EPA problematic for West Africa

ECOWAS has still not given final approval to the Economic Partnership Agreement(EPA) as Nigeria raised concerns that Heads of State agreed to address when they met in their annual summit in the Ivory Coast. They did however approve it in principle. An article in Al Jazeera points out that the pact will have a number of negative effects on the economies of many ECOWAS countries because of concessions that ECOWAS made.

In particular the member states of ECOWAS will give up the freedom to set their own policies and plan a path to industrialization that would be in the best interest of West Africa.

The pact would prohibit using tariffs or import duties as a means of promoting local industrial development. In the early stages of development local industries may not be competitive with foreign imports. Tariffs on foreign products can give the local industries the additional support they need to thrive.

Under GATT and the WTO, most ECOWAS countries as developing countries are permitted to use tariffs within a certain limit as a means of fostering sectors within their economies. For example Ghana has a bound tariff of 99 percent but currently applies a tariff of 20 percent on imports. However, once the EPA comes into force Ghana will not be allowed to impose any new duties or raise the current rate.

ECOWAS countries will also be unable to use export taxes as a means of ensuring that raw materials are available for local use. Ghana in the past placed a tax on the export of scrap metal in order to guarantee an adequate supply for local manufacturers. In order to encourage value added production, Kenya has an export tax on raw leather.

There is also a Most Favoured Nation (MFN) clause that will exclude preferential agreements among ECOWAS developing nations a provision specifically allowed under WTO rules. The liberalization of trade will make regional markets ripe for takeover by European corporations.

ECOWAS manufactured products go mainly to Africa, whereas exports to Europe are mainly raw materials.

The EPA may ensure that ECOWAS countries remain as exporters of primary commodities while their manufactured goods may be replaced by those of Europe.

While there are some agriculture sectors on a “sensitive list” the sector faces imports from Europe that benefit from their own domestic supports. EU agricultural products are often highly subsidized to aid their own producers. There has been a movement towards what are called “green box” subsidies that supposedly reduce trade distorting subsidies:

“Green box policies refer to domestic or trade policies that are deemed to be minimally trade-distorting and that are excluded from reduction commitments in the Uruguay Round Agreement on Agriculture. Examples are domestic policies dealing with research, extension, inspection and grading, environmental and conservation programs, disaster relief, crop insurance, domestic food assistance, food security stocks, structural adjustment programs, and direct payments not linked to production. Trade measures or policies such as export market promotion (but not export subsidies or foreign food aid) are also exempt.”

However, the total support may be the same and there is evidence that markets are still distorted and producers in developing countries are still at a disadvantage.

The West African region will lose an estimate $1.8 billion annually in import taxes alone. The EU promises $8.8 billion for the entire region over five years, but this will be much less than the revenue lost from export and import tariffs.

The EPA also requires that within six months of signing there must be further negotiations that will extend the treaty from just trade in goods to cover most other aspects of economic activity and policy decision-making.

The author of the Al Jazeera article Sylvester Bagooro concludes: This means Europe will now be consulted on decisions of West Africa with regards to financial services and financial policy in areas such as current account and capital account management; all other service sectors; technology policy and intellectual property, including traditional knowledge and genetic resources; personal data protection and use; competition and investment and government procurement. The EPA is fundamentally an attack on national sovereignty.

GUEST COMMENTARY BY KEN HANLY – SOURCE: POLITICS

“The last four or five hundred years of European contact with Africa produced a body of literature that presented Africa in a very bad light and Africans in very lurid terms. The reason for this had to do with the need to justify the slave trade and slavery”.

Chinua Achebe