Ghana prepares for EPA implementation with finalisation of its revised tariff offer

In terms of ‘diversifying’ the Ghanaian economy and ‘boosting trade and investment’ there has been no appreciable diversification of Ghanaian exports away from the EU market in recent years, with exports to the EU accounting for a higher % of Ghana’s total external trade in 3 of the past 4 years with only a marginal fall in the overall share of the EU in total Ghanaian exports between 2015-18 as a whole (2).

Ghana Global Exports and Export to the EU

Source: EC, EU Merchandise Trade with Ghana

https://webgate.ec.europa.eu/isdb_results/factsheets/country/overview_ghana_en.pdf

Similarly in terms of Ghana’s exports to the EU, these continue to be dependent on cocoa bean and value added cocoa product exports, with, depending on the international price of cocoa beans, between 2014 and 2018 these products accounting for between 84.1% and 86.1% of the value of total Ghanaian exports to the EU. However what is noteworthy within this cocoa sector trade is the growing value of Ghanaian value added cocoa products to the EU. By 2018 value added cocoa product exports to the EU had risen 50.6% by value compared to 2014 (3).

This strongly suggests a level of structural development in the Ghanaian cocoa sector is underway which could overtime also lead to the development and expansion of value added cocoa product exports to non-EU markets.

A critical question in this context is how could this trend in expanded production of value added cocoa products and market diversification beyond the EU be supported?

In this context the UK’s impending departure from the EU customs union and single market could create opportunities This would be particularly the case if, regardless of whether a successor EU/UK trade agreement was in place, the UK went ahead and left the EU customs union and single market on 1st January 2021 in line with recent Conservative Party election commitments.

Under current UK MFN post-Brexit tariff schedule proposals this would see duties of 9.6% on ‘non-fatted cocoa paste’ (180310) and 7.7% on cocoa butter (1804) imposed on current duty free imports from EU27 member states (4). This could then create new opportunities for the export of Ghanaian ‘non-fatted cocoa paste’ and cocoa butter direct to the UK market.

Currently only limited direct exports of non-fatted cocoa paste’ and cocoa butter to the UK market take place. These exports to the UK are dwarfed by Ghanaian exports to EU27 member states which are respectively 33 times larger and 20 times larger for non-fatted cocoa paste and cocoa butter respectively (5).

The significance of a potential expansion of non-fatted cocoa paste and cocoa butter exports to the UK market lies in the opportunities this could create for also serving other non-EU markets as well the UK.

Ghanaian Exports to the EU28 and UK and Currently Proposed UK MFN Tariff Treatment

Similar considerations arise in the preserved tuna sector where UK MFN duties of 24% could potentially be imposed on canned tuna imported from Spain under a ‘No-Deal’ Brexit scenario.

These Brexit related opportunities for increasing industrial investment in Ghana and expanding production of value added products will however need to be seized and supported through the inclusion of targeted new provisions of any future Ghana-UK trade agreement. This assumes of course the Ghanaian government will be in a position to conclude a bilateral Ghana-UK free trade agreement within the 18 months provided for in the current unilateral UK Transitional Protection Mechanism.

Given the entry into force of the Ghanaian governments reciprocal tariff elimination commitments towards the EU from the beginning of 2020, the UK government, once it has left the EU customs union and single market will be reluctant to see UK exporters discriminated against relative to EU27 suppliers and so will want to see a parallel UK-only trade agreement in place as soon as possible.

In the coming year therefore the Government of Ghana will need to accord priority to:

· concerted action with governments of similarly affected fellow ACP countries to ensuring the UK retains in place its currently proposed ‘development friendly’ post-Brexit MFN schedule during the forthcoming review (scheduled for the first quarter of 2020) (see companion epamonitoring.net article ‘Conservative Party Election Victory Mean Full Speed Ahead with Brexit and Raises The Threat of Loss of ACP Tariff Preference as a Result of Post-Brexit UK MFN Tariff Choices’, 16 December 2019);

· concluding a Ghana-UK trade agreement which not only preserves existing preferential access to the UK market but is supportive of the Ghanaian government’s structural development objectives.

In terms of the recently initiated dialogue on ‘sustainability in the cocoa value chain’ to date the EU has not yet thrown its weight behind calls for the full application of the Living Income Differential proposal being advanced by the Governments of Ghana and Cote d’Ivoire. This is despite growing calls for effective action in this area (see epamonitoring.net article ‘Growing Support for Payment of the Living Income Differential in the Cocoa Sector’, 9 January 2020).

This however is unlikely to be the only area of tension in the Ghana-EU dialogue on the cocoa sector.  EC President Ursula Von Der Leyen’s new European Green Deal includes a focus on working with global partners to curtail biodiversity loss. This focus could pose problems in the cocoa sector where in West Africa cocoa related deforestation is causing growing concern in Europe (6). This could see growing pressure on the Government of Ghana to take effective action to curb deforestation and biodiversity loss.

A final point which needs to be borne in mind as the process of eliminating tariffs on EU imports gets underway is the pre-existing trend in the growth of the value of EU agro-food exports to Ghana which is already underway.

Between 2014 and 2018 the value of EU agro-food exports to Ghana grew 43.3%, to a level equivalent to almost 1/3 of the value of Ghanaian agro-food exports to the EU in 2018 (this compares to under ¼ in 2014). This sustained expansion of the value of EU agro-food product exports to Ghana is likely to be given a significant boost as the government of Ghana implements not only its agreed tariff reduction commitments but more importantly comes under pressure to comply with commitments on the use of non-tariff trade policy measures on imports from the EU contained in the Ghana-EU ‘stepping stone’ EPA.

EU – Ghana Agricultural Product Trade

Source: EC, EU Merchandise Trade with Ghana https://webgate.ec.europa.eu/isdb_results/factsheets/country/overview_ghana_en.pdf

These twin effects of the implementation of the Ghana-EU EPA will over time provide increasing margins of trade preference to EU exporters compared to other third country suppliers (including the UK once it has left the EU customs union and single market), thereby increasing the role of EU agri-food exporters on the Ghanaian market, with, in some areas these imports from the EU being in direct competition with national Ghanaian and regional West African producers.