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CHAPTER ONE

INTRODUCTION

1.1      Background of the Study

The goal of economic integration is to foster access to wider market by merging economies of various countries. It is a mutual agreement between two or more countries to unify their economic policies through the partial or full abolition of tariff and non-tariff restrictions on trade and the coordination of monetary and fiscal policies. “The aim of economic integration is to reduce costs for both consumers and producers, as well as to increase trade between the countries taking part in the agreement...there are varying levels of economic integration, including preferential trade agreements (PTA), free trade areas (FTA), customs unions, common markets and economic and monetary unions. The more integrated the economies become, the fewer trade barriers exist and the more economic and political coordination there is between the member countries” (Alemayehu & Haile, 2014). Tinbergen’s classification of economic integration as consisting of a series of stages, including, free trade area, customs union, common market, and economic union provides useful insight to understanding the process of economic integration (Tinbergen, 1954).

The concept and practice of economic integration between or among states has an old history. By literature available to the researcher, it dates back long before the period of the Berlin Conference in 1884, when African nations thrived on cooperation and community life to resolve challenges and develop their communities (Asante, 1997).

Since independence, African countries have always embraced the idea of an African Economic Integration. This idea was initially motivated by shared colonial experiences and the perception that the colonial powers deliberately created artificial lines among African states. Regional Economic Communities and cooperation are considered by many as pivotal to continental and global economic stability and growth (Padoa-Schioppa, 1987). This is more so as the focus of RECs has moved beyond trade agreements and concessions to include monetary, economic and financial stability considerations. In contemporary times, economic growth and stability cannot be achieved by any state in isolation. Regional Economic Communities and cooperation among nation states will continue to shape economic growth in many years to come. Sadly however, African countries have not significantly taken advantage of the synergy RECs can offer and the potentials of the African Economic Community (AEC). Although the scope and progress of economic integration of the RECs vary, regional and continental economic integrations have been low across the African continent because of political and economic challenges.

For example, the African Union, (AU) currently recognizes 8 RECs in Africa as major building blocks of the African Economic Community. These 8 RECs are: Arab Maghreb Union (UMA), East African Community (EAC), Economic Community of West African States (ECOWAS), Southern Africa Development Community (SADC), Community of Sahel-Saharan States (CENSAD), Inter-Governmental Authority on Development (IGAD), Common Market for Eastern and Southern Africa (COMESA), Economic Community of Central African States (ECCAS). The other existing integration groups are: Economic Community of Great Lakes countries (CEPGL), Southern African Customs Union (SACU), Mano River Union (MRU), West African Economic and Monetary Union (UEMOA), Central African Economic and Monetary Community (CEMAC), an Indian Ocean Commission (IOC).

The benefits of economic integration include (Alves et al., 2007): collective bargaining as a bloc, trade and financial flows, direct foreign investments, diversification, availability of resources and improvements in competitiveness etc. (Carnoy, 1972). Economic integration increases available market for firms operating within the region thereby enhancing the opportunities of the companies to gain economies of scale in production (Sakakibara & Yamakaw, 2005). It also allows companies to gain industrial specialization and competitiveness. Companies concentrate and specialize on products that give them a cutting-edge advantage over other companies and may close factories that are not performing at optimal level. Consumers also have access to a wide range of products at reduced and competitive prices. This is because regional trades and tariff elimination will reduce goods from outside the region. Goods that are imported into the regions will also have to be priced very low to compete with regional prices. Further, economic integration has the potential of attracting direct foreign investments as multinational companies embrace the opportunity to invest in countries that are part of economic blocs so as to gain advantages associated with being members of the economic bloc (United Nations, 1985) i.e. tax incentives and preferential treatments for exports among members of the same bloc. Samsung for example has hugely invested in the EU to take advantage of the EU economic integration. Another benefit of economic integration is the potential advantages that many landlocked countries will derive from the coastal countries in the same bloc. In view of the foregoing, this study is aimed at assessing the role of economic co-operation and integration as a panacea to the development and Unity in Economic Community of West African States (ECOWAS).