into the dangerous trap of a simplistic participation in world trade.
SOUTH-SOUTH COOPERATION FOR SELF RELIANCE
As Todaro(1992) pointed out while it may be possible for many less developed countries to be self reliant on an individual country to country basis, some form of trade and economic cooperation among equals is probably preferable to each country trying to ‘go alone’ in a world of unequal trade, technology dominance, increasing protectionism among developed countries and various forms of non market price determination. This means more than ever before, before initiatives toward south south cooperation should be perceived as the basement of any sound economic policy undertaken by a third world country possessing a potential or a resource to exchange.
The south-south cooperation will accelerate the pace and render effective the economic independence of LDCs. The Northern partners of southern countries would be progressively replaced by southern partners. For instance, Nestlé could rightly face a competition from Brazilian coffee, South African milk whose industries in these domains of activities could quickly develop to satisfy that aim. The result would actually be a multiplication of vendors which will inevitably affect the prices of those commodities, in such a situation it’s quite sure the customer would soon pay the real price. In addition, one could believe, the relative proximity (geographical, cultural and sociological) makes south partners more suited to provide satisfying products among themselves. For their needs are relatively the same. Arthur Lewis (1977) stated that ‘the LDCs have within themselves all that is required for growth. They have enough land to feed themselves, if they cultivate it properly. They are capable of learning the skills of manufacturing and of saving the capital required for modernization.’
A regional organisation could be defined as a grouping of countries, in most cases neighbouring countries, into an organisation in order to address a particular issue: economic development; the management of their common resources such as lakes, rivers; the management of plagues with potential consequences beyond a country. Economic issues constituting the main problem in almost all societies, it is also the main stake of regional integration. In fact the world is slashed into pieces of regional groupings with membership overlapping at times owing to double membership of certain members. However this enthusiasm toward integration can not hide the relative and mitigated success of regional integration. If excluded the European Union, ASEAN, NAFTA regional integration has offered little compared to the fruits awaited.
Jarle Moen distinguishes between ‘once-and-for-all-benefits and dynamic benefits of integration in third world countries.
For many LDCs especially those with very small domestic markets, regional economic integration may offer a valuable experience, helping the transition to a more balanced economic development and a more open economy. Within the integrated, both quality and marketing techniques can improve and promote diversification and export production at a larger stage without compelling these countries to face the awkward effects of the liberalised market as the tendency seems to be. Integration can also increase the market size and, where economies of scale are present, reduce the cost per unit. This could benefit both producers and customers in the integrated market. For customers, it makes it possible to purchase goods at their real prices, since a competition among more than one regional economic actor (producer or distributor) would have as a consequence the obligation to offer the best prices possible. Also in a larger market, partners outside the integrated region would find it interesting for them to invest in such a region so as to take advantages of the discriminatory policies put in place to safeguard the region’s industries. According to Thomsen (1994) host country market size is one of the strongest determinants of where foreign firms invest. One has to take into account the fact that an investment from a developed country in a developing country is accompanied by a substantial transfer of technology.
Once achieved, regional integration will boost the members’ countries bargaining power in the international community. A power which can easily increase with cartelisation. Countries belonging to a regional organisation tend to present the same features, for instance they could belong to the same climatic belt, central Africa for instance and southern African countries. This geographic situation can enable such countries to bargain with additional strength in what they produce best on which they could expect better returns on sales thereby reach a situation of absolute gains.
MOEN Jarle: Trade and Development: is South South Cooperation a Feasible Strategy? London School of Economics 1994
MYRDAL Gunmar: An International Economy, London: Routledge and Kegan Paul
TODARO Michael: Economics for a Developing World, New York: Longman 1992
KRUGMAN Paul ‘Is Free Trade Passé?’ Economic Perspectives, vol 1 pp 131-144