Africa’s introduction to the world market, beginning in the fifteenth century, could not be considered in many respects a positive undertaking. Africa’s backwardness compared to the rest of the world (developed countries, newly industrialized countries and emerging countries), which is a paradox because of its enormous resources and potential, clearly demonstrates that Africa remains the big loser in the international economic order. Situation that worsened when the policies undertaken by developed countries were considered: the creation of regional and non-regional trade blocks, the protection of internal markets through quotas.
According to Gunnar Myrdal, how underdeveloped countries conduct their trade policy will be one of the most significant factors in determining whether they will fail or succeed in their drive for economic development. This statement has the merit of addressing trade as the dominant economic factor. possible activity in Africa and other Third World countries. Therefore, he takes into account the fact that African countries cannot live in isolation and retracts the fact that the growing competition in the production and distribution of goods and services will make these countries more vulnerable every day if nothing is done . Consequently, it is necessary to reflect on industrialization and trade for effective development in a liberalized market context.
A DISTORTED AND UNFAIR ECONOMIC ORDER
Former US President Bill Clinton observed that “globalization is a fact, not a political option.” This implies that globalization is more than a mere creation of the human being, but the consequence of increasing contacts between individuals, peoples and communities. The failure and collapse of the communist model and its abandonment by pioneer countries like China and Russia are evidence that the liberal economic order was inevitable.
The discussion about the need to reform the current economic order is as old as the deterioration of the terms of trade. On the one hand, LDCs, as a result of an international division of labor dating from the colonial experience, produce goods in the form of raw materials. They have no control over operations such as transportation, transit and distribution of these resources, so they cannot determine the prices of these products. On the other hand, developed countries sell these products once they are manufactured with such a high added value that there is a huge gap between the merchandise sold by underdeveloped countries and the manufactured product they sell to the same countries. Nearly half of third world countries derive more than 50 percent of their income from exports of a single primary product, such as cocoa, coffee or bananas. These countries are now confined to a productive structure of low value-added activities. Third world countries are not only stuck to trade in a single commodity, they are also dependent on a few if not a single foreign market for the supply of manufactured goods and trade in their primary products.
In Africa, about 340 million people, which is half of the continent’s population, live on less than one US dollar a day, the mortality rate for children under 5 is 140 per 1,000, while hope life expectancy at birth is only 54 years. Only 58 percent of the overall African population has access to clean water.
As stated in the NEPAD document, “Africa’s place in the global community is defined by the fact that the continent is an indispensable resource base that has served humanity for so many centuries.” The theory underpinning the current economic order is largely classical and neoclassical business theories. According to them, all countries would gain by participating in international trade. Free trade maximizes global production by allowing each country to specialize in what it does best. According to the IMF, outward-oriented trade policies lead to faster growth because they promote competition, foster learning by doing, improve access to trade opportunities, and increase the efficiency of resource allocation. In order not to miss out on this turn of history and thus remain the losers, Africa and other LDCs must undergo a deep reflection to reap the benefits of globalization. A challenge that cannot be postponed or neglected in a context of high risk for these countries of losing the few opportunities they already had: the protection of recent inventions and the avalanche of multinational corporations in the goods and services markets of LDCs are dangers obvious. The simple liberal approach to trade is not consistent with the historical experience of many developing countries. First, the theory of trade so much applauded by some is based on assumptions that are violated in most international markets.
Much of world trade is in oligopolistic industries such as automobiles, chemicals, electronics, and steel. The growing importance of multinational corporations is a clear indication that imperfect competition matters. On this point, Krugman (1987) states that “the ideas of the new models that incorporate imperfect competition, learning and economies of scale have reduced the doctrine of free trade from an optimal strategy to a reasonable rule of thumb.
Our goal in conducting this analysis is to show that regional economic integration and more effective South-South cooperation among countries could enable third world countries to avoid falling into the dangerous trap of simplistic participation in world trade.
SOUTH SOUTH COOPERATION FOR SELF-SUFFICIENCY
As Todaro (1992) pointed out, while many less developed countries may be self-sufficient from one country to another, some form of peer-to-peer trade and economic cooperation is probably preferable to each country trying to ‘go it alone’. in a world of unequal trade, dominance of technology, growing protectionism among developed countries, and various forms of non-market price determination. This means more than ever before that initiatives towards south-south cooperation must be perceived as the basis of any sound economic policy undertaken by a third world country that possesses a potential or a resource to exchange.
South-South cooperation will speed up the pace and realize the economic independence of LDCs. The northern partners of the southern countries would gradually be replaced by southern partners. For example, Nestlé could rightly face competition from Brazilian coffee, South African milk whose industries in these areas of activities could rapidly develop to meet that goal. The result would actually be a multiplication of sellers that would inevitably affect the prices of those products, in such a situation it is quite certain that the customer would soon pay the real price. Furthermore, one might believe, the relative proximity (geographical, cultural and sociological) makes the southern partners more apt to provide satisfactory products to each other. Because their needs are relatively the same. Arthur Lewis (1977) stated that ‘LDCs have within themselves everything that is required for growth. They have enough land to feed themselves, if they farm it properly. They are able to learn manufacturing skills and save the capital required for modernization.’
REGIONAL INTEGRATION
A regional organization could be defined as a grouping of countries, in most cases neighboring countries, in an organization to address a particular issue: economic development; the management of its common resources such as lakes, rivers; pest management with possible consequences beyond a country. The economic question, which constitutes the main problem in almost all societies, is also the main bet of regional integration. In fact, the world is divided into pieces of regional groupings with sometimes overlapping membership due to the dual membership of certain members. However, this enthusiasm for integration cannot hide the relative and mitigated success of regional integration. If the European Union, ASEAN, is excluded, the regional integration of NAFTA has offered little compared to the expected fruits.
Jarle Moen distinguishes between ‘once and for all benefits and dynamic benefits of integration in third world countries’.
For many LDCs, especially those with very small domestic markets, regional economic integration can offer valuable experience, helping the transition to more balanced economic development and a more open economy. Within the integrated countries, both quality and marketing techniques can improve and promote the diversification and export of production at a higher stage without forcing these countries to face the uncomfortable effects of the liberalized market, as seems to be the trend. Integration can also increase the size of the market and, where economies of scale exist, reduce the cost per unit. This could benefit both producers and customers in the integrated market. For customers, it enables the purchase of goods at their real prices, since a competition between more than one regional economic actor (producer or distributor) would result in the obligation to offer the best possible prices. Also in a larger market, partners outside the integrated region would find it interesting to invest in said region to take advantage of discriminatory policies implemented to safeguard the region’s industries. According to Thomsen (1994), the size of the host country market is one of the strongest determinants of where foreign firms invest. It must be borne in mind that an investment from a developed country to a developing country is accompanied by a significant transfer of technology.
Once achieved, regional integration will boost the bargaining power of member countries in the international community. A power that can easily increase with cartelization. The countries belonging to a regional organization tend to have the same characteristics, for example they could belong to the same climate belt, central Africa for example and countries in southern Africa. This geographical situation may allow these countries to negotiate with greater force in what they produce best and in what they could expect better returns on sales, thus reaching a situation of absolute profit.
REFERENCES
MOEN Jarle: Trade and Development: Is South-South Cooperation a Viable Strategy? London School of Economics 1994
MYRDAL Gunmar: An International Economics, London: Routledge and Kegan Paul
TODARO Michael: Economics for a Developing World, New York: Longman 1992
KRUGMAN Paul ‘Has free trade passed?’ Economic Perspectives, vol 1 pp 131-144