Summary
The EC’s presentations on the state of the EPA process in West Africa over-simplifies a complex reality, with to date no progress having been made in implementing EPA commitment agreed as early as the end of 2007. However how the EC seeks to interpret and apply the newly ratified bilateral IEPAs will be an important test case for the EC’s future approach to EPA implementation. Any attempt by the EC to ride rough-shod over West Africa’s own regional integration efforts, through encouraging violations of the regionally agreed common external tariff could carry serious implications for the nascent regional integration processes both in West Africa and at the continental level. An over-vigorous interpretation and application of Ghanaian and Ivorian EPA commitments on the elimination of non-tariff barriers to EU exports could carry important ramifications for EPA signatories across the ACP
The latest January 2017 European Commission (EC) overview of economic partnership agreements (EPAs) highlights how in West Africa the stepping stone economic partnership agreements with Cote D’Ivoire and Ghana have now been signed and ratified. The government of Cote d’Ivoire signed the agreement on 26 March 2008 but the National Assembly of Cote d’Ivoire only ratified the agreement on 12th August 2016. This saw the provisional application of the EU-Cote d’Ivoire interim-EPA from the 3rd of September 2016. (1)
Analysis from the French NGO SOL, highlights the impact the loss of traditional preferential access and consequent re-imposition of GSP duties would have on Ivorian agro-food exports to the EU. Taking the export value in 2015, over €3 billion of products would be affected, with additional duties in excess of €114 million being applied. These re-imposed import duties would be even higher if eligibility for GSP preferences were lost under the EU’s revised GSP scheme, which links GSP access to market shares (this would mainly affect cocoa products). For some products the re-imposed duties would be in the range of 7.6% to 23.8%. (12)
GSP Duties on Ivory Coast Agricultural exports to the EU (2015 value)
| Value of agricultural products affected | €3,055.5,million |
| Total Value Standard GSP Duties imposed | €114.1 million |
| Total Value GSP+ imposed if applied to Ivory Coast | €38.2 million |
Source: SOL, ‘The absurd ratification of Ivory Coast Interim EPA’, 31 December 2016
In the case of Ghana, the government signed the IEPA only on the 28th July 2016, with the Ghanaian Parliament ratifying the agreement on 3rd August 2016, only a matter of weeks before the European Commission’s unilateral 1st October 2016 deadline for the completion of the ratification process entered into effect. (1, 2) This saw the provisional application of the Ghana-EU interim-EPA from the 15 December 2016. (1)
In the run up to the deadline for EPA ratification officials at Ghana’s Trade Ministry had estimated the lapsing of Ghana’s duty free-quota free access to the EU market and the imposition of import duties on Ghanaian exports to the EU (for the first since 1975), would cost the country ‘€400 million in export taxes to the European Union’. (3) An amount almost equal to total annual EC and EU member states development assistance to Ghana.
This was not the only effect. Investors in the fisheries sector made it clear in the months before the EC deadline, that if duty free access to the EU market was lost they wold relocate to other exporting countries. In April 2016 a spokesperson for the seafood food products company, Thai Union, said ‘if the 20% increase on export will happen … we will have to relocate the plant from Ghana to countries where it is more favorable…it might be in Ivory Coast may be in Ecuador’. This would reportedly have affected 2,000 jobs. (4)
Other ‘less foot-loose’ industries would also have suffered from the re-imposition of duties, putting thousands of additional jobs at risk. (3)
These real and immediate losses needed to be set against the possible negative effects of EPA implementation on the development of the Ghanaian economy. According to the Third World Network coordinator, Dr. Yao Graham, ‘the EPA will lead to a loss of jobs and other means of livelihood…In the manufacturing and other industrial sectors, the EPA will cost about 40,000 jobs in ten years. We also anticipate that there will be a collapse of domestic industry’.
In contrast in welcoming the ratification of the Ghana IEPA the EU Delegate to Ghana focussed on the benefits of the agreement, claiming the agreement would preserve Ghana’s duty free preferences on the EU market thereby ‘protecting thousands of jobs In Ghana, mainly in the agriculture sector’ and ‘provide a long-term predictable framework to help increase trade and investment’, which could ‘create more jobs in the future’. (6)
In addition, the Third World Network fears the signing and ratification of a bilateral agreement with the EU would ‘undermine ECOWAS economic integration and the wider process of intra Africa trade and lead to the loss of government revenue from trade duties’. (2)
In the case of Cote d’Ivoire, according to analysis form SOL, while recognising overall tariff revenues could increase in the early stages of tariff reductions, as trade volumes increase, by the end of the tariff phase down period (after 20 years) these tariff revenue losses could reach just under €1 billion. (12)
In terms of the regional West Africa-EU EPA, the negotiations were formally concluded on 6 February 2014, with the text being initialled on the 30th June 2014 and the ECOWAS Heads of State endorsing the agreement for signature on 10th July 2014. (1) The EC acknowledges however that thirty months on the process for finalizing the signature and ratification of the agreement is still ongoing. (1) As Commissioner Malmstrom acknowledged at an NGO meeting in Brussels in January while 13 West African governments had signed the regional EPA, three had still not. (5)
The Nigerian government in particular continues to argue that certain aspects of the EPA require renegotiation. It was argued at the end of January 2017 there are ‘issues that require constant retooling or negotiation’, which requires ‘making room for adjustment’. The collapse of oil prices has had a major impact on the Nigerian economy and has boosted the importance attached to developing other non-oil sectors of the Nigerian economy. Commissioner Malmstrom however ruled out any renegotiation, arguing once the agreement was in force the review mechanism could be used to try and ‘improve’ the agreement. (5)
As the SOL analysis points out, there are significant variations between the bilateral IEPA and regional EPA provisions related to the use of non-tariff trade measures. Problems also arise from the bilateral IEPA tariff ‘standstill’ clause, which makes no provision for the accommodation of the ECOWAS common external tariff (CET), which nominally came into effect on 1st January 2015. The ECOWAS CET establishes a maximum import tariff of 35% for sensitive products (most of which are agricultural products), while the bilateral IEPAs allow a maximum duty of 20%. There are also significant differences in the classification of tariff lines for tariff reduction purposes between the bilateral IEPAs and the regional EPA. (12)
In addition the implementation of tariff reductions on imports from the EU (scheduled to begin under the Ivorian and Ghanaian IEPAs 2 years and 5 years after the entry into force of the agreements respectively) could undermine the functioning of the ECOWAS CET and lead to a re-introduction of tariffs and other non-tariff controls on intra-ECOWAS trade. (12) Smuggling of rice, poultry meat and other agricultural products across the border from Benin into Nigeria has already seen the introduction of stricter border controls on trade, which is having a noticeable impact on traders in Benin. (12 &13)
If the implementation of the bilateral IEPAs were to see a strengthening of controls on intra-ECOWAS trade, this would be in fundamental contradiction to EU policy statements in support of regional market integration in West Africa (12). Although this being noted, the EC has always favoured processes of what it calls ‘open regionalism’, where regional integration and international market opening take place in parallel.
Source
(1) EC, ‘Overview of Economic Partnership Agreements’, updated January 2017
http://trade.ec.europa.eu/doclib/docs/2009/september/tradoc_144912.pd
(2) citifmonline.com, ‘Ghana’s Parliament ratifies EPA with EU’, 3 August 2016
http://citifmonline.com/2016/08/03/ghanas-parliament-ratifies-epa-with-eu/
(3) citifmonline.com, ‘Ghana to lose millions of euros as EPA expires on October 1’, 12 April 2016
http://citifmonline.com/2016/04/12/ghana-lose-millions-euros-epa-expires-october-1/
(4) citibusinessnews.com, ‘Foreign investors freeze investments to Ghana over EPA delay’ 16th April 2016
http://citifmonline.com/2016/04/16/foreign-investors-freeze-investments-ghana-epa-delay/
(5) Euractiv.com, ‘Malmström put on spot by Nigeria on EU deals with ACP countries’,27 January 2017
https://www.tralac.org/news/article/11187-malmstroem-put-on-spot-by-nigeria-on-eu-deals-with-acp-countries.html
(6) European Union External Actions Service, ‘EU welcomes Ghana’s signing and ratification of the EPA’, 5 August 2016
https://eeas.europa.eu/headquarters/headquarters-homepage_en/7766/EU%20welcomes%20Ghana’s%20signing%20and%20ratification%20of%20the%20EPA
(7) Concord Time, ‘Ecowas Postpones Signature of EPAs’, 22 January 2008
http://allafrica.com/stories/200801241184.html
(8) EC, ‘Access to EU markets for exporters from ACP countries’, 30 September 2011
http://www.bilaterals.org/spip.php?article20344&lang=en
(9) Point of access for the EC ‘Proposal for a regulation of the European parliament and of the Council amending Annex I to Council Regulation (EC) No 1528/2007 as regards the exclusion of a number of countries from the list of regions or states which have concluded negotiations’, COM (2011) 598, 30 September 2011
http://www.ipex.eu/IPEXL-WEB/dossier/dossier.do?code=COD&year=2011&number=0260
(10) Agritrade, ‘EC to strengthen enforcement of third-country compliance with trade commitments’, 21 January 2013
http://agritrade.cta.int/en/Back-issues/Agriculture-monthly-news-update/2013/Agriculture-Newsletter-February-2013
(11) Agritrade, ‘ECOWAS agrees common external tariff with greater agricultural protection’, 23 February 2014
http://agritrade.cta.int/Agriculture/Topics/ACP-FTAs/ECOWAS-agrees-common-external-tariff-with-greater-agricultural-protection
(12) SOL, ‘The absurd ratification of Ivory Coast Interim EPA’, 31 December 2016
https://www.sol-asso.fr/wp-content/uploads/2016/06/The-absurd-ratification-of-Ivory-Coasts-interim-EPA-December-31-2016.pdf
(13) Business Day, ‘FG questions complications on ECOWAS external trade agreements’, 6 December 2016,
http://www.businessdayonline.com/fg-questions-complications-on-ecowas-external-trade-agreements/
(14) New Telegraph, ‘Nigeria’s ban on ‘tokunbo’ cars, rice cripples Benin economy’, 11 December 2016
https://newtelegraphonline.com/nigerias-ban-tokunbo-cars-rice-cripples-benin-economy/
| Comment and Analysis While ratification of the bilateral Ghanaian and Ivorian interim EPAs has now been completed, the situation with regard to the implementation of IEPA commitments in West Africa is by no means straight forward. Indeed, the situation has been compounded since the IEPAs were concluded at the end of 2007 by the progress made in regional market integration.In October 2013 ECOWAS agreed a common external tariff which was scheduled to come into effect in 2015. The CET has divided some 5,899 product lines between five tariffs: 0%, 5%, 10%, 20% and 35%. Agricultural products tend to be more heavily protected than others: ‘55% of agricultural tariff lines are in the 20% or 35% band and none are in the 0% band. Ninety percent of the products in the 35% band are agricultural goods.’ Overall this agreement on average led ‘to higher nominal rates of protection on agricultural products’. Only limited deviation by West African governments from the CET is allowed and solely in the direction of maintaining higher tariff levels than agreed under the CET (11). This new common CET supersedes the national tariff regimes applied by West African EPA signatories (with the exception of Mauritania). Initially the conclusion of the West African CET ‘led EC officials to express optimism about reaching an agreement on the outstanding issues in the EU–West Africa EPA negotiations’. (11) This optimism initially appeared justified, with in February 2014 the formal process of EPA negotiations being concluded, the initialling of the text taking place in June 2014 and ECOWAS Heads of State endorsing the agreement for signature in July 2014. However, by January 2017 three West African governments had still not signed the regional EPA, with this non-signature making ratification of the regional EPA by any ECOWAS/UEMOA member a violation of agreed rules on the conclusion of third party trade agreements. The hard reality facing the European Commission is that it is only after ratification of trade agreements that governments become legally bound to enforce the commitments entered into under such agreements. This creates a situation for the EC where, despite the conclusion of two West Africa IEPAs in 2007 and the finalisation of regional EPA negotiations in February 2014, none of the commitments on the reduction of import tariffs and elimination of non-tariff barriers on imports from the EU, entered into by West African under the various (I)EPA agreements, have actually entered into force. Indeed, the governments of Ghana and Cote d’Ivoire are not in a position to begin implementing tariff reduction commitments under the IEPA without violating the ECOWAS common external tariff (CET). Given the back loading of tariff reduction commitments under the IEPAs the EC appears to be hoping to avoid intra-regional conflicts by securing the signing and ratification of the regional EPA before Ghana and Cote d’Ivoire need to commence the tariff reductions set out in their respective IEPAs. However once the regional EPA is signed and ratified the provisions of the IEPAs will be superseded by the provisions of the regional EPA. This rather makes the ratification of the bilateral EPAs a moot exercise. Trends in EU-West Africa agro-food sector trade which have seen West Africa’s agro-food sector trade surplus with the EU fall nearly 42% between 2008 and 2015 accounts for the on-going concerns over the possible impact of EPA commitments on West Africa’s agro-food sector development. It suggests if the EC wants to see a regional EPA signed and ratified in West Africa then the European Commission is going to need to go beyond Commissioner Malmstrom’s current position and provide assurances on the flexible and responsible application of EPA commitments, in the light of West Africa’s evolving economic circumstances and national strategies for structural transformation. Evolution of West Africa-EU Agro-food Sector trade 2009-2014 (million €)
Source: EC, Agri-food trade statistical factsheet: European Union – ACP – West Africa’ Given the exclusion of a large range of agro-food products from tariff reduction commitments and the back-loading of the agro-food sector tariff reduction commitments which have been made, this ‘flexibility’ will initially need to be applied in the interpretation and application of West African-EU EPA commitments on the elimination of non-tariff barriers to imports form the EU. Such a move however wold be likely to further infuriate EU exporters associations which have been highly critical of the EC’s failure to secure full compliance with trade agreement commitments on the elimination of non-tariff barriers to EU exports. These non-tariff measures are seen as particularly important by EU agro-food exporters, with their removal having been a long-standing priority in EU trade negotiations. If the EU were to make a firm commitment to the flexible and responsible application of EPA commitments, including in regard to interpretation and application of provisions dealing with non-tariff measures, the Nigerian government may feel its agro-food sector development aspirations can be accommodated within the existing EPA framework. In this context it may finally come fully on-board the regional EPA process, without formal amendments to the existing regional EPA text agreed in February 2014. In contrast if the EC were to be given a free hand to rigorously interpret and vigorously pursue the strict application of EPA commitments on the immediate elimination of non-tariff barriers to imports from the EU this would carry important implications not only for West African EPA signatories but all ACP EPA signatories. There is therefore a need to closely monitor the EC’s interpretation and application of the provisions of the recently ratified bilateral IEPAs concluded with Ghana and Cote d’Ivoire. |
| Key words: West Africa EPA Tags: West Africa EPA |