The EAEU should actively cooperate with the African Union

_ Yuri Kofner, head, Eurasian sector, CCEIS, HSE, research assistant, IIASA, editor-in-chief, analytical media “Eurasian Studies”. Munich, 25 July 2019. [1].

In 2019, we celebrate the 25th anniversary of modern Eurasian integration and the 5th anniversary of the EAEU Treaty. But not only in the expanses of Eurasia integration processes have intensified and and do they celebrate integration jubilees. On another subcontinent – Africa – marks an anniversary  this year and therea also unification processes are rapidly accelerating. Their scale is even more ambitious and their consequences can be even more far-reaching than those that exist in the EAEU. Eurasian exporters, universities and governments should not miss the chances opening up from the possible “Age of Africa” and from cooperation with its potentially main player – the African Union (AU).

A new player of the forgotten black continent


20 years ago in the Libyan city of Sirte,  the inception of the African Union was announced – a complex trade-economic and military-political bloc, consisting of all 55 countries of the African continent. It was officially established in 2002 in the South African city of Durban as the successor to the Organization of African Unity (OAU, 1963-1999).

The African Union has economic and political bodies. The supreme decision-making body is the Assembly of the African Union, which includes all the heads of state or government of the AU member states.

The AU also has a representative body – the Pan-African Parliament, which consists of 265 members elected by the national legislative bodies of the AU member states.

The main administrative body of the African Union, which serves as the secretariat of its intergovernmental bodies, is the African Commission. Its headquarters is situated in Addis Ababa, Ethiopia. The modern complex worth $200 million was a gift from the People’s Republic of China.

Despite the fact that the African Union is a complex intergovernmental organization, which is often accused of low efficiency, it at the same time has many aspects, which already are aimed at deeper integration than, for example, the EAEU has at its disposal. Thus, there is an institution of permanent representatives of the governments of the member states at the AU, whose task is to ensure a straightforward process of harmonizing the positions of national governments, as well as to help the commission in developing its policies. There is a similar institute in the European Union (COREPER I and II). However, in the EAEU such an idea is being discussed so far only as a proposal from the expert community to improve the institutional functioning of the Eurasian bloc.

In addition, the Constitutional Act of the African Union stipulates the possibility of imposing sanctions on member states who do not pay on time to the general budget or do not execute union decisions. In the EAEU the member countries are not yet ready for such a deepening of integration obligations.

In 2018, 74% of the AU budget funds came from international assistance, mainly from the EU, and only 26% of the contributions came from African countries themselves. For comparison: for 2019 the budget of the AU is $681.5 million. Its expenses include $273.3 million to finance peacekeeping operations, $ 249.8 million for the AC programs and another $158.5 million for the operational budget. Over the same period, the entire annual budget of the EAEU is only $133.7 million. Of these, almost $6.2 million will go to the work of the EAEU Court and $7.7 million to implement the digital agenda of the EAEU. The budget of the EAEU is formed entirely by contributions from member states, 85% of which is covered by Russia.

Ipumbu Shimi, President of the National Bank of Namibia. Photo: Nils Thies ©

Currently, the AU has a more than ambitious goal of creating a common domestic market without barriers to the free movement of four factors of production – this is  the so-called “Continental Free Trade Zone” project, as well as creating a full-fledged monetary and economic union with its own central bank and single currency. And all this is planned to be realized by 2023 (!), which seems neither possible, much less expedient [2]. However, these are plans [3].

Big ambitions, but still bigger problems


The updated “Agenda 2063”, adopted by the African Union in 2015, set forth ambitious goals of socio-economic development and deep economic and military-political integration of the continent. However, in contrast to the “African dream”, reality does not yet look so joyful.

In 2018 the cumulative GDP of all 55 countries on the African continent reached $2.8 trillion, which is lower than Germany’s of $4.0 trillion. According to former US President Barack Obama, Africa’s total GDP in 2016 was equal to that of France. For comparison: according to the EEC, the GDP of the Eurasian Economic Union at the end of 2018 was $1.9 trillion. At the same time, from 2014 to 2018, the average annual growth rate of the EAEU’s GDP was only 0.8%, yer that of the African Union – 3.4%.

At the same time, the cumulative increase in the population of Sub-Saharan Africa during this period was 11.3%. With a high demographic growth, Africa’s population is currently around 1.3 billion and can reach 2 billion by 2050. The total population of the EAEU is almost ten times smaller. In 2018, it amounted to 184 million people.

Such a significant increase in population requires states to continuously expand and improve access to health care, education, and housing, but in most cases this potential improvement in quality of life is negated due to the increasing number of people in need. At least 554 million Africans are considered poor, which is a consequence of a particularly high birth rate in this region. Most AU countries do not have social security coverage. Every night, more than 240 million working adult Africans go to bed hungry. Africa remains a continent where per capita income is the lowest in the world. According to the report of the African Development Bank, 645 million Africans do not have access to electricity, and more than 300 million do not have convenient access to drinking water.

More than 80% of the labor force in Africa works in the informal sector of the economy and its importance has increased over recent years. The agricultural sector remains in its infancy. Although 65% of Africans claim to be farmers, the continent lives in constant food insecurity. According to OECD estimates, food imports amount to almost $ 36 billion a year and can reach $ 110 billion by 2025.

Relations of Eurasia with Africa


Starting in 2010, the trade turnover of the EAEU countries with African countries has increased by 2.7 times and amounted to $ 21.7 billion in 2018. In terms of trade with the EAEU, the African Union is already ahead of the United States of America, which, on the one hand, shows a positive trend of trade and economic cooperation, and on the other, a large yet untapped potential for increasing and deepening trade volumes in the future.

Five countries account for over 80% of the EAEU’s exports to Africa: Algeria, Egypt, Morocco, Nigeria and Tunisia. Egypt’s share in trade with EAEU countries exceeds 33%, almost reaching $8.0 billion in 2018. At the same time, African countries trade most of all with Russia (94% of trade with the African continent). Other Union countries are also becoming more prominent in cooperation with Africa, although there are opportunities to enter the single market of all countries. The export of Belarus to Africa over the past 8 years has increased by 1.5 times, of the Kazakhstan – by 2.4 times. A steady growth in trade turnover of 10-15% between the EAEU and the Southern African Development Community, which is a part of the AU, is observed annually, and by the end of 2018 this figure was $ 2 billion.

Broad trade preferences are still granted to African states, and a preferential customs tariff regime applies to the bulk of Russian imports from Africa. Investment promotion and protection agreements have been concluded with a number of African states (with Angola, Algeria, Egypt, Zimbabwe, Namibia, Nigeria, South Africa, Equatorial Guinea), and Russia’s accumulated investments in Africa from 2003 to 2017 amounted to about $ 17 billion. African states demonstrate a fairly strong interest in products, technologies and human capital of the Eurasian Economic Union.

EAEU – African Union


In this regard, it would be advisable to start negotiations on a possible preferential trade and economic agreement between the EAEU and the African Union. Currently, the Eurasian Economic Commission (EEC) is in talks to conclude an agreement on a free trade zone with Egypt. The third round of talks is scheduled for the third quarter of 2019. And in September 2017, the EEC and the Government of Morocco signed a Memorandum of Cooperation. Also, last year the EEC held a meeting with ambassadors of the states of the East African Community, where they agreed on further cooperation

It is noteworthy that the Eurasian Economic Commission and the African Union plan to sign a Memorandum of Cooperation at the Russia-Africa summit, which will be held on September 24, 2019 in Sochi. This memorandum can give the necessary impetus for launching closer cooperation between the commissions and, later, for negotiations on a  preferential trade agreement.

Should relations between the EAEU and the African Union be formalized in the form of a free trade zone, as between EAEU and Vietnam, or in the form of an agreement on trade and economic cooperation without a (wide) reduction of import duties, as between EAEU and China? The answer to this question should be based on econometric and computer generated models. At the same time, it is already possible to intuitively describe the most interesting for both sides areas of cooperation, which one way or another would be worth covering in a potential agreement (s):

In terms of trade in goods, it could be worth opening markets to each other, i.e. reducing import duties for machinery, equipment, chemicals, cars, electronics, and all other types of high-tech products. Most likely, the African countries will be interested in importing such goods from the EAEU. since they are necessary for the modernization of their own production, and which, at the same time, have a greater price competitiveness than similar products from Europe and the USA.

In terms of trade in agricultural products, markets could be opened asymmetrically. In this regard, the EAEU could nulify import duties for food products that grow only in tropical and sub-tropical climatic zones, such as cocoa, and in return the African Union removes barriers to the importation of wheat, sunflower oil and other traditional Eurasian crops.

One of the most important areas of cooperation could be the harmonization of technical regulations and standards, as well as of sanitary, phytosanitary and veterinary measures. Although, it will be more difficult to reach an agreement in the second case due to the sensitivity of the agricultural sector to the economies of the member countries of both unions.

The core of the potential agreement could be a section on investment, scientific and industrial cooperation. The African states are extremely interested in attracting foreign direct investment and technologies. Especially in such areas as mining and energy, astronautics, nuclear energy, pharmaceuticals, the military industry, the production of agricultural equipment the Eurasian companies have something to offer their African partners.

In addition, the EAEU and the African Union could agree on cooperation in the field of digitalization of the economy. Here the Eurasian countries have a potential above average. In particular, in the field of digital education, digitization of agriculture and industry, the Eurasian Union could become a net exporter of digital services.

A separate interesting area of ​​cooperation could be the exchange of experience between the commissions in the field of managing economic integration processes. The EAEU and the African Union share many similar problems, for example: a small share of mutual trade in overall trade (14 and 13%, respectively), an excessive dependence of the primary sector in the economic structure, the need for catching up with scientific and technological modernization, the need to develop a qualitative legal system and governance. An exchange of experience, not only between the commissions, but also at the level of expert communities of both unions, could help in solving these similar problems.

In particular, the EAEU and the African Union could exchange ideas on how best to shape trade and economic cooperation not only among themselves, but also with the European Union. The key question could be how to interact favorably with a comparatively more influential and competitive Europe, without jeopardizing one’s own developing industry and modernization.

In addition, interregional cooperation between integration blocs meets is one of the leading trends of the global economy and fits perfectly with the R20 concept proposed by the Valdai Club at the T20 summit in May 2019.

Due to the limited powers of the supranational authorities in the EAEU and the AU, it is likely that it will not be possible to cover all of the above mentioned areas in one single agreement. It would be advisable to sign, firstly, one “horizontal” agreement at the level of the two unions, which would presuppose trade issues (tariffs, trade protection measures, technical regulations and standards, sanitary and phytosanitary measures, cross-border competition), as well as the creation of working groups on all the other issues. Secondly, under this horizontal agreement, the willing countries could, on a bilateral basis, for example, Belarus – Egypt or Russia – Morocco, sign deeper “vertical” trade and economic agreements denoting such issues as, for example: opening branches of universities , the creation of joint industrial parks, infrastructure and energy cooperation.

In the end, I would like to note that the EAEU and the African Union share another aspect. The formation of both is connected with a common ideology: Pan-Africanism and Eurasianism, respectively. Moreover, before becoming an element of the integration processes in Africa and Eurasia both concepts first had to go the way of de-radicalization, getting rid of an over-aggressive anti-colonial and anti-Western rhetoric in favor of more moderate ideas of continental unification and multipolar cooperation. Both here and there discussions are actively continuing on the content of the new Pan-Africanism and pragmatic Eurasianism.

***

We see that the EAEU and the African Union share similar problems and mutual interests. And these are enough reasons to start talking about comprehensive and deep cooperation between them.

Notes:

[1] The article reflects the author’s personal views, which may not coincide with the official position of the National Research University Higher School of Economics and IIASA.

[2] Due to too much heterogeneity in the levels of socio-economic development and the need for different monetary policies of the African countries, the introduction of a single currency between them will only lead to serious financial and credit crises. Much more effective would be the work on dedollarization and the coordination of the monetary and fiscal policies of the AU member states towards their gradual convergence. In fact, this is what is being done in the Eurasian Economic Union.

[3] At a meeting in the German Bundesbank in early July 2019, Ipumbu Shimi, President of the National Bank of Namibia, confirmed to me that plans to come to a single currency before 2023 were too ambitious, and that the AU member states are now planning to focus on creating a continental free trade zone.

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