Customs Union Research Articles

The ‘Flexibility’ Standard in the African Union and Its Ramification for the Implementation of the African Continental Free Trade Area (AfCFTA) Agreement

African Union’s (AU’s) integration history indicates that the continental body is plagued by flexibility hindering its goal of continental unity. This article investigates the utility of ‘flexibility’ standard in the adoption, ratification, and the implementation of AU treaties. Through an empirical analysis of the seventy treaties currently in force at the AU, thirty-four treaties have been able to secure the minimum level of ratification. Results show that a treaty that lacks the required number of signatories and ratifications creates a big challenge for the continental body. On the other hand, treaty ratification is not a guarantee for successful implementation. Historically, differing views on AU’s role, goals and effect on regional stability has forced a gravitational pull on the essence of the body. Yet, AU continues to facilitate regional free trade agreements and customs union. One of these is the recent African Continental Free Trade Area (AfCFTA) Agreement. This article argues that achieving flexibility under AfCFTA is illusionary, hence AU should strive towards attaining a clear roadmap for flexibility milieu in the implementation of AfCFTA. We argue that, for AfCFTA to be effective, all AU Member States must ratify the agreement, thereby ensuring the harmonization of regional trade agreements, and elimination of tariff and non-tariff barriers. The article concludes that the AU must utilize the principle of variable geometry to have a differentiated level and speed of integration, still achieving the same objective of a unified continent towards maximum intra-trade realization. flexibility, African Union, AfCFTA, variable geometry, regional integration, trade barriers, and trade liberalization

EAEU Policies and Governance – The Future of Eurasian Integration

The article evaluates policies and governance of the Eurasian Economic Union (EAEU) and validates the future of Eurasian integration. In order to avoid volatility of quantitative indicators and externalities that may lead to uncertain predictions, the means for this task include: Firstly, a qualitative analysis of EAEU constituents, namely of Customs Union (CU) and Common Economic Space (CES) policies, as well as of the functions of Union’s bodies in accordance respectively with theories of economic integration and theoretical approaches on state sector’s effective operation. Secondly, the strategic dimension of collaboration of EAEU member states in other Eurasian organizations and associations, such as the Commonwealth of Independent States (CIS) and the Greater Eurasian Partnership (GEP), in relation with Russian grand strategy and its dynamics on global order.

Federalism and Foreign Direct Investment - An Empirical Analysis

Previous empirical studies suggest that decentralization, measured by the number of government layers, is associated with less foreign direct investment (FDI). With an improved dataset on tax autonomy of sub-federal government tiers, we present evidence that fiscal decentralization (de facto) does not reduce FDI. If local governments can set their tax rates and bases independently, they attract more FDI. Analyzing 83,458 corporate cross-border acquisitions (CBA), between 148 source and 187 host countries from 1997 to 2014, we also find that takeovers between two countries increase with size, cultural similarities and common borders of two economies. Shared institutions such as membership in a customs union facilitate CBA. These results apply for high-income hosts but not for middle-income countries.

Determinants of economic growth in the European Union. An empirical analysis of conditional convergence

Being established from the initiative of six visionary countries in the second half of the 20th century, the European Economic Community has shifted the history of the European continent by promoting economic collaboration and political stability. Given its initial success, the regional group has quickly evolved from customs union to Economic and Monetary Union, comprising nowadays twenty-seven European countries. Although the European Union has successfully managed political, economic, social and even sanitary turmoil, the stability of the European architecture continues to be threatened by the heterogeneity of its members. In this respect, one of the main challenges for the European Union in its current composition aims the convergence of the economic performance between countries and regions. The purpose of this paper is to study the economic growth patterns in the European Union during 2000 and 2019, also conducting a comparative analysis between New and Old Member States. In order to capture the European economic landscape, the methodology was based on conditional β-convergence and the estimates were conducted by using ordinary least squares and generalized least squares with fixed effects. We have tried to find the relationship between the lagged value of GDP per capita and the subsequent growth rates, but also to study the influence of macroeconomic and social-related variables. By estimating regressions based on panel data, we have found evidence in favor of income convergence in the European Union, based on the inverse relationship between the lagged value of GDP per capita and the annual growth rates. Moreover, the comparative analysis between the New and Old Members illustrated that convergence was stronger in the latter group, given the sound macroeconomic and social environment. The empirical analysis suggested that the economic growth process both at aggregate and subgroup level was enhanced by investment, exports of goods and services, sound public finances and the increase of percentage of population with tertiary education. Consequently, in order to increase the cohesion between Members and to avoid separatist movements, the European decision-makers should strengthen the macroeconomic and social frameworks, maintaining a sustainable economic growth trajectory for both the New Members from Central and Eastern Europe and the Old Member States.

The Republic Period of the Turkish Automotive Industry and Product Design

After the First World War, during the transitional period the Republic of Turkey from the Ottoman Empire, this qualitative research that sheds light on changes and variations were the focus of the industry, for the conservation and use of located original value in the historical development, it has been compiled with archival-tracer information. The Ottoman Empire, after the industrial revolution, these historical studies that discussed the effects of the touch industry has ceded to the Republic of Turkey, in the automotive assembly industry realized the product development and product design activities, with examples of significant diffraction in all, were transferred with qualitative data. The main objectives of the study are how and why the automotive industry, which was established before the world wars and restructured afterwards, came to life in the global context and the regional developments it showed. Therefore, in the coming days, the study was carried out in a narrow field in order to understand the global integrity where geographical regions converge, and the structure in which full integration has been completed in companies and organizations in the automotive industry. In this context, the geographical continent transition taking place among Turkey’s automotive industry, within the limits of qualitative studies, creating a historical perspective, the region, released today stems from the importance of global integration centers. In this context, Turkey is located between geographic continent transitions to create operating limits of the automotive industry, the global integration of the indicator is due primarily to the fact that the reveal. The study evaluated two different development structures in the automotive industry: mass manufacturing and vehicle design, product development. Therefore, examining the development of the automotive assembly industry in the light of original product design studies, which constitute the basic requirement of mass manufacturing, strengthened the cause and effect flow. Under the new technology-oriented, original product design, the enhancement or sustainability of global competitiveness, regional mass manufacturing industry, specific applications for the automotive sector were included in the findings and main results of the research. In addition, the use of common platforms and parts between global companies in the automotive assembly industry or a common design approach in cost-oriented mass manufacturing has been determined within the scope of the research boundaries. The global competition that shapes the basic development of the automotive industry, the brand and model memory of regional markets, short product life cycles, product diversity and increasing consumer demands, predictable implementation of similar basic strategies have shaped the background of the study. Research limits built-in, well situated Turkey’s automotive assembly industry in the 1960s to set up and under liberal policies in the mid-1980s to be included with mass manufacturing capacity with a special agreement with the European customs union, today, global integration, to be completed by Asian companies cannot stay away from the expected in this sector in the working axis is revealed.

Особенности стратегии ЕАЭС по формированию сети ЗСТ

The number of free trade agreements (FTA) in international trade is rapidly growingand it makes them the main tool for countries’ trade liberalization. Created in the 2015, the Eurasian economic union (EAEU), that has the competence of the customs union, also started actively building a network of FTAs. To date, four such preferential agreements and one non-preferential trade agreement are in force, and at least three other agreements are expected to be signed in 2021-2025.Some specific features can be attributed to the emerging network that will impact the economic development of the EAEU Member States and will allow its partners to adapt their foreign trade policies accordingly. The geography of the EAEU agreements demonstrates the intention to create a wide network of FTA covering primarily the Eastern hemisphere, with the potential to extend it to all major regions. The EAEU partners are generally small States and notthe strongest economies, and the content of FTA agreements is not yet as broad and deep as, for example, concluded by the EU. It is noteworthy that the system almost does not contain WTO-extra provisions. However, the EAEU is only at the beginning of building an FTA network that may change the EAEU position in the international trade system.The main goal of the article is to track the distinct features of this new EAEU trade policy and to identify specifics and prospects for the emerging FTA network, based on the already concluded agreements and the coming ones.

“Grabbing the ‘Bull’ by the ‘Horns’”: A Critical Analysis of the Establishment of AfCFTA

The establishment of the Free Trade Area (FTA) covering the whole of Africa is intended to combine the existing Free Trade Areas (FTAs) within the Regional Economic Communities (RECs), to attain maximum gains from trade and bolster AU’s growth and development objectives. But several regional blocs, including the Tripartite Free Trade Areas (T-FTA), have all missed their deadlines set to achieve the objectives of the Abuja Treaty of 1991 in six stages. This means that the launch of the CFTA has become a parallel process with immediate effect since all FTAs and T-FTA are to collapse into the Af- CFTA when trading commences. The question therefore is, why hasn’t the AU waited until it can harmonize, that is, combine existing arrangements of trade and the movement of persons, under its “building blocs” concept for continental unity? In launching the AfCFTA by the AU, does such a “hasty act,” tantamount to the removal of layers of complexity in Africa’s existing arrangements? The prevailing continental state system in Africa, according to functionalists, contributes to continental tensions and conflicts because it is institutionally inadequate. Accordingly, it cannot deal with the basic continental problems because it has arbitrarily divided continental society into national units based on territory, and not on the problems (or issues) to be solved. This is because any successful integration project requires autonomous and credible central institutions that can act as motors of acceleration. Employing theories of functionalism and neo-functionalism, this paper is of the view that the attempt to launch the AfCFTA by the AU is an act of rebooting the dormant Custom Unions across the respective RECs. The action by the AU is to arrest their failures, hence “grabbing the bull by the horns,” so as to empower and also embolden RECs to own the regional integration processes and to build resilience against global shocks.

Theoretical and methodological approaches to assessing integration: international experience

This article considers the theoretical and methodological foundations and experience in assessing the development of some of the most famous integration associations in the world. In modern conditions, practically no country in the world can effectively develop without interacting with other countries. Countries are united based on their political, economic, geopolitical or geoeconomic interests. To realize these interests, various integration groups are being created. Today, there are about 300 regional trade agreements in force in the world, including agreements on economic integration, on the formation of customs unions and agreements with a partial scope of action, covering a certain list of products. The goals of countries' participation in integration associations may differ depending on the level of their economic development. At the same time, successful integration associations have a "core of integration" – a country or a group of countries that are the driving force behind the integration processes. Integration potential is a combination of natural, industrial, labor, financial, intellectual and other resources of the countries participating in the integration association, the joint mutually beneficial use of which can provide an integration effect, expressed in additional benefits and advantages for the participating countries. The idea of comparing integration associations by a set of indicators is not new. Similar studies were carried out by many international organizations, research institutes, and regulatory bodies of integration associations in order to assess how the creation of this or that integration group corresponds to the interests of the international economy as a whole.

African Peacekeeping and African Integration: Current Challenges

Peacekeeping and economic union are the two most important dimensions of African integration. The first section of this article aims to analyse some current challenges to African peacekeeping, peacemaking, and African integration. The continuing Libyan civil war epitomizes the diplomatic stalemates and military stalemates which form the limits of current African peacekeeping. It exposes the North African Regional Capability and North African Standby Brigade as paper structures which do not exist operationally, and so limit the capacity of the African Union’s Peace and Security Council. The military intervention of states outside Africa can polarize conflicts and escalate civil wars. Africa’s colonial epoch serves as a warning of the potential dangers of foreign military bases in Africa. In parts of West Africa, states sub-contract peacemaking and anti-terrorist operations to unsupervised local militias, which are lawless at best, and commit ethnic killings at worst. African integration fares better in the economic dimension. The second section analyses African integration, with its focus on the most recent step of the African Continental Free Trade Area (AfCFTA), which starts to lay the cornerstone envisaged four decades ago in the Lagos Plan of Action, and three decades ago in the Abuja Treaty for an African Economic Community. The historic track record of African continental organizations indicates that a decade will be a realistic minimum period for it to be substantially implemented. The Pan-African Payment and Settlement System will help operationalize the AfCFTA by lowering forex currency transaction charges. Severe difficulties can be predicted for future attempts to upgrade the AfCFTA into a continental customs union, and ultimately into a continental common market.

Political Uncertainty, FDI, and Trade In Intermediate Goods: Evidence From Ukrainian Firms

In this paper, we introduce a new method to measure uncertainty using quantitative text analysis and explore the effects of uncertainty on firm performance. We extend a theoretical model with heterogeneous firms and sunk investments to derive hypotheses about the impact of trade policy uncertainty (TPU) on firm-specific investment and firm’s decision to trade intermediate goods. We look at Ukraine’s trade relations with EU and Russia to measure TPU and to test our predictions. Ukrainian firms faced considerable uncertainty with regards to two mutually exclusive trade policies: the conclusion of a free trade agreement with the European Union (EU FTA) or a customs union with Russia (RU CU). Using firm-product level data of Ukrainian manufacturing firms between 2003 and 2013, we find a substantive increase in firm level FDI inflows and imported intermediate goods from EU countries and a decrease in FDI from the Customs Union, once uncertainty with regards to the EU FTA is reduced. Moreover, more protected goods respond stronger to a reduction in TPU. The novel measure of uncertainty can be easily applied to other cases where governments face multiple mutually exclusive policy options.

Harmonização de Regulamentos e Normas Técnicas no Mercosul

With thirty years of life, the Mercosur has accumulated information and experiences that should be used to guide its development in the decades to come. If the results may not have met themost optimistic expectations, Mercosur continued to exist and to remain faithful to its founding objectives: the creation of a free trade area and the sub-regional customs union in South America. The accumulated experience in harmonizing regulations and technical standards, a condition for overcoming technical barriers to trade and making productive integration feasible, is quite substantial. The results obtained in terms of competitiveness and trade could have been better, but the challenges were greater. Macroeconomic instability as well as the historically poor infrastructure and structural differences between partners were the main obstacles. The similarity in the government’s collaboration with the private sector in the countries that integrate the blocwas essential to the stability of the practices and actions that took place in the three decades ofMercosur, in the area of regulations and technical standards.

Brexit: What economic impacts does the literature anticipate?

The results of the June 2016 referendum in favour of the UK leaving the EU opened a period of huge economic and political uncertainty in the UK, and in the EU27. A large number of official and academic analyses have been published that address the economic impact of different modalities of Brexit. Section 1 analyses possible models for the future UK-EU relationship, from remaining in the single market and in the customs union, to a Free Trade Agreement (FTA) or world trade organization (WTO) rules. Section 1 also discusses the future of UK trade regulations (tariff and non-tariff barriers, trade agreements) and the various channels through which Brexit could have an impact on the UK economy (trade, foreign direct investment (FDI), migration, productivity, fiscal policy). The UK must make a trade-off between ensuring access to the EU market and increasing its regulatory autonomy. Section 2 surveys studies released on the impacts of Brexit, over short- and long-term horizons, under different scenarios, from a soft Brexit to a hard Brexit and a no deal scenario. These studies provide very different results depending on the methods they use and the assumptions they adopt on the future relationship between the UK and the EU27, mainly on how they view the effects of trade openness and regulations on productivity, in level as in growth rate. Studies using gravity models and computable general equilibrium models generally find negative but small effects on UK GDP. Some studies increase these effects by adding the negative impact of a less open UK economy on labour productivity growth, even if Brexiteers want to open the UK to non-EU economies. Others believe that a liberalisation shock could boost output growth, but the UK is already a very liberal economy. The impact of Brexit on the GDP of the EU27 countries is on average 4 to 5 times smaller than on UK GDP, although some countries (Ireland in particular) are more affected. In the shorter term, uncertainty about Brexit has a negative effect on investment and exports, which is partly offset by lower interest rates and exchange rates.JEL codes: F10

The Prospect of the Proposed Currency Union on Intra-Regional Trade: Southern African Customs Union

Formal currency union with a common policy is welfare superlative to formal currency union due to relatively greater transparency. The study evaluates whether adopting a common currency will lead to trade. Additionally, the study estimates whether countries are under trading or overtrading to investigate whether there exists trade potential. The results show there exists greater trade potential due to geographic and economic fundamentals therefore adopting a common currency will lead to trade. Also, the study showed that the financial markets served as a buffer for the volatility of the currencies notably the Rand. The study concludes that a currency union with a common policy could serve as a panacea when the appropriate institutional policy framework is adopted to reduce trade and non-trade barriers.

Why the French Said ‘Non’: A New Perspective on the Hoover Moratorium of June 1931

Why did the French government delay its endorsement of the Hoover Moratorium in the summer of 1931? Key policymakers were fully aware that their stance would exacerbate the German financial crisis, which ultimately dragged the European economy into the abyss. Most historical accounts identify the plan for an Austro-German customs union, which became known publicly in March 1931, as a major cause for the French ‘non’. We suggest a different chronology by showing that the French government was reluctant to help Germany as early as the fall of 1930 when, in the wake of the Nazi victory in the Reichstag elections, a currency crisis threatened to ruin the German monetary and financial system and bring down the government. We also argue that the reason for this French reluctance to extend financial help to Germany was the traumatic experience resulting from the evacuation of the Rhineland in June 1930. This chauvinistic outburst in Germany not only frightened the French public, but also made it clear to French politicians how the lack of military cooperation with the Anglo-Saxon powers had made France highly vulnerable on its Eastern front. After June 1930 a financial bargain with Germany became unrealistic, due to domestic opposition.

Análisis sobre la suscripción de la unión aduanera de la Comunidad Andina: creación y desviación comercial (1967-2017)

El presente documento busca determinar si la suscripción de la unión aduanera de la CAN en el año 1995 dio lugar a un proceso de creación/desviación del comercio intrarregional y extrarregional para sus miembros. Por tal motivo, se estima el modelo estructural de gravedad de comercio, con datos de panel de 83 países, que comprende el periodo que va de 1967 a 2017, con una desagregación de doce tipos de cadenas productivas de bienes, mediante el método de estimación “Poisson Pseudo Maximum Likelihood”. Las estimaciones sugieren que la suscripción de la unión aduanera de la CAN da lugar a un proceso de creación de comercio intrarregional y creación de importaciones procedentes de países no miembros. Entre otros resultados, se identifica que la suscripción de esta unión aduanera incrementa el comercio intrarregional en las siguientes cadenas productivas de bienes: papel y madera, acero y hierro metales no ferrosos y electrónicos. También, se encuentra que en los grupos de cadenas productivas de energía, químicos, vehículos y eléctricos se genera un proceso de creación de exportaciones hacia países no miembros.

Procedure for Assessing the Investment Attractivenessof Foreign Markets.Comparative Analysis of Former USSR Countries

One of the natural stages of development of the enterprise is the desire to expand its business abroad. Globalization, global trade integration, technology development, the emergence of political, economic, customs unions, the existence of international courts of arbitration, the emergence of elements of world culture and other factors reduce the barriers between potential investors and countries to internationalization. This phenomenon has a positive impact on the decisions of companies in diff erent parts of the world about the expansion abroad. The main goal of a foreign investor who plans to internationalize is making the most optimal choice of a foreign market where prevailing realities on business environment will enable the achievement of competitive advantage. Because of this, before internationalization, foreign investors should evaluate the investment attractiveness of all potential directions of internationalization in order to be able to realistically assess their own capabilities in these markets and assess all the risks and opportunities that may arise during the operation. The quality of the analysis which assess the level of investment attractiveness of potential directions has a large impact on the success of the company abroad. The article presents the procedure of comparative analysis taking as an example former USSR countries at the macro level.

Analysis of Global Economic and Political Factors and Challenges of the Eurasian Economic Integration

The development of the EAEU takes place in the context of the formation of a new system of world economic relations and the transformation of the rules of world trade. Further areas of multilateral cooperation between states and regional integration associations are emerging (including the digital economy, cryptocurrencies). As a consequence of the aggressive foreign policy of economically developed countries, the regionalization of trade and economic ties is gaining popularity, which makes it urgent to reformat trade relations with regional integration associations. Along with this, the primary integration effect associated with the opening of national markets and the simplification of trade rules, which manifested itself at the first stages of the formation of the customs union and the single economic space (CES), is being exhausted. The volumes of mutual trade of the member states are changing, but its share in the capacity of the common market of the EAEU remains virtually unchanged from year to year. The further growth of trade and economic ties within the EAEU is mainly due to the removal of existing obstacles and the qualitative improvement of the conditions for doing cross-border business. Various negative phenomena distort the integration agenda and substantially neutralize the positive effects of integration. The reasons noted above make the task of a comprehensive study of the economic and geopolitical factors of the integration of member states and new challenges to the integration processes urgent. To develop approaches to strategic planning for the development of the EAEU, adequate assessments of the use of the integration potential of the member states should be made and areas with the most significant reserves for building up integration cooperation should be identified. The full involvement of Armenia and Kyrgyzstan in the orbit of the Eurasian economic integration, as well as severe changes in the external economic situation that have occurred in recent years, require the actualization of possible scenarios for the development of the Eurasian Economic Union and the development of new tactics for the response of the EAEU and the Union member states to newly emerging factors and challenges affecting on integration processes.

Investigating the Core–Periphery Relationship in the Southern African Customs Union

This study explores the relevance of the core–periphery relationship in the Southern African Customs Union (SACU), a union comprising five highly unequal economies. In the analysis, the study employs five key indicators: economic size, trade logistics and facilitation, regional integration, and intra-SACU trade, to assess the main aspects underlying the core–periphery relationship in the union. The findings of this study point to dominance-dependency behavior within the union, where South Africa is the dominant core while Botswana, Lesotho, Namibia, and eSwatini are the dependent periphery. Based on the findings, the recommendations are that SACU countries should, among other strategies, identify ways of promoting high-value-added cross-border value chains across the union members. Also, the Botswana, Lesotho, Namibia, and eSwatini peripheries could improve their infrastructure and productive capacity if their objective is to create an export base in some of the products currently supplied by South Africa.

The Birth of the Soviet School of European Integration Studies. Part 2

The first part of the article shows that in the mid-1960s some Soviet researchers of the European integration problems concluded that integration did not correspond to the Leninist-Stalinist theory of the general crisis of capitalism. On the contrary, it corresponded to some Western concepts of the custom union, the common market, and economic integration. A new approach to the European integration studies was offered by the Institute of World Economy and International Relation (IMEMO), established in 1956. For many decades IMEMO was serving as the focal point for the European integration studies, and was providing the Soviet leadership with analytical information. The number of inquiries from authorities increased significantly. Firstly, it can be explained by the achievements of integration. Secondly, it was due to the growth of economic cooperation between the USSR and the EEC. Thirdly, Moscow defined new foreign policy priorities towards Western countries including Europe. There were two turning-points of bilateral relations: with France – in 1966, and with Germany – in 1969. The Organization for security and cooperation in Europe (OSCE) was established during final session of the top-level Conference of European States in Helsinki in August 1975. Fourthly, experience of the EEC was relevant for the COMECON

Effects of the Common External Tariff on intra-regional trade: The case of the West African Economic and Monetary Union and the Economic Community of West African States.

In West Africa, two common external tariffs coexist at the sub-regional and regional level with eight countries out of fifteen sharing their membership of the two entities. This paper analyzes intra-West African Economic and Monetary Union trade flows with the implementation of the Economic Community of West African States common external tariffs. The study makes use of a methodology which is based on an augmented gravity model. Overall, the findings from the three estimated models converge in the same direction, with several significant coefficients simultaneously and of the same sign. The findings provide overall satisfaction in the estimation of the gravity model. The lack of diversification of the economies of the two zones is one of the explanatory factors for the relative weakness of intra-regional trade. The issue of the structural transformation of the economies of the member countries therefore arises, more than ever acutely, which would contribute to the intensification of trade to make intra-regional trade one of the levers of economic growth and development in the two customs unions.