Paper short abstract:

This paper tries to show the benefit and cost of forming intra-regional trade agreements in Sub-Saharan Africa, case of Ethiopia, and discuss the challenges facing in intra-regional integration in Africa.

Paper long abstract:

Many researchers have claimed that regional integration is important for resource allocation, promoting technology transfer and raising the standard of living. On the other hand, studies have concluded that economic integration causes trade imbalances, increases financial market volatility and fosters less-effective macroeconomic policies. Regardless of this, regional integration remains an important economic and political goal for sub-Saharan Africa. Currently, there are over 14 intra-regional trade agreements in Africa, some with an overlapping membership. The major ones are ECOWAS, COMESA and ECA. Regional integration agreements between developed countries tend to promote a convergence in their per capita income( EU case), while trade agreements between African countries show mixed results. This is because, the similarity in comparative advantage of trading countries and less complementarity of the products. Countries that are mainly dependant on the primary sector benefit less from regional trade integration with partners at similar stages of development (Ethiopia case). Therefore, the objective of this paper is to explain the different levels of economic integration, to apply the economic analysis tools to regional integration, to address some of the challenges and the obstacles facing integration.