Challenges that Globalization Poses to Economic Integration in ECOWAS Trading Block - Coursework Example

?Running head: Using ECOWAS as a trading block discuss the challenges that globalization poses to economic integration Insert         Insert Grade Course Insert Tutor’s Name 20 March 2012 Challenges that Globalization Poses to Economic Integration in ECOWAS Trading Block Introduction Regional integration has become an important trading arrangement, thanks to globalization, as it allows economic growth and resources sharing among the member countries. ECOWAS is one such integration, which links West African countries in terms of trade. According to Nielson and Zouhon-Bi (2007, p.1), “the Economic Community of West African states (ECOWAS) promotes regional , political cooperation and economic integration with the aim of eventually establishing an economic union among the west African countries.” ECOWAS was established in 1975 in Lagos, Nigeria, with fifteen members joining; it utilizes three languages, English, Portuguese, and French. Its membership has remained stagnant, with only one additional member and one withdrawal. The main objective of ECOWAS is the promotion of economic integration in agriculture, commerce, transport, and natural resources among others. Generally, ECOWAS countries enjoy free movement of goods, which is tariff free, and therefore, reduction of trade barriers is evident among these countries (Babatunde, 2006, p.8). ECOWAS will be celebrating the 35th anniversary this year, with some of its achievements being suppression of custom duties and taxes, and economic growth. According to Mark (2000, p.1), globalization can be defined as the process of continuous integration of countries globally, mainly influenced by technological change and trade liberalization. Technological changes are evident with globalization trend; indeed, improvement in transportation network and technology reduces the transportation costs. The existence of globalization has fostered international trade, which has led to knowledge acquisition, especially for African countries, and as a result, fostering development in these countries. However, globalization is also accompanied with various challenges, especially to economic integration. Despite the global market being out of reach for African countries for many years, the negative effects of globalization are catching up with ECOWAS countries. This paper will discuss the Challenges that globalization poses to economic integration using ECOWAS as a trading block. ECOWAS as a trading block Economic integration involves the abolishment of trade barriers, which include tariff and non-tariff barriers, with an aim of enhancing the flow of goods and services between member nations. ECOWAS’ main aim is economic integration; competition law has been introduced by the organization, which comprises of a set of rules and regulations aimed at encouraging free and fair markets, equal competition condition, promotion of allocative efficiency, maximization of consumer welfare, and ensuring transparency and fairness (ECOWAS, N.d, p.3). Therefore, ECOWAS has regulated competition as a form of ensuring fairness and equality. Economic Integration or regionalism Economic integration enables member states to have a wide selection of goods and services at low costs due to reduced tariffs. In addition, economic integration encourages trade among nations. Moreover, employment opportunities are created through trade liberalization that leads to the expansion of markets. Market expansion yields to investments in other nations, thereby creating job opportunities for citizens of the host country. Countries that trade together can provide solutions for issues such as political instability, which may be affecting a trade partners. The agreement to manage and control trade, monetary policies, and fiscal policies is advantageous; for instance, trade is given a chance to progress, thus, acquisition of goods and services at low costs becomes a possible mission. Such agreements, for instance in ECOWAS, lead to long lasting relationship between countries, which can also lead to political co-operation. In addition, it benefits the financial markets, since member states can easily borrow finances at low rates of interest. Moreover, foreign direct investments are increased as a result of economic integration; this occurs through mergers, acquisitions, or takeovers. Therefore, if economic integration is well utilized, it creates a win-win situation. In addition, economic integration can lead to the use of a single currency by the member state, which is effective to work with. According to Martinez and Monsalvez (n.d, p.5), the benefits of economic integration can be justified in the expansion of markets for goods, services, and labor. Economic integration also contributes to the growth of an economy by raising its productivity and the access of free markets; therefore, the less developing nations are in a position to develop fast, rather than rag behind. Needless to say, economic integration has its flaws as well; for instance, in case of trade barriers, non-member countries do not benefit from free trade. It can also open doors to illegal issues and moral decay, as a result of integrating with many cultures. In addition, barriers to trade can lead to limit in knowledge spillovers for the developing nations; for instance, ECOWAS exempts the West African nations who are members from barriers of trade, and therefore, they are limited to knowledge tapping and development because they do not integrate with other developed nations. Bamb (n.d, p.20) acknowledges that the West African nations suffer from poor infrastructure due to marginalization. Just as globalization, economic integration creates winners and losers as well. Unemployment levels have increased in some countries; this is as a result of technological advances, which require only skilled employees, and since computers and other innovative machines do most of the work, only a few employees are required. Therefore, the unskilled employees are laid off due to the advances in technology, and they are at times exploited by foreign nations as a source of cheap labor. In addition, income distribution is unequal for well off countries compared to countries that do not have comparative advantage. For instance, Nigeria is well off due to the presence of oil, unlike Ghana, which does not have oil as a natural resource; therefore, income distribution between these countries differs. Challenges that globalization poses to economic integration According to Bertucci and Alberti (N.d, p.1), globalization is a complex phenomenon, possessing both positive and negative impacts. It creates interdependence globally, with trade liberalization, technological advances and innovation, social networks, and entrepreneurship being the main driving forces. In addition, globalization has led to the promotion of free trade and the reduction of trade barriers worldwide as a result of international trade. Therefore, nations worldwide have contributed to the enhancement of integration. Some of the aspects of globalization include, trade, foreign direct investment, labor migration, tapping of knowledge among others. Globalization mostly involves movement of people, capital, and goods caused by increase in economic integration, and as a result, sharing of services, goods, and cultures is evident globally. According to Esty and Ivanova (2003, p.6), economic integration leads to sharing of values, which other trading nations must oblige to. With globalization advancing, economic integration has also broadened; however, it is not smooth. This is because the developing nations feel that their moral preferences should be respected by other nations, failure to which may lead to tensions. Needless to say, free trade allows integration; however, some countries emerge as winners while others become losers. This is as a result on international competitiveness, which leaves most African countries at a disadvantage. With economic integration involving the removal of trade barriers, partially or fully, ECOWAS has incorporated economic integration as one of their aims. Their preferential trade arrangement involves providing low barriers to participating nations, while at the same time providing non-members with high level of trade barriers (Bamba, N.d, p.5). Therefore, ECOWAS reduces custom duties among its members only, leaving the non-member states at a disadvantage. In addition, its regional unity and cooperation aids in curbing the challenges brought about by the competitive global markets as a result of globalization. Therefore, this stiff global competition results to the weakness in integration among these countries. Diversification of resources increases the variety of goods and services available, while foreign direct investment impacts positively on economic growth; however, the developed countries benefit more. Foreign direct investment involves the investment of foreign assets into domestic goods and services; regional trade agreement such as ECOWAS can lead to the rise of foreign direct investment (FDI). Less developed nations can loose FDI as a result of economic integration. Needless to say, FDI has increased globally as a result of globalization. In this case, African nations have not been left out either. According to Eregha (2011, p.6), FDI has the potential of increasing growth, and therefore, it infringes on the accumulation of domestic investment in ECOWAS countries. The less developed countries are also likely to benefit from technological spillovers from FDI. Labor migration is another aspect of globalization due to diversification of resources; labor migration is evident, especially from developing countries to developed countries. Therefore, immigrants are seen as a human capital investment; however, the developing nations lack enough personnel to fill relevant positions in their organizations. This is because their citizens migrate to developed nations in search of greener pastures. According to Grant and Soderbaum (2003, p.xiii), regional labor migration was common in the early years and mainly influenced by mining or crop production opportunities. ECOWAS is established with the aim of economic integration; however, regionalism is changing due to globalization. ECOWAS has a protocol on free movement of individuals within the member states, hence managing and monitoring the labor migration patterns (International organization for migration, 2008, p. 363). However, globalization has contributed to the expansion of labor migration from developing to developed nations and vice-vice. ECOWAS, acting as a trade block, has ensured that its members benefit from trade agreements. Globalization yields to competitive global markets, and to some extent, the developed countries continue to benefit from this competition due to their capability to compete worldwide. As a result, it creates inequality in these developing nations. According to Brune and Garrett (2004, p.3), the developed nations are at an advantage due to the presence of skilled labor, while developing countries have less skilled labor. The ECOWAS countries are weakly integrated to date; this is as a result of poor infrastructure, social factors, and political factors that result to few opportunities for development (Bamba, N.d, p.20). ECOWAS countries are marginalized, hence preventing them from benefiting from the advantages of globalization. It is rather evident that globalization has not always operated smoothly, nor has it benefited all the nations equally. However, globalization continues to broaden, but the pattern and pace of economic development is different among nations. In addition, the existence of cheap labor in the developing countries makes them prone to exploitation by the developed nations. Needless to say, ECOWAS has impacted positively on global development for the West Africa states; the member states do not tolerate illegal or unethical issues brought about social or political influences. This has resulted to suspension of Guinea and Niger due to existence of coups and unfair elections. Globalization has led to the access of international market, which has increased employment opportunities and knowledge. It has been argued that, globalization yields to development of African countries; however, the ECOWAS members’ states do not agree with this statement. They argue that globalization only presents opportunities for powerful nations to liberalize these countries. For instance, Ghana is among the ECOWAS nations, which have allowed international companies to invest in their countries in exchange of foreign exchange and international investment. One such international company is Coca-Cola, which is said to exploit the nation’s resources (Ofsu, 2011). In addition, globalization has contributed to the eradication of Ghanaian culture, which has been replaced by western morals. Some nations in West Africa are much more advanced compared to others; for instance, Nigeria is more advanced because of the presence of oil in the country. Despite globalization promoting integration, it has also eradicated culture of the developing nations, mostly in Africa. Needless to say, economic integration is affected in various ways; when the African countries open their doors to international trade and investment, their labor and resources are exploited by the developed nations. This is because the most developing nations have cheap labor, which is an added advantage to the developed nations, meaning that they can make huge profits in the developing nations. Nevertheless, globalization creates inequality aspect among nations; this is the case when some countries benefit fully from the impacts of globalization, while some countries lag behind as a result of the same repercussions. For instance, developing nations may suffer from environmental degradation, while developed nations accumulate huge profits from their investments in developing nations. These negative effects of globalization have made ECOWAS restrict trade interaction from non-member states, only encouraging free trade among member states. Needless to say, globalization creates losers and winners, which is a form of inequality, whereby, the developed nations emerge as winners and declaring the developing nations losers. Conclusion The agreement to manage and control trade, monetary policies, and fiscal policies is advantageous; for instance, trade through the reduction of trade barriers among member states has been beneficial. Economic integration has resulted to development among nations and low cost of goods and services, and market expansion as well. In addition, the rise in employment opportunities is notable worldwide; a wide variety of goods is accessed by the member states through trade. Therefore, each country benefits from the other country in form of goods, labor, knowledge, and services, but at low costs. Nevertheless, the rise of globalization has also enabled nations to engage in international trade, and benefit from knowledge acquisition, technological know-how, and development, especially in the developing nations. However, globalization is accompanied by international competition, which affects economic integration of the developing nations. In this case, West African nations are subjected to inequality and considered generally weak due to their marginalization from globalization. Despite the numerous benefits of globalization, ECOWAS, acting as a trade block, has ensured that it protects its member states from the challenges of globalization. It ensures that free trade is only encouraged among member states, therefore costing the non-member state a fortune to trade in West Africa. Therefore, for equality to be achieved in globalization, a win-win situation should be evident, hence encouraging the marginalized countries to engage in globalization. Reference List Bamba. N.d. ECOWAS regional integration: Position of Common Investment Market, Commissioner Macroeconomic Policies. (Online). Available at: http://www.privatesector.ecowas.int/en/III/ECOWAS.pdf (Accessed 26 March 2012). Babatunde, M., 2006. Trade Policy Reform, Regional Integration and Export Performance in the ECOWAS Sub-Region. (Online). Available at: http://www.acp-eu-trade.org/library/files/Babatunde-EN_010406_UniversityofIbadan_trade%20policy%20reform,%20ECOWAS.pdf (Accessed 26 March 2012). Bertucci, G., & Alberti, A., N.d. Globalization and the Role of the State: Challenges and Perspectives. (Online). Available at: http://unpan1.un.org/intradoc/groups/public/documents/un/unpan006225.pdf (Accessed 26 March 2012). Brune, N., & Garret, G., 2004. The globalization Rorschach test: international economic integration, inequality and the role of government. (Online). Available at: http://bev.berkeley.edu/ipe/readings/globalizations-rorschach-test-paper.pdf (Accessed 26 March 2012). ECOWAS. N.d. 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