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Summary, Overview & Development Report 3.4

New Scrambles on the Bloc: EU, TNCs & Regionalism

Summary, Overview & Development Report 3.4
The Case for Regional Trade: September 2001
By Emmanuel.K.Bensah, ICDA Secretariat
Related SOD Report: "1.4 The Big Four: MERCOSUR; ECOWAS Tales, and NAFTA"

Of the existing regional organisations in the Third World, there are too many to count on one's fingers. There's SADC, COMESA, ECCAS, OAU, and ECOWAS, to name but five. Little is known about the latter, despite the fact that it has been in existence since 1975.

Set up by the Treaty of Lagos, the Economic Community of West African States, whose mandate has long been an economic one, staged what some might call a comeback in 1990. For the first time ever in Africa, peacekeeping troops comprising 70% Nigerian troops, under the moniker of ECOMOG, brought some degree of closure to the war in Sierra Leone - with little assistance from the West. (For more info on ECOWAS, please check: http://un_org.tripod.com/liberia) It is no coincidence that September's WTOIL made reference to it. However, we first turn to another important issue that featured in September's Impact List - the dynamics of regional trade.

Though this issue has, in the past, graced many a page of the monthly SOD Report on Regional Trade, it is worth exploring different authors' opinions in order to ascertain whether any type of affinity can be arrived at. "Who is saying what about regional trade? Why are they saying it?" are some of the questions we hope to answer both implicitly and explicitly when we use different academic viewpoints on this complex subject.

The first article to open the debate featured in WTOIL 6 September. A well-known senior researcher at the University of Western Cape - Dot Keet - penned it. Her 1999 article, entitled "Regional Trade Agreements - Bases; Strategies; Tactics", sought to outline some of the complexities inherent in regionalism, as well as regional trading blocs. One of the more interesting conclusions that she arrives at in her analysis is that of transnationals and how they have managed to profit (true to form) from the Uruguay Round. Free Trade areas, as exemplified by Nafta, are a testimony to the growing audacity of these TNCs. Her statistic is frightening - "87% of TNCs" are based in the European Union. As if that were not bad enough to make the average Civil society actors' hair grey, she implies that it is not unreasonable to question the extent of collusion that the EU theoretically has with such multinationals.

Keet charges that the EU, "in the more recent period", has adopted a neo-liberal "paradigm" that has "began to gain hold internationally and within Europe". Fortress Europe, as Europe is sometimes cynically referred to, or what Keet calls "Greater Europe, is not only now "a geo-political power base from which European companies can operate more effectively in the highly competitive global economy", but is also a "geo-economic" power.

As for the United States, its equivalent can be found in the form of the North American Free Trade Agreement (NAFTA), which Keet describes "from the outset, a more direct response and instrument to influence and engage with the global economy." In many respects, she likens the power of the US to that of the EU.

With regard to WTO-compatibility and these regional trading blocs, Keet argues that they have been very beneficial for TNCs. She maintains that "nonetheless, NAFTA is still proving to be a useful complement, and support to the US national economy", because it allows the US room for "a larger, intermediate, regional base from which US TNCs can engage with the global economy." Also, it is a good way for these organisations to utilise the regional grouping as "an important backyard learning and neighbourhood growth base for 'proto-global' US companies."

Simultaneously, these regional groupings "can set useful precedents and can be used to exert influences/pressures upon the broader multilateral processes." (WTOIL 6 Sept.) Keet continues that it is in this same vein that "states and other interests within such economic power blocks are positioned to obtain the best of both worlds."

However, obtaining the best of both worlds comes at a price. It is, therefore, not surprising that these TNCs have a highly detrimental effect on the world's poor, as evidenced, for example, in John Madeley's book "Big Business, Poor Peoples." Madeley's point of departure is that apart from two-thirds of world trade handled by TNCs, they have co-opted even "southern-friendly" institutions, such as UNCTAD, as evidenced by the Geneva-based's annual "World Investment Report", endorsing the benefits of TNCs for developing countries.

To boot, these multinationals and their high sensitivity to profit puts them in the position to offset the potential good that regional groupings, such as the EU, can theoretically bring in the debate on globalisation. Keet continues that "the high degree of self-sufficiency of such huge economic blocks as NAFTA and the EU run counter to the aims and principles of full global interdependence and integration." Ultimately, what will ensue will be a Europe that will become an island onto itself (Fortress Europe), and a United States that "could retreat into a hemispheric layer against the rest of the world because they are both so powerful and so protected against the adverse impacts of globalisation due to their dalliance with TNCs.

The New Scramble
That said, Keet argues that despite the growing affinity between the US and the EU in terms of geo-economic power, both have different agendas, which could result in what Keet calls "conflicting motivations - and tensions -in the expansion of the giant economic blocks." She contends that "the US is driving towards the extension of NAFTA" [through the FTAA, scheduled for 2005], while the EU, conversely, is "gradually moving towards the integration of the whole of Europe."

That, however, is not the only factor that can potentially undermine the power of these two powerful blocs. There is also the fact that from this process could emerge "intense competition" between the two "both in each other's respective immediate zones and in other regions of the world, such as APEC." Keet maintains that because the EU is not a member of APEC (unlike the USA), it is seeking to redress the power balance by "urgently promoting its ASEM (Asia-Europe Movement) to create its own region-to-region agreements between the EU and as many Asian countries as it can."

More significantly, both the EU and the US are currently utilising what Keet calls "predatory and pre-emptive regional free trade strategies" to compete with each other. These have come in the form of emerging economies, such as MERCOSUR, that are increasingly being seen by both blocs as a lucrative bloc to do business with. The objective, Keet argues, is "to incorporate such emergent regional groupings into broader FTAs in order to open them up to the dominant economies/companies therein."

The groupings that have currently been targeted are MERCOSUR; Association of South East Asian Nations (ASEAN); and Southern African Development Community (SADC). It appears the latter is the latest victim as both the EU and the US clamour to obtain free trade agreements exclusively with SADC. The motivation behind the hunt for MERCOSUR, however, is different.

Keet contends that the principal reason why the US is interested in the latter is because of the potential economic clout that two of those bigger groups within that four-member group (six in theory, with Chile and Bolivia as associate members) - ie. Brazil and Argentina - have within the Americas. The trick here is that should these two ever establish FTAs with other countries in the area, they will seriously undermine the US's "strategy to integrate the entire hemisphere into an FTAA dominated by itself."

Keet finally closes her argument with the position of the EU, and its consistent attempts to promote reciprocal free trade regional agreements. Keet calls this behaviour "contradictory".

She maintains that the EU's support for regional integration in ACP (African Caribbean Pacific) countries and such 'embryonic' groupings such as ECOWAS, or CARICOM, are predicated on the belief that these countries rapidly "translate into free trade regions", and that they enter the co-called Regional Economic Partnership Agreements (REPAs) with the EU. Keet believes that this volte-face by the EU to eschew the predatory free trade strategy "arises in the first instance from the non-competitive and non-threatening nature of the ACP economies, and the many advantages to be gained - not least by the EU itself - from their integration into larger economic units."

Effusive over ECOWAS
With regard to ECOWAS, three articles featured in WTOIL September. The first was entitled "Good Neighbours" and was written by Nigerian journalist Fola Adekeye. Here again, the name spoke volumes. The article elaborated on how Nigeria and Niger "have remained a model of bilateral co-operation to other countries in the ECOWAS sub-region."

However, the article was not all about praise. Africa currently is undergoing serious steps to strengthen its regional institutions not only with a view to mitigating the adverse effects of globalisation, but also so as to ensure that the increasing WTO-compatibility parameters, as prescribed by the West through, for example, the EU's REPA, do not take the continent by surprise.

In the above article, we learnt that the Prime Minister of the Niger Republic, Hamma Ahmadou, told the Nigerian government how "African integration would enable Africa to occupy its rightful place in the world." Here, the EU could help, as evidenced by the second article regarding ECOWAS.

Entitled "ECOWAS, European Union Fine-Tune Agenda for Ministerial Meeting", the report on the ECOWAS website elaborated on how a 13-man EU delegation made up of EU ambassadors, at a little-publicised meeting in the Nigeria-based ECOWAS, on September 20, 2001 agreed to "review their economic, political and security cooperation", with a view to preparing for the 2nd EU/ECOWAS Ministerial Meeting "between the two institutions" held in Brussels in October 2001. (WTOIL, 27 September).

Topics on the agenda included peace and security, terrorism and preparations for the Regional Economic Partnership Agreements in preparation for WTO-compatibility. Also included was the issue of strengthening regional integration in the sub-region. The EU expressed its usual desire to continue involving itself in strengthening ECOWAS as a regional institution in the sub-region.

Finally, the thread of ECOWAS took us back to WTOIL 6 September, where we read how in 1993, "the ECOWAS Treaty was revised…to expand the political mandate of its members and authorised the formation of a number of new bodies such as a regional parliament." The article, entitled "Regionalism to Globalism; SADC & ECOWAS Compared", did just that - compare the two blocs, and provide some historical insight into where they came from and where they're going in terms of managing globalisation with their current mechanisms. This was actually the thread running throughout the article.

However, perhaps the most significant thing to come out of the article was the proposal for SADC to soon have "four directorates that appear similar to ECOWAS's four specialised commissions (trade, industry, transport and social affairs) and a tribunal, which will be similar to ECOWAS's community Court of Justice." (WTOIL 6 Sept.) Rudimentary though the latter may be for now, it bears reminding that regionalism as practised by the EU has considerably emboldened many emerging economies (see SOD Report 1.4). Small wonder, therefore, that Africa is re-considering its regional organisations. The author is unsure whether "regionalism provides an adequate or appropriate response to globalisation."

This senior lecturer, Anthoni van Nieuwkerk, based at the University of Witwaterstrand in Johannesburg, believes that regionalism at least "advises against economic communities pursuing military adventures, and asks for a focus on the promotion of human rather than state security…" To this, the human agenda must be included, he adds. If SADC and ECOWAS are to move forward in the spirit of regionalism, then, they must both " 'bring in' the non-state sector." Nieuwkerk believes that these would include civil society interests, NGOs, organised labour and, yes, you guessed it - "business concerns."

© E.K.Bensah, 2002

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