Bullion

Volume 34 Number 4 Article 4

12-2010

The role of economic community of West African States

(ECOWAS) in promoting borderless trade in West Africa.
Adam J. Akperan
University of Abuja

Sanni Ganiyu Kayode

Central Bank of Nigeria

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Recommended Citation
Akperan, A. J., and Kayode, S. G. (2010). The role of Economic Community of West African States
(ECOWAS) in promoting borderless trade in West Africa. CBN Bullion, 34(4), 31-40.

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Volume 34, No. 4 October - December 2010

THE ROLE OF ECONOMIC COMMUNITY OF WEST AFRICAN STATES

(ECOWAS) IN PROMOTING BORDERLESS TRADE IN WEST AFRICA*
BY
ADAM, JAMES AKPERAN, PhD
Department of Economics
University of Abuja, Abuja

AND

SANNI, GANIYU KAYODE

Central Bank of Nigeria, Abuja

Nations Conference on Trade and

Development ( UNCTAD) in 1964
and, its adoption as a permanent arm
of the UN. This arm of the UN
specializes in analyzing and
reshaping trade policies to benefit
developed and developing nations.
Adam, James Akperan, Phd The second was the adoption of new Sanni, Ganiyu Kayode
principles in the General Agreements
1.0 Introduction on Tariffs and Trade (GATT). This has corroborated by the recent
made trade policies to remain central development in China, the fastest
The influential role of trade in in the design of macroeconomic growing economy in the world, where
economic development has long been policies in both developed and trade potentials have been effectively
accepted since 1776 when Adam developing countries. Most harnessed to achieve higher growth
Smith published The Wealth of importantly, it is now viewed that rate of gross domestic product (GDP)
Nations. The prevailing and still the growth prospects for developing as well as increasing the general
popular view is that countries with countries are greatly enhanced welfare of the populace. The
more liberal trade policies have better through an outer-oriented trade emphasis on trade integration by
economic performance than those regimes, that is, trade policy which is ECOWAS is consistent with the call
with restrictive trade policies (Sachs more open enhances international by the World Trade Organisation
and Warner, 1995 and Krueger, trade on the ground that trade has (WTO) and the International Financial
1998). Proponent of this view argue acted as an important engine of Institutions (IFIs) for countries to
that liberal trade policies enable growth for countries at different integrate in order to tap fully the
countries to produce and allocate stages of development, not only by benefits of global trade. That is, a
resources more efficiently; access contributing to a more efficient process of economic integration will
new ideas and technology; and also allocation of resources within create better economic development,
have access to cheap foreign countries, but also by transmitting and security for the countries
consumer goods. However, free trade growth from one part of the world to engaged in a process of integration.
is not without its disadvantages as it another. This “better” economic development
encourages capital flight and job loss
will allow integrated countries to
as local firms loses sales to imported It is in recognition of the critical role of increase their GDP, and the overall
goods. Some of the groups that are trade in stimulating development of welfare of member countries.
hurt by foreign competition may not nations that countries within the West H o w e v e r, m o s t d e v e l o p i n g
wield enough political clout to obtain Africa sub-region came together to economies including ECOWAS
protection dumping of substandard form the Economic Community of member countries have not benefited
imported products in developing West African States (ECOWAS). The much from trade owing partly to policy
countries, which eventually destroy objectives of ECOWAS include inconsistency, non-competitiveness
local industries. Nevertheless, among others: the promotion of trade of exports and the lack of access to
barriers to trade continue to exist among member countries with the global markets occasioned largely by
despite their sizable economic costs. belief that increased participation in inadequate and low quality of
The continued acceptances of the trade is associated with higher inflows exportable (Sanni 2006).
positive role of trade by countries of foreign investment/capital and new
within the United Nations (UN) were technologies which can be adopted to Against this development, the
driven by two major factors. The first transform an economy through objective of this paper is examining
being the creation of the United appropriate policy. This view is the role of ECOWAS in promoting

*The views expressed in the paper are those of the author and do not in any way represent the official position or thinking of the Central Bank of Nigeria. The author
acknowledges the comments and criticisms of anonymous reviewer.

31
Volume 34, No. 4 October - December 2010

trade in the West Africa sub-region specializes in the production of those (management), or argue that scale
with a view to proffering suggestions goods it has relative advantage, and learning economies play crucial
for improvement. Following the rather than producing all the products role in determining competitive
introduction are the conceptual and it needs. advantage (increasing returns to
theoretical issues. This is followed by scale), while others assign roles to
the examination of ECOWAS 2.1 Role of International Trade differences in technology (product
integration efforts in the sub-region. cycle). These theories suggest that
International trade plays a positive
Section four assesses the role of trade of comparative advantage have
role in economic development
ECOWAS in promoting trade while developed beyond conceptual
because exports serve as an earner
section five concludes the paper with framework of the traditional
of foreign exchange that are used to
suggestions for improvement. explanation of undifferentiated
finance development programme.
labour, capital endowment and
The most obvious gain from exports is
2.0 Conceptual and Theoretical productivity (Bankole and Bankole,
the access to goods from abroad
Issues 2004).
provided by earnings of foreign
Conceptually, international trade can exchange. Exports permit not only the
2.2 Trade Liberalization
be defined as exchange of goods and satisfaction of a broader range of
services between the residents of one consumer goods than could be Trade liberalization is a form of trade
economy and another (Stigeler, supported by the narrow structure of policy (other forms are: export
1982). While free trade is usually traditional domestic output but also p r o m o t i o n s t r a t e g y, i m p o r t
defined as the absence of tariffs, provide access to the capital substitution strategy, etc.) that has
quotas, or other governmental equipment and technology of been a central element of successful
impediments to international trade, advanced countries that are crucial to growth strategies especially in
allows each country to specialize in the development process. The developed and emerging economies.
the goods that it can produce cheaply positive impact of trade has long been The doctrine of liberalization
and efficiently relative to other supported by the traditional trade contends that there are no restrictions
countries. Such specialization theories such as those of Adam to trade, economic and business
enables all countries to achieve Smith's absolute advantage theory activities. Specifically, it requires the
higher real incomes (standard of and the Ricardian and Heckscher- state to dismantle existing regulatory
living). Trade has been recognized by Ohlin Learner Samuelson (HOLS) structures in financial markets, traded
both the classical and neo-classical models which consider differences in goods markets and in labour markets.
economists as an “engine of growth”. comparative advantage as the basis The central argument is that factors of
This is because trade promotes for trade. Though they differ in some production, goods and services are
growth and development through of their assumptions and explanations optimally priced and allocated when
technology and foreign investment of the differences in comparative their prices are freely determined in a
flows and other benefits associated advantages across countries, the competitive environment. It is further
with global capital movements. later theories emphasize the argued that in the absence of free
production and consumption gains pricing, there would be inefficiency in
Trade can be divided into visible trade from trade. Granting critical resource allocation, which would
and invisible trade. The visible trade is shortcomings, Ricardo's theory states worsen, as the authorities try to
trade in tangible items such as capital that a country will tend to export the administer measures to cope with
goods, manufactures, machinery and commodity in which it has a dwindling foreign exchange earnings
equipment and raw materials. The comparative advantage and import and shortfall in public revenue. There
invisible trade relates to trade in the commodity in which it has a are many possible ways to open an
intangible items such as comparative disadvantage. Thus, economy (sequencing of openness).
communication services, financial given the assumption of constant The challenge for policy makers is to
services, postal services, costs, a country will specialize identify which best suits their
transportation services, insurance completely in the production of the c o u n t r y ' s p o l i t i c a l e c o n o m y,
services and other business services commodity in which it has institutional constraints, and initial
that enhance the production and comparative differences in relative conditions. As these vary from
exchange of physical goods. factor endowments, production country to country, it is not surprising
Krugman and Obsfeld (1999) posit functions, and pattern of demand. The that there is a striking heterogeneity in
that countries engage in trade for two summary of the HOLS model is that 'a country experiences regarding the
basic reasons, each of which country would export a commodity timing and pace of reforms. Different
determines the extent to which a which uses its more abundant factor countries have opened up different
country gains from trade. First, more intensively and import a sectors at different speeds (for
countries trade because they have commodity which uses its scarce example Bangladesh and India);
different resource endowment and factor more intensively'. Other others have achieved partial
can benefit from trade by making an theories have been developed to liberalization through the
arrangement in which each country explain the causes of trade, especially establishment of export processing
specializes in those activities it does as related to strategic advantages of zones.
relatively well. Second, countries trans-national enterprises through
trade to achieve economies of scale foreign direct investment (FDI). Some The rationale for the adoption of trade
of production. That is each country of these theories admit human capital liberalization is well documented in
can produce more efficiently if it as a separate factor of production the literature. In the World Bank

32
Volume 34, No. 4 October - December 2010

(1997) view for instance, good policies and misaligned exchange rate technology, all of which creates more
are those which accelerate integration movements' all impeded the growth of employment opportunities for people
into global markets by removing non-oil exports in Nigeria. and allow them to move from one
barriers to the free flows of goods, country to another to find jobs or to
services, and investment. In the long- 2.3 Economic Integration earn higher pay.
run, it is envisaged that trade
Economic integration can be viewed
liberalization will reduce poverty in In spite of these benefits, economic
as second best trade theory, free
LDCs through redistribution of gains integration has a few demerits. The
trade being the first best trade theory.
from trade. Calvo and Drazen(1998), creation of economic bloc would assist
Economic integration is an
h o w e v e r, s h o w e d t h a t t r a d e in increased trade and movement but
arrangement of economic/social
liberalization of uncertain duration this would also lead to the creation of
cooperation among some countries of
could lead to an upward jump in trading blocs which can increase trade
the world. There are six different
consumption including non-tradables. barriers against non-member
stages of economic integration,
It is viewed that developing countries countries. Economic integration also
namely: (i) preferential trading area
have reaped little from international leads to trade diversion because of
(ii) free trade (iii) custom union (iv)
trade with gains that have accrued to trade barriers. Integration could be a
common market (v) economic and
industrialized nations from trade. threat to national sovereignty.
monetary union; and (vi) complete
Another argument against trade Integration amongst nations requires
economic integration. Put simply,
liberalization is that of public revenue member countries to give up some
regional economic integration is an
loss, arising from cut or removal of level of control over some of their key
agreement among contiguous
tariff on traded goods (Adam, 2005). policies like trade, monetary and fiscal
nations to allow for the free flow of
policies. The higher the level of
ideas, investment funds, technology,
There are diverse opinions as regards integration, the greater the degree of
goods and services. There are many
the effect of trade liberalization on controls that needs to be given up and
degrees of economic integration, but
growth. The first school of thought threat to national autonomy
the most preferred and popular one is
believe that trade promotes growth particularly in the case of a political
free trade area Balassa (1961). The
through the impact of the inherent union which requires nations to give
inherent benefits in economic
benefits associated with trade among up a high degree of sovereignty. Three
integration explained why regional
countries. The other school of thought fundamental factors have affected the
economic cooperation has gained
believe that trade liberalization does process of economic globalization and
momentum partly as a strategy to
not promote growth particularly in are likely to continue driving it in the
cope with global economic problems.
developing countries owing to lack of future. First, improvements in the
As many countries are not strong
tradable commodities in the global technology of transportation and
enough on their own to cope with the
market such that trade openness by communication have reduced the
rapid changes in the global economy,
such countries would not enhance costs of transporting goods, services,
groups of countries use regional
growth but rather undermine the and factors of production and of
integration to achieve the necessary
growth of local manufacturing communicating economically useful
conditions for sustainable growth and
industries through importation of knowledge and technology. Second,
development. The ultimate aim is to
different kinds of goods. Developing the tastes of individuals and societies
increase trade across the world. It
countries are confronted with have generally, but not universally,
allows for more trade creation
underdevelopment and poverty which favored taking advantage of the
amongst member countries, for
requires a well articulated opportunities provided by declining
instance they are privy to a wider
macroeconomic policy for the costs of transportation and
selection of goods and services not
transformation of their economies in communication through increasing
previously available to them; member
order to attain rapid growth and economic integration. Third, public
nations can also acquire goods and
development. Olomola (1992) noted policies have significantly influenced
services at lower costs due to lower or
that for a developing economy to the character and pace of economic
elimination of tariffs. It also fosters
extricate itself from low equilibrium integration, although not always in the
political cooperation and relative
trap owing mainly to underutilization of direction of increasing economic
peace amongst member states. A
its resources and poverty, it require integration. These three fundamental
group of nations could have more
the implementation of programme that factors have influenced the pattern
political influence as a faction than
emphasise increasing long-run and pace of economic integration in all
each nation would have had on its
growth. Trade liberalization is thus of its important dimensions.
own. Thus, integration is an essential
seen as a veritable means to achieve
strategy to address the effects of
long-run growth. In a study by Sanni 3.0 E C O WA S a n d R e g i o n a l
conflicts and political instability that
(2005) on Nigeria, the regression Economic Integration Efforts
may affect the region and is also an
result showed that trade liberalization
important tool in handling the social The Economic Community of West
is essential for growth. Trade
and economic challenges associated African States (ECOWAS) is a
liberalization impact positively on non-
with globalization. In addition, regional group of fifteen countries,
oil exports and economic growth, but it
economic integration provides founded in 1975. Its mission is to
found that weak infrastructural
employment opportunities, because it promote economic integration in "all
p r o v i s i o n ( p o w e r, r o a d s ,
encourages trade liberation and leads fields of economic activities,
communication, etc), unfavourable
to market expansion, more particularly industry, transport,
international conditions, high inflation
investment and greater diffusion of t e l e c o m m u n i c a t i o n s , e n e r g y,

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Volume 34, No. 4 October - December 2010

agriculture, natural resources, are discussed below: and waste resulting from
commerce, monetary and financial manufacturing operations within
questions, social and cultural 3.1 E C O W A S T r a d e member states; and vegetable
matters". The Institutions of the Liberalisation Scheme products and herbs harvested within
ECOWAS are the Commission, the (ETLS) member states.
Community Parliament, the
The ECOWAS Trade Liberalization
Community Court of Justice and the Amongst French speaking West
Scheme (ETLS) came into force on
ECOWAS Bank for Investment and African countries, there exists a
January 1, 1990, with provisions for
Development (EBID). ECOWAS common external tariff for imports
tariff reductions on unprocessed
aims to promote peace, co-operation originating from a third country, in
goods, handicraft and industrial
and integration in economic, social contrast to the Anglophone group of
products of community origin. The
and cultural activity, ultimately leading ECOWAS who have different tariff
objective of the ETLS is to promote
to the establishment of an economic rates. The tariff differences among
cooperation and integration leading to
and monetary union through the total the countries usually lead to trade
the establishment of an economic
integration of the national economies creation and trade diversions which
union in West Africa in order to raise
of member states. It also aims to raise form the basis of discontent among
the living standards of its citizens, and
the living standards of its peoples, cooperating countries in a regional
to maintain and enhance economic
maintain and enhance trade arrangement; this absence of
stability, foster relations among
economic/political stability, foster common external tariff in the
member states and also contribute to
relations among member states and ECOWAS makes inter-industry
the progress and development of the
contribute to the progress and linkage which could occur in an
African continent. It also aims to
development of the African continent. economic entity or sub-region absent.
establish a customs union among all
ECOWAS integration policies and Inter-industry linkages mainly occur
member states for the total
programme are influenced by the in trade arrangements where
elimination of customs duties and
prevailing economic conditions in its industrial sectors of the cooperating
taxes of equivalent effect, removal of
member countries, the need to take countries are equally matched and
non-tarrif barriers and the
the principal provisions of the African advanced. Due to this various factors,
establishment of a Common Customs
Economic Council (AEC) Treaty into ETLS has not been very successful
External Tariff to protect goods
account, and relevant developments as Intra-regional trade in ECOWAS
produced in member states. The
on the international scene. The sub-region and amongst member
premise of the liberalization
revised treaty of 1993, which was to states is very low. According to the
programme is based on the free
extend economic and political co- statistics for the years 1998-2002,
movement of unprocessed goods and
operation among member states, intra-regional exports and imports
traditional handicraft products, to be
designates the achievement of a averaged US$1250 million and
exempted from import duties and
common market and a single US$.212 million respectively. In
taxes.
currency as economic objectives, contrast, the region's total imports
while in the political sphere it provides and exports to Europe Union
The second aspect of the programme
for a West African parliament, an averaged US$8260 million and
involves the gradual removal of
Economic and Social Council and an US$8000 million during the same
customs duties and equivalent taxes
ECOWAS court of justice to replace period. Leading economies in the
on industrial products of community
the existing Tribunal and enforce region like Nigeria, Cote d' lvoire, and
origin and, thereafter, the lifting of
Community decisions. The treaty also Ghana have sustained economic
non-tariff barriers to intra-community
formally assigned the Community development momentum and are
trade. The liberalization of trade in
with the responsibility of preventing preferring linkages outside the
unprocessed goods are livestock,
and settling regional conflicts. region. ECOWAS constantly faces
fish, plant or mineral products that
challenges to trade which include
have not undergone any industrial
Several schemes/programme have illegal barriers, harassment, multiple
transformation while traditional
been established to actualize the roadblocks and reduced road use
handicraft products are articles made
objectives of economic integration even with the ETLS scheme in place.
by hand, with or without the help of
and trade facilitation by ECOWAS. In spite of signed cross-border trading
tools, instruments or devices that are
Among them were ECOWAS Trade provisions which are often violated by
manipulated by the craftsman. They
Liberalisation Scheme (ETLS), West national border officials, Intra-
are to be circulated freely, fully
African Clearing House (WACH) now regional trade is often minimal or
exempted from import duties and
West African Monetary Agency largely informal and is often driven by
taxes and are not subject to any
(WAMA), Inter State Road Transport inter-country price differentials. The
quantitative or qualitative restriction.
( I S RT ) , E C O WA S M o n e t a r y free movement of goods continues to
Products which are considered
Cooperation Programme (EMCP), face challenges.
originating from member states
West African Monetary Zone
include; live animals born and raised
(WAMZ), West African Monetary 3.2 E C O WA S B a n k f o r
within member states, mineral
Institute (WAMI); West African Investment and
products extracted from the ground of
Institute for Financial and Economic Development (EBID)
member states, products obtained
M a n a g e m e n t ( WA I F E M ) a n d
from animals living or raised in The ECOWAS Commission and the
ECOWAS Bank for Investment and
member states; electric energy ECOWAS Bank for Investment and
Development (EBID). Some of them
produced in member states; scrap Development, more often called The

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Volume 34, No. 4 October - December 2010

Fund, has its two main institutions 3.3 West African Monetary monitoring, coordination and
designed to implement policies, Agency (WAMA) implementation of the ECOWAS
pursue a number of programme and monetary cooperation programme,
The West African Monetary Agency
carry out development projects in encourage and promote the
( WA M A ) i s a n a u t o n o m o u s
member states. Such projects include application of market determined
specialized agency of the Economic
intra-community road construction exchange rates for intra-regional
Community of West African States
and telecommunications; and trade, initiate policies and programme
(ECOWAS). In 1996, the West African
agricultural, energy and water on monetary and economic integration
Clearing House (WACH), which was
resources development. The Heads and ensure the establishment of a
established in 1975 as a multilateral
of State and Government broke with single monetary zone in West Africa.
payment facility to improve sub-
the past by their decision to transform The Agency's financial resources are
regional trade in West Africa, was
the ECOWAS Secretariat into a derived from annual contributions
transformed into a broad based
Commission at thirty. By becoming a from member Central Banks and such
autonomous agency called the West
Commission with enhanced powers other sources as may be approved by
African Monetary Agency (WAMA).
and Commissioners in charge of the Committee of Governors.
WAMA's Headquarters was officially
smaller and clearly defined sectors, Resources for the WAMA budget are
inaugurated on the 28th November
the ECOWAS Secretariat will have derived 40 per cent from equal
1996. Upon the transformation of
more impact and become more visible contributions of member Central
WACH into WAMA, WAMA took over
in Member States. Regarding the Banks, and 60 per cent on the basis of
the assets and liabilities of the West
Community Parliament, the the ratio used by ECOWAS in fixing
African Clearing House. WAMA is
restructuring is designed to make it each Member State's contribution to
comprised of the eight Central Banks
more efficient by providing it with the ECOWAS budget.
of the West African sub-region. These
relevant management support.
include: BCEAO (Banque Centrale
Similarly, the Community Court of 3.4 West African Monetary
des Etats de l'Afrique de l'Ouest),
Justice is being re-organized to have Institute (WAMI)
Bank of Cape Verde, Central Bank of
its judges also concentrate on their
the Gambia, Bank of Ghana, Central The Heads of States of six countries in
core competences. Restructuring
Bank of Liberia, Central Bank of West Africa, as part of the fast-track
ECOWAS allows it to better adapt to
Nigeria and Bank of Sierra Leone. approach to integration, decided in
the international environment, play a
These central banks serve fifteen out Accra, Ghana, April 20, 2000 to
more effective role in the integration
of the sixteen countries of the West establish a second monetary zone to
and development process, have
African sub-region with Mauritania be known as the West African
smaller and more clearly defined
being the only one out of the union. Monetary Zone (WAMZ) by the year
sectors, support Member States in
2003. These countries namely The
building their capacities for
The Agency is concerned with Gambia, Ghana, Guinea, Liberia,
programme implementation, and a
monetary co-operations and payment Nigeria and Sierra Leone signed the
predictable rotation system based on
issues within the context of economic 'Accra Declaration' which defined the
equity, transparency and functionality.
and monetary integration process of objectives of the zone as well as an
EBID is an international finance
the region and therefore has the action plan and institutional
institution established by the new
following objectives: promotion and arrangements to ensure the speedy
Article 21 of the Revised Treaty as
use of national currencies for implementation of this decision. It is
amended by the Additional Act
regional trade and transactions; envisaged that WAMZ will be merged
A/SA.9/01/07 of 19 January 2007. It
bringing about savings in the use of with the CFA Franc Zone to form a
has two windows, one for the
foreign reserves for member states; single monetary zone in West Africa.
promotion of the private sector and the
encouraging and promoting trade and In order to facilitate the creation of the
other for the development of the public
exchange liberalization; enhancing common Central Bank and the
sector. Its main objective is to
monetary cooperation and introduction of a common currency, an
contribute towards the economic
consultation among member states; interim institution, the WAMI was set
development of West Africa through
facilitating the harmonization and up in Accra, Ghana in January 2001. In
the financing of ECOWAS and
coordination of monetary and fiscal accordance with its statute, the
NEPAD (New Partnership for Africa's
policies and structural adjustment Institute is mandated to perform the
Development) projects and
programme; ensuring the monitoring, following functions: monitor state of
programmes, notable among which
coordination and implementation of convergence; harmonise regulations
are programmes relating to transport,
ECOWAS monetary cooperation and design policy framework; promote
energy, telecommunications, industry,
programme; encouraging and regional payment system; exchange
poverty alleviation, the environment
promoting the application of market rate mechanism and conversion rate;
and natural resources. EBID's mission
determined exchange and interest and organisation of scheme as well as
is to contribute towards the creation of
rates for intra-regional trade and designing technical preparation of the
the conditions which would enhance
initiating policies and programme on new currency; modalities for setting up
the emergence of an economically
monetary integration and cross a common central bank and foster
strong, industrialized, and prosperous
border investments that will lead to a cooperation among member
West Africa that is perfectly integrated
single monetary zone in West Africa. countries.
both internally and in the global
economic system in order to benefit
WAMA was empowered to ensure the
from the opportunities offered by
globalization.
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Volume 34, No. 4 October - December 2010

4.0 Assessment of ECOWAS from high cost of production as well as preferences rather than on variations
Efforts toward Promoting weak productive base among others. in factor cost. Benefits from increased
Borderless Trade in the According to UNCTAD (2003), the trade based on variations in
West African sub-Region continuing dependence on traditional comparative factor costs appear to be
commodity exports also reflects the elusive in ECOWAS. Relative factor
The objective of ECOWAS to ensure
region's inability to tap fully into the costs within the group of countries are
trade creation within the custom union
international trade in “market- identical, to a large extent, because
informed the introduction of ECOWAS
dynamic” (non-traditional) the entire region is characterised by
trade liberalization scheme, as well as
commodities, such as horticulture and an abundance of labour and a
allowing free movement of labour,
processed foods. These products are shortage of capital (Dean and Owusu,
capital and goods and services within
highly income-elastic, with lower rates 1998).
the sub-region. But the experience of
of protection in industrialized and
ECOWAS countries so far show that
large developing countries (UNCTAD, Beyond the apparent fundamental
this objective has not been fully met.
2003). In the period 2000 - 2005, no problems of trade generation within
Available data (Table 1 see
African country featured among the ECOWAS, the organisation seems to
appendix) show the volume of trade in
world's 20 leading exporters of be faced by additional disadvantages
the region. Total trade increased from
processed food, although these that can hinder trade. Political
US$5.3 billion in 1996 to US$5.6
include countries such as Argentina, problems, both domestic and
billion and US$5.8 billion in 1997 and
Brazil, Mexico, India, Indonesia and international, have hindered efforts at
1998, respectively. In 2000 total trade
Thailand. South Africa, the largest regional integration in SSA since the
stood at US$6.5 billion and increased
African exporter of these products, end of the colonial era (Sommers and
to US$10.8 billion in 2005. It rose
had a global market share of less than Mehretu, 1992). The uneven size of
further by 50 percent to US$17.7
1 per cent. Mauritius, the second- ECOWAS's individual members with
billion in 2007 from the level in 2006.
largest exporter of processed Nigeria large, a small number of
Exports from ECOWAS countries
products in sub-Saharan Africa, came intermediate-sized countries in Cote
amounted to US$3.1 billion and
a distant 59th in the global rankings, d'lvoire, Ghana and Senegal, and the
US$4.0 billion in 2002 and 2004
with only a 0.2 per cent market share. remaining countries very small
respectively. It rose to US$5.7 billion
In the case of semi-processed creates unease over the incidence of
and US$5.9 billion in 2005 and 2006,
products, South Africa was the only costs and benefits of regional
respectively. On the other hand,
sub-Saharan African country among integration (Gambari, 1991). In
import by ECOWAS countries ranged
the top 20 exporters in the period addition, transaction costs are high
between US$1.6 billion in 1996 and
2000 - 2005. There were no sub- within ECOWAS (Knowles, 1990;
$8.8 billion in 2007(see table 1).
Saharan African countries at all Obadan, 1984; Gambari, 1991;
Overall, there were trade surpluses in
among the leading exporters of Henink and Owusu, 1998 a sited by
1996 and 2002, while the region
processed products in that period Augustine 2005).
recorded trade deficit in 2003 and
(OECD, 2008).
2004.
There are common languages among
According to Dean and Owusu (1998) some of the countries as a result of
Table 2 (see appendix) shows that
the prospect of ECOWAS providing a colonisation, but none that are
within the West African sub-region,
meaningful vehicle for the increase of common to all. There is a common
Nigeria account for the highest share
trade, linkage, and economic currency within the French franc area,
of inter trade averaging 70.5 percent
development among its members but that area and ECOWAS are not
between 2003 and 2008. This was
does not appear to be strong. Trade coincident. In some cases,
followed by Cote d'Voire with an
creation effects of customs unions are infrastructure connecting individual
average share of 10.55 percent, and
likely to be realised in either of two countries is sparse, making large-
Ghana which accounted for 6.1
ways: the conventional theory of scale shipments between them
percent. Despite, the glaring
comparative advantage and the new unlikely (Obadan, 1984). While these
advantages of global trade, Africa
trade theory of increasing returns in and similar problems are faced by all
recorded poor performances when
differentiated markets, both resulting customs unions, they seem
compared with the rest of the world.
from a decrease in transaction costs particularly important in ECOWAS,
The share of Africa in global trade was
that should occur with freer trade. where they only serve to add to more
3.3 percent in 2009 compared with
Based upon the conventional theory fundamental economic problems of
Asia (30.4 percent), America (5.7
of comparative advantage, such trade improving trade through regional
percent) and developed countries
liberalisation would lead to trade integration.
(60.0 percent). Within Africa, the
based upon comparative factor costs,
share of Northern Africa recorded the
and growth would occur from the Trade within ECOWAS often involves
highest with 38.2 percent, followed by
national specialisations that would exchange of such commodities as
South Africa and West Africa 20.6 and
result. If the new trade theory of grains (rice, corn, and cola from the
18.0 percent, respectively.
increasing returns in differentiated forested areas to the Sahel countries
markets is invoked, then the ultimate (Dean and Owusu, 1998 Burfisher
The weak performance of sub-
result is the same. Liberalised trade and Missiaen, 1990). On the other
Saharan Africa in global trade is
leads to particular specialisations hand, it's livestock, however, which
attributed to many factors including
within the members of a customs constitutes the highest valued
the export of primary products, non-
union based upon variations in market agricultural commodity in trade which
competitiveness resulting largely

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Volume 34, No. 4 October - December 2010

results from a complementarity in sub-sector possesses potential for the region have been attributed partly
production and consumption between growth. India, for instance has made to the following factors:
the Sahel countries and the coastal an impressive landmark in software
states. The cattle trade demonstrates development and the foreign (i) Export of primary products
the responsiveness of commodity exchange earned from it has been (mono-export base)
flows in the region to drought as well utilized to transform the Indian
as to changing political and economic economy. China has also used the e- (ii) High cost of production, thus,
conditions (Awudu and Egger, 1992). commerce facility to make more leading to uncompetitiveness of
While much of this trade is informal inroads into many economies (Sanni, export
and unrecorded, it appears to be 2006,). However, the Nigerian
highly important to the individual banking industry and communication (iii) Weak production base and
national economies. Locally sub-sector have recently made an in- supply response
manufactured items are less road within the sub-region. This is
significant within the region's trade. hoped to enhance intra-regional trade (iv) Low trade in services(invisible
They include yarn, fabric and jute as well as investment flows to the trade)
bags (Burfisher and Missiaen, 1990), region.
and processed wood (Owusu, 1994). (v) Poor infrastructure provision
PetroLeum trade is important, with Amongst French speaking West and near-lack of trust among
Nigeria supplying crude oil in the African countries, there exists a members
region and refined petroLeum being common external tariff for imports
supplied by Cote d'lvoire, Ghana and originating from a third country, in (vi) Weak currency and language
Senegal (Burfisher and Missiaen, contrast to the Anglophone group of barrier
1990). ECOWAS who have different tariff
rates. The tariff differences among the (vii) Political and economic
The direction of trade within ECOWAS countries usually lead to trade instability
seems to follow established patterns. creation and trade diversions which
Dean and Owusu, (1998) and Obadan form the basis of discontent among 5.0 Conclusion and Policy
(1984) have observed that the cooperating countries in a regional Recommendations
landlocked countries of Mali, Niger trade arrangement; this absence of
The role of trade in the development of
and Burkina Faso conduct a common external tariff in the
an economy has been well
substantial portion of their trade with ECOWAS makes inter-industry
documented in the literature. China's
other ECOWAS countries. It follows a linkage which could occur in an
rapid economic expansion with over
north-south pattern, part of which is economic entity or sub-region absent.
US$5.0 trillion external reserves has
transit trade through coastal Inter-industry linkages mainly occur in
been largely induced by its
countries. They export such trade arrangements where industrial
performance in global trade.
commodities as live cattle, sheep and sectors of the cooperating countries
ECOWAS effort to promote trade has
goats, and hides and skins. They are equally matched and advanced.
resulted to increased intra regional
import food crops such as yams and Due to this various factors, ETLS has
trade but the share of the West Africa
vegetables in addition to petroLeum not been very successful as Intra-
in global trade has been very low
and petroleum products. Much of the regional trade in ECOWAS sub-
suggesting that the custom union has
trade within ECOWAS has not yet region and amongst member states is
not brought desired trade creation into
significantly transcended the colonial very low. Industrial development has
the region. This implies that the sub-
language blocs and their associated remained low among the countries
region has not been able to fully tap
barriers which existed prior to the and this has accounted for low intra
the benefits of trade in terms of
union's formation. There is, therefore, regional trade, which has created
increased foreign investment, better
an apparent concentration of intra dichotomy in ECOWAS cooperation
standard of living, employment
language-zone trade. This is stronger (Adiavor, 2003). ECOWAS constantly
generation and increased industrial
among the former French colonies; faces challenges to trade which
production, among others. This
transaction costs are lowered not only include illegal barriers, harassment,
development is traceable to a lot of
by common language but also by a multiple roadblocks and reduced road
factors including the reliance on
common currency system (CFA use even with the ETLS scheme in
primary products for trade,
francs) and greater contiguity than in place, in spite of signed cross-border
uncompetitiveness of products from
the case of the separated former trading provisions which are often
the region, lack of convertible
British colonies (Obadan, 1984). violated by national border officials,
currency, and prolonged crisis in some
Intra-regional trade is often minimal or
countries in the region as well as lack
The low participation in the informal and is often driven by inter-
of good infrastructure that links the
international trade in services has country price differentials.
members of the custom union
affected the volume of trade in the
together, etc.
sub-region. Such services include The review has revealed that intra-
shipping, telecommunication, air trade has increased but not
It is against this backdrop that
transportation, computing and appreciably. The experience of
ECOWAS member countries needs to
financial services. Experience from ECOWAS countries has shown that
be seriously committed to goals and
emerging economies such as China the objectives of ELTS have not been
objective of the union, find a lasting
and India has shown that the services fully met. The causes of low trade in
solution to the cases of trade diversion

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Volume 34, No. 4 October - December 2010

in the sub-region as well as solve the political environment. Furthermore, taken to plan and sequence removal
problems of low industrial productivity there is need for improved road of restrictions on trade, labour and
and infrastructural deficiencies in network (less road-check points), capital. Within this framework, effort
member countries. Similarly, there is telecommunication facilities and should be made to encourage
need to improve on rapid lessen bureaucratic bottle-necks at division of labour, specialization and
technological and innovativeness border points. Measures should be industrialization in the region.
through improve economic and

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Adjavor, Bonaventure: May 2003: Trade Liberalisation Scheme in West Africa: Progress, Constraints and Prospects
Ghana's Perspective

Augustine S. Langyintuo (2005): Potential Regional Trade Implications of Adopting Bt Cowpea in West And Central Africa
being a paper presented at the 9th ICABR International Conference on Agricultural Biotechnology Ravello (Italy), July 6
to July 10

Awudu, A. and U. Egger (1992) 'Intraregional Trade in West Africa: Impacts of Ghana's Cocoa Exports and Economic
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Burfisher, M. and M. Missiaen (1990) 'Intraregional Trade in West Africa', in J. Okolo and S. Wright (eds) West African
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Calvo, Guillermo A., and Allan Drazen, 1998, “Uncertain Duration of Reform: Dynamic Implications,” Macroeconomic
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APPENDIX
Table 1: ECOWAS Visible Trade Statistics (US$' Billion)

YEARS EXPORTS IMPORTS TOTAL TRADE

1996 3667.01 1629.68 5296.69
1997 3863.52 1766.87 5630.38
1998 3165.36 2639.65 5805.01
1999 2584.06 1684.02 4268.08
2000 2788.28 2324.41 5112.69
2001 2306.19 2631.93 4938.12
2002 3148.21 2415.76 5563.97
2003 3037.8 3458.73 6496.52
2004 3986.13 4327.85 8313.97
2005 5389.90 5361.39 10751.29
2006 5928.89 5897.53 11826.42
2007 8893.33 8846.30 17739.63
Source: Englama and Sanni (2008).

Table 2: Percentage (%) Share of ECOWAS Countries in Intra Trade 2003-2008

Country 2003 2004 2005 2006 2007 2008

Benin 1.68 1.33 1.15 1.35 2.01 1.99
Burkina Faso 0.80 0.95 0.91 0.95 0.74 0.74
Cape verde 0.82 0.83 0.75 0.69 0.95 0.94
Cote d’ 12.76 12.44 11.45 11.18 7.75 7.74
Voire
The Gambia 0.24 0.28 0.24 0.20 0.26 0.25
Ghana 7.40 6.60 6.39 6.41 5.22 5.21
Guinea 2.08 1.16 0.96 0.80 0.82 0.81
Guinea 0.18 0.29 0.12 0.10 0.11 0.11
Bisau
Liberia - - - - - -
Mali 2.86 1.98 1.56 1.71 1.54 1.53
Niger 0.80 1.15 0.80 0.73 0.79 0.79
Nigeria 64.23 67.43 70.57 71.28 74.69 74.81
Senegal 4.68 4.50 4.14 3.68 4.14 4.11
S/Leone 0.28 0.16 0.18 0.19 0.16 0.15
Togo 1.19 0.94 0.77 0.73 0.82 0.82
Source: Computed by Author from ECOWAS data.

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