Ghana: EPA Implementation in the Context of EU’s West Africa EPA Strategy
Summary
Ghana, alongside Cote d’Ivoire, signed an interim EPA with the EU despite the stalled regional negotiations in order to preserve existing duty free-quota free (DFQF) access to the EU market. Since 2014 EU agri-food exports to Ghana have grown in value by 38.3%. This has seen strong growth in volume of EU poultry meat exports (+163%) and dairy exports (+44%), alongside a 93% increase in EU animal and vegetable fat exports and a 237.5% increase in exports of miscellaneous edible products. In contrast between 2014 and 2017 a small decline in the value of Ghanaian agri-food exports to the EU occurred. Despite this since 2008 the granting of full DFQF access for Ghanaian banana exports has seen a 57% increase in export volumes. However global volatile cocoa prices have held back any sustained growth in agri-food sector export values. Movement up the value chains to the export of more processed value added cocoa products is potentially offering greater agri-food sector export earnings stability and even growth in the future. However given the importance of the UK in Ghana’s export trade to the EU a key trade issue which is not being addressed is the impact of Brexit on the value of the Ghana-EU EPA preferences. A host or Brexit related issues need to be urgently addressed, including: securing continued DFQF access to the UK market after 29th March 2019; the scope for maximising opportunities for direct exports of value added cocoa products to the UK market arising from a ‘no-deal’ Brexit; minimising the trade diversion effects of Brexit on trade in animal products which could increase pressure on Ghanaian poultry, beef and dairy product markets; minimising the adverse effects of the EU’s new plant health regulation on emerging non-traditional horticulture and sub-tropical fruit exports.
- The Overall Trade Situation
Ghana concluded its stepping stone agreement with the EU in December 2007. However given the desire to move forward within a common regional framework, the bilateral agreement was not signed by the Government of Ghana until July 2016 and was not ratified until August 2016, shortly before the EU’s deadline for the lapsing of the interim EPA market access arrangement (established under MAR 1528/2007).
Discussions remain on-going on the updating of the implementation schedule for Ghana’s market access commitments which were enshrined in the initial 2007 agreement. Once this process is completed Ghana will start implementing its tariff reduction commitments on imports from the EU. These tariff elimination commitments cover some 80% of all current EU exports to Ghana. In this context the EC highlights how ‘effective liberalisation is still pending’. As with the Ivorian agreement the EU expects the Ghanaian agreement to be replaced by a subsequent EU-West Africa EPA (1).
While the EC highlights how ‘merchandise trade with Ghana has been relatively stable over the last decade’ (1) eurostat data show a 68% growth in the value of EU imports from Ghana and a 58.6% in the value of EU export to Ghana from 2008 to 2017. This has nevertheless seen the EU’s trade surplus with Ghana increase from €666.5 million to €938 million. (2)
EU-Ghana Total Value of Trade 2008-2017 (€ million)
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | + % | |
| EU imports | 1,261 | 1,105 | 1,475 | 3,481 | 3,300 | 3,379 | 2,885 | 2,645 | 2,308 | 2,119 | +68% |
| EU exports | 1,928 | 1,754 | 2,150 | 2,926 | 3,613 | 3,416 | 3,116 | 3,040 | 2,891 | 3,057 | +59% |
Source: EC, Market Access Data Base: http://madb.europa.eu/madb/statistical_form.htm
In terms of agri-food sector trade Ghana has a surplus with the EU, in a context where agri-food products account for 62% of Ghana’s exports to the EU while they account for only 14.6% of EU exports to Ghana (1).
- Trends in EU Agro-food Exports to Ghana
Between 2014 and 2017 EU agri food exports to Ghana have shown a steady increase (+38.3% over the period as a whole), with particularly strong growth in 2017 (+27.6%, despite a fall in Ghanaian export earnings to the EU of 8.2% in 2017). This can be seen as a strong EU export performance given the slump in Ghanaian oil revenues from exports to the EU (- €800 million between 2014 and 2017), as prices fell from over $100/barrel in July 2014 to a low of $30/barrel in January 2016 rising to $50/barrel by December 2016, and then fluctuating throughout 2017 reaching a high of $61/barrel at the end of the year.
EU-Ghana Agro-food Sector Trade (€ million) 2014-2017)
| 2014 | 2015 | 2016 | 2017 | % change 2014-17 | |
| EU Exports | 321 | 348 | 348 | 444 | +38.3% |
| EU Imports | 1,335 | 1,508 | 1,650 | 1,313 | -1.6% |
Source: Extracted from Table 2 EU-28 Merchandise trade by AMA/NALA sector with Ghana (1)
However within this dire macro-economic context EU export product categories performed differently, with some dramatic increases in EU export values from 2014 and 2017. Thus we find that between 2014 and 2017 there was:
- an 3% increase in the value of EU exports of meat and edible offal, consisting mostly of poultry meat where a 163% increase in the value of EU exports occurred between 2014 and 2017 (2), on the back of a 159% increase in volume, with a further 13% increase in volume between January and August 2018) (3);
- an 2% increase in the value of EU exports of animal or vegetable fats and oils, which consisted mostly of margarine (65.2% in 2017 following a 88.5% increase since 2014), but also with strong growth in EU exports of olive oil, soya oil and sunflower oil;
- a 5% increase in EU exports of miscellaneous edible products;
- an 9% increase in EU exports of dairy products by value and a 44% increase in volume (reflecting the slump in global dairy prices particularly for EU SMP exports which increased 46% by volume and only 12% by value and a growth in cheese exports of 165 % by volume and 113% be value) (3) (for details of evolving patterns of EU engagement in the Ghanaian dairy sector see companion article, ‘Arla Plans Expanded Investment in Production of Milk Powder for Export to Africa’, 1 March 2018).
Whereas in 2014 these four categories accounted for 31.8% of EU agro-food exports to Ghana, by 2017 they accounted for 55.2% of EU agro-food product exports to Ghana.
Main Trends in EU Poultry Meat and Dairy Exports to Ghana 2014-17 (tonnes)
| 2014 | 2015 | 2016 | 2017 | % change | |
| 0207 poultry meat and edible offal | 56,672 | 79,866 | 114,797 | 146,711 | +158.9% |
| 0401 Milk and cream (fresh) | 3,045 | 3,331 | 3,036 | 3,507 | +15.2% |
| 0402 Milk and cream (concentrated) | 9,955 | 14,701 | 12,758 | 14,502 | +45.7% |
| 0403 Buttermilk, curdled milk & cream, yogurt etc | 497 | 387 | 72 | 725 | +45.9% |
| 0404 Whey | 2,582 | 3,722 | 4,317 | 4,228 | +63.7% |
| 0405 Butter etc | 316 | 285 | 331 | 373 | +18.0% |
| 0406 Cheese | 255 | 309 | 502 | 678 | +165.9% |
Source: EC Market Access Data Base
- Trends in Ghanaian Agro-food Exports to the EU
As with Cote d’Ivoire Ghana’s strong dependence on cocoa products and other raw materials which are zero rated at MFN level, means more than 60% of Ghana’s exports to the EU would be accorded duty free access to the EU market regardless of whether or not an EPA was in place (1).
The picture in terms of trends in Ghanaian agro-food exports to the EU is slightly more complicated given the dominant role which cocoa products play in overall Ghanaian exports to the EU (53% total exports and 84% agro-food exports) and the volatility of cocoa prices. Cocoa price rises saw export revenue gains in the cocoa sector of nearly 50% between 2013 and 2016 before falling 22.3%. This resulted in cocoa export earnings being up 16.1% overall from 2013 to 2016 and overall agro-food sector earnings being up 15.5% (2)
Since 2008 Ghana has benefited from ‘duty-free quota-free market access for processed cocoa products and has in consequence steadily increased exports of ‘transformed cocoa products to the EU market’. According to the EC this has seen Ghana increase its ‘exports of cocoa butter, cocoa paste and cocoa powder to the EU by 237%’. This growth is contrasted with the situation in Nigeria ‘which remained under the GSP trade regime’ and which ‘saw its processed cocoa exports to the EU stagnating’ (1).
The EC correctly notes how moving into ‘locally processed cocoa products makes Ghana more resilient to fluctuating world market prices for raw materials’ (1).
Ghanaian Cocoa Product Exports EU (tonnes) and % change 2008 to 2017
| 2008 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | % change | ||
| Beans | 421,440 | 393,445 | 324,920 | 347,943 | 289,384 | 339,842 | 263,162 | -37.6% | |
| Paste | 21,836 | 58,394 | 55,011 | 64,291 | 67,384 | 60,273 | 81,956, | +275.3% | |
| Butter | 8,752 | 28,756 | 37,563 | 35,509 | 33,078 | 32,549 | 48,847 | +458.1% | |
| Powder | 408 | 8,651 | 16,530 | 16,155 | 20,801 | 12,442 | 23,531 | +5,467.4% | |
| Chocolate | 15 | 20 | 56 | 26 | 33 | 149 | 82 | +446.7% |
Source: EC, Market Access Data Base
Exploring the agro-food sector trade data more closely we find strong growth in Ghanaian exports of edible fruits (+53.5%), with half of this category of exports being accounted for by bananas. The growth in Ghana‘s banana exports began in 2006 but has grown in bursts since then with occasional setbacks.
In trade policy terms the most significant development was the replacement of the Banana Protocol by the granting of full duty free-quota free (DFQF) access established through MAR regulation 1528/2007under the interim EPA concluded with Ghana in 2007.
Ghanaian banana exports to the EU
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Volume (Tonnes) | 46,233 | 36,767 | 52,631 | 47,420 | 50,932 |
| Value (Euros) | 29,765,832 | 26,121,691 | 38,354,528 | 33,417,599 | 34,709,026 |
| 2013 | 2014 | 2015 | 2016 | 2017 | |
| Volume (Tonnes) | 42,952 | 46,724 | 51,261 | 58,021 | 70,590 |
| Value (Euros) | 30,660,751 | 30,409,592 | 39,409,669 | 49,097,770 | 55,780,314 |
Source: EC Market Access Data Base
It is in this context that Ghana retains a large agro-food sector surplus with the size of the agro-food trade surplus with the EU fluctuating in the light of cocoa price levels (which impacts on exports values) and Ghana’s oil revenues (which impacts on import values).
- Institutional Developments and Accompanying Measures
The EC notes how at the institutional level the ‘first meeting of the EPA Committee was held in Accra, Ghana, on 24 January 2018’. This focused on:
- procedures, and the ‘state of play in the implementation of the EPA with Côte d’Ivoire’;
- ‘the process of adoption of the regional EPA with West Africa’;
- updating the tariff reduction schedule first set out by Ghana in 2007;
- rules of origin issues;
- ‘the monitoring of operation and impact of the EPA’; and
- ‘the Aid for Trade accompanying measures’ (1).
The EU is providing €12 million in support of EPA implementation in Ghana over the 2018-23 period. This will include:
‘i) support to the Ministry of Trade to implement the EPA and to engage on EPA-related issues;
ii) support to the Ghana Export Promotion Authority and the Ghana Investment Promotion Centre; and
iii) overall support to improving the business policy and regulatory environment’ (1).
This builds on an earlier €12 million ‘Trade Related Assistance and Quality Enabling programme (TRAQUE)’, aimed at assisting in modernizing ‘Ghanaian quality infrastructure and strengthen export competitiveness’. The EC maintains this project helped Ghana ‘improve the inspection and control system for phytosanitary requirements at exit points’ with this resulting in ‘the EU lifting an import ban on five vegetable commodities from Ghana (chilli pepper, bottle gourds, luffa gourds, bitter gourds and eggplants)’ (1).
The EC also ‘supports Ghana’s agricultural sector, through the Market Oriented Agricultural programme (MOAP) (EUR 35 million, 2017-2024) and the programme to promote productive investments for sustainable agriculture in Northern Ghana (2018-2025, EUR 102 million)’ (1).
In terms of following up on EPA implementation the EU and Ghana have agreed to:
‘a) Review and endorse the final transposition of the tariff nomenclature in HS 2017;
b) Review and endorse the updated liberalization schedules
c) Set up an appropriate mechanism to monitor the operation and impact of the EPA;
d) Start negotiating the procedures relating to a reciprocal Protocol on Rules of Origin’ (1).
In its concluding remarks the EC notes ‘as Ghana moves to implement its market access commitments, close attention will be paid to the effects the iEPA might have for Ghana’s economy in terms of trade and investment flows, government revenue and sustainable development’. It further notes ‘in the coming years, the implementation of iEPA should also be impacted by the ongoing business climate and fiscal reforms in Ghana and by the EU support to various aspects of iEPA implementation 2018’ (1).
| Comment and Analysis
The key issue which is not being addressed in the context of the Ghana-EU EPA is the impact which the UK’s withdrawal from the EU will have on existing patterns of Ghana’s exports to the existing EU28 market. While only 10.5% of Ghana’s total exports to the EU are directly exported to the UK market, this masks some very high levels of dependence on the UK market for Ghanaian agri-food sector and fisheries exports. Thus we find in 2017: · 46.6% of Ghanaian banana exports to the EU went directly to the UK market: · 73.9% of Ghanaian exports in the category of Guava mangoes etc (080450) went directly to the UK market; · 53.4% of Ghanaian exports of canned tuna went directly to the UK market; · 26.7% of Ghanaian exports of pineapples went directly to the UK market. The most serious area of concern is the potential loss of duty free-quota free (DFQF) access to the UK market for bananas and canned tuna exports, given the EU MFN import tariffs the UK is committed to implementing from the 30th March 2019. Ghana’s Current Exports to the UK and EU28 Affected by Loss of Preferential Access By BREXIT (2017 €)
Source: EC market access data base: In this context for these exports the first priority for the Government of Ghana has to be preserving current DFQF access to the UK market from the 30th March 2019. While through Article 129 this DFQF access will be preserved up to 1st January 2021 (and even beyond) if the EU/UK Withdrawal Agreement is ratified political developments in the UK have increased the likelihood of this agreement being rejected by the UK Parliament. Against this background contingency planning for a ‘no-deal’ Brexit in both the EU and UK is intensifying (see companion epamonitoring.net article ‘Deferment of UK Parliamentary Ratification Heightens Uncertainty and Gives Added Urgency to ACP Engagement with EU and UK Contingency Planning Processes’, 13 December 2018). Under a ‘no-deal’ outcome to the current Brexit process the existing DFQF access to the UK market enjoyed by Ghana would lapse. This would leave the Government of Ghana with two options: a) the launching, in association with other ACP EPA signatories, of a concerted campaign to persuade the UK government to unilaterally apply Article 129 of the concluded Withdrawal Agreement regardless of the state of play in the ratification process; b) the initiation of immediate steps to ensure the government of Ghana is in a position to sign a ‘rolled over’ ‘interim-UK-only’ reciprocal trade agreement based on a revised EPA text by 29th March 2019. Option a) would provide certainty for UK and Ghanaian commercial operators in the run up to the UK’s withdrawal from the EU, thereby averting any disruption of Ghanaian exports to the UK market While option b) would also ensure Ghana retained duty free-quota free access to the UK market it would need to include a special annex setting out a detailed list of Ghanaian concerns which would need to be addressed under the final agreement with the UK prior to ratification of the agreement. This would need to address issues such as · future rules of origin to be applied in the fisheries sector where significant improvements are possible given the absence of any long distance UK fishing fleet whose fisheries access interests need to be protected and promoted through the rules of origin applied under preferential trade agreements; · the scope for removing all packaging and preservatives used in value added food products from calculations of originating status of products in determining eligibility for the granting of preferential tariff treatment; · the plant health regulations to be applied by the UK under an autonomous agricultural trade policy given past difficulties faced in meeting EU standards and the current evolution of EU standards (see companion epamonitoring.net articles, ‘Lifting of EU Ban May Provide Little Relief for Ghanaian Vegetable Exporters’, 16 November 2017 and ‘The Potential Differential Effects of Stricter EU False Coddling Moth Controls on African Exports’, 19 March 2018); · the UK’s future tariff treatment for banana imports from non-ACP suppliers. Certain issues would also need to be taken up with the EU authorities, most notably the future treatment of bilaterally negotiated banana TRQs with $ banana exporters. If this issue is not addressed in ways which minimise additional commercial competition on EU27 markets then Ghanaian banana exporters could see themselves facing declining banana prices on EU27 markets which they serve, as a result of the removal of UK import demand under these banana TRQs. In addition given the expanding EU27/UK trade in value added cocoa products, the question arises as to how the application of standard third country treatment to EU/UK trade under a ‘no-deal’ Brexit will impact on the functioning of cocoa products supply chains. Given the way these supply chains function this could well see any additional trade costs being transmitted back down to Cocoa exporters in Ghana in the form of lower retained incomes. This is an issue which needs to be urgently assessed, since the reverse side of this coin is the potential for expanded direct exports of value added cocoa products from Ghana to the EU which a ‘no-deal’ Brexit could give rise to. The final Brexit related dimension which needs to be factored in is the potential impact of a ‘no-deal’ Brexit on extra-EU exports of animal products. The hard reality faced is that the emergence of a no-deal’ Brexit would see the application of standard EU 3rd country import controls on the current UK-EU27 trade in animal products, in a context where all UK exporting plants would need EU food safety certification and all imports would need to be checked at the point of entry to the territory of the EU. This would pose major infrastructure and human resource challenges which would prove highly trade disruptive. This would be particularly damaging for UK exports of poultry parts 70% of which are currently destined for EU27 markets. These products could easily be diverted to Ghanaian markets placing even stronger commercial pressures on what remains of the Ghanaian poultry sector. Similar pressures would also be likely to emerge in the beef and dairy sectors. The Government of Ghana needs to be in a position to deal with these potential challenges, if existing agricultural production and regional agri-food sector trade flows are not to be disrupted. A final issue left unaddressed in the EC review of the implementation of the EU-Ghana EPA is the impact of ever stricter EU plant health import requirements on the Ghana’s emerging non-traditional horticulture and sub-tropical product exports. This has already seen import bans placed on a range of non-traditional horticulture exports which were only lifted in January 2018, with this respite potentially proving short-lived given the implementation of stricter controls on False Coddling Moth infestations and the pending full implementation of the EU’s new Plant Health Regulation by December 2019 (see companion epamonitoring.net articles ‘Lifting of EU Ban May Provide Little Relief for Ghanaian Vegetable Exporters’, 16 November 201 and ‘The Potential Differential Effects of Stricter EU False Coddling Moth Controls on African Exports’, 19 March 2018). According to COLEACP the new EU Plant Health Regulation ‘introduces specific measures concerning imports, and the movement within the EU, of certain high risk commodities’ (4,) with a ‘list of products which, because of their well-established track record and favourable risk assessments, can be excluded from the need for plant passports’ also being drawn up (5). The list of high risk commodities is scheduled to be drawn up by December 2018. Once the list of high risk plants has been established ‘importing these high risk commodities will be prohibited unless and until a detailed pest risk assessment (PRA) has been carried out to determine if imports are acceptable and, if yes, under what conditions’ . These PRAs will only be conducted by the EU authorities ‘on request’, with third country competent authorities being responsible for providing basic data ‘on the pests and diseases present on the crop’. Thus ‘while the import of most plants and plant products from non-EU countries will in principle be allowed, they will be subject to more stringent conditions’ (5). The new EU Plant Health Regulation is thus seen as establishing a ‘new level of precaution’ in the application of the EU’s precautionary principle. Through this regulation the EC seeks to set in place a more proactive approach to pest controls in imported products (4). This is seen as a potentially contentious area of the new regulation. As part of the trade dimension of enhanced EU controls the new regulation will allow the introduction of ‘temporary measures against new trade’ where there is no track record of trade and hence the pest risks are unknown. This could see the introduction of ‘temporarily restrictions on imports, or even a ban, until more data becomes available to enable a risk assessment’. This could potentially carry serious implications for ACP agri-food exporters such as Ghana which are seeking to diversify into new export products which the EU intends to classify as ‘high risk commodities’. A dialogue on practical measures which can be taken to ensure the commercial prospects for the development of these new non-traditional exports are not undermined while they are still in their infancy is urgently needed. Yet this level of dialogue within EPA structures is seriously underdeveloped. There also needs to be clarity as to what extent under a ‘no-deal’ Brexit outcome the UK would apply the EU’s new Plant Health Regulation, which will only come fully into effect in December 2019. This is an important issue given the cost and potential market closure implications of the EU’s enforcement of its new Plant Health Regulation beyond December 2019. |
Sources:
(1) EC, ‘Individual reports and info sheets on implementation of EU Free Trade Agreements’, Commission Staff Working Documents, pp 241-245, SWD(2018) 454 final, 31 October 2018
http://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157473.PDF
(2) EC, Market Access Data Base,
http://madb.europa.eu/madb/statistical_form.htm
(3) EC, EU Market ‘Situation for Poultry Committee for the Common Organisation of the Agricultural Markets’, 8 November 2018, ‘Exports of poultry meat to selected destinations’
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
(4) COLEACP, ‘New EU Plant Health Regulation: anticipating impacts for African Caribbean and Pacific countries’, 12 October 2017
https://www.coleacp.org/en/actu/new-eu-plant-health-regulation-anticipating-impacts-for-african-caribbean-and-pacific-countries
(5) COLEACP, ‘Stringent new European Union Health Regulations Introduced’, 27 January 2017
https://www.coleacp.org/en/actu/stringent-new-european-union-plant-health-regulations-introduced