Business News of 2014-04-04

Comment: ECOWAS, EU and economic partnership agreement

The Economic Community of West African States (ECOWAS) was founded under the Treaty of Lagos on May, 28, 1975. As its name indicates, the purpose of ECOWAS is to create a large and common market of West African countries to facilitate trading in agricultural produce and exchange of manufactured products, and movement of persons, across the borders without hindrance or obstruction of any kind.

Since 1975, ECOWAS has established protocols to allow easy movement of goods, services and persons.

ECOWAS citizens now have right of settlement and establishment in any of the members states, and entry without visa.

Besides promoting economic relations within West Africa, ECOWAS also exists as a bloc to protect and foster economic relations of member-states with other countries outside Africa, such as Europe.

Fortunately for West African citizens, Europe has, since 1958, achieved what West Africa began in 1975 – to create a common market for the region.

Established under the Treaty of Rome in 1958, the European Union (EU), formerly European Economic Community (EEC), has achieved goals well ahead of the targets it set itself in 1958. By 2005, the EU had expanded to include 25 states of Europe.

Seventy countries of Africa, the Caribbean and the Pacific (ACP) have affiliated relationship with the EU under what is known as the Lome Convention.

The Cotonou Agreement of 2002 between the EU and the ACP makes necessary, signing of regional Economic Partnership Agreements (EPAs).

ECOWAS is part of the African region and, as a sub-regional group, it is expected to negotiate and sign an EPA with the EU.

The EPA is required to change trade preferences that have existed for 30 years which, in the words of both sides, have not helped to achieve the desired economic development in West Africa.

“The general philosophy is to gradually transform the relationship between ECOWAS and EU from one of dependence to one of mutual trading partners,” a source close to the European Union has said.

The envisaged EPA offers ECOWAS countries the right to protect infant industries and products from competition from abroad.

The EU is expected to support West African countries under the EPA’s Development Programme (EPADP).

“Once signed, the EPA will be applied asymmetrically with the EU fully opening up its market and ECOWAS only over time while retaining the right to protect a share of its sensitive industries from European competition,” the EU source added.

Meanwhile, some West African countries such as Ghana and Cote d’Ivoire had signed bilateral interim agreements with the EU. Ghana signed what is known as “stepping-stone” or interim EPA in 2007 and Cote d’Ivoire in 2008.

A permanent EPA that will replace the interim EPAs has reached its final stages of negotiation and signing at the time of writing.

Are there benefits to accrue to ECOWAS countries under the new EPA?

In the relationship with EU, all West African countries, except Ghana, Nigeria and Cote d’Ivoire, are classified as Least Developed Countries (LDCs).

The LDCs of West Africa are expected to have unfettered access to the European market for all commodities except guns under the Everything But Arms (EBA) agreement.

Sierra Leone, an LDC, is already benefiting from such an agreement.

Another benefit is that the EPA is framed in a way to give West African producers, businesses and banks, the opportunity to do business with the EU from an advantageous position.

That is seen as an advantage which is not available to other developing countries.

Reduction in tariffs and cost of imports is expected to benefit West African industries and businesses because it will reduce cost of production.

According to an EU source, “these will boost growth, create new employment opportunities and contribute to poverty reduction”.

The source believes that the EPA will help ECOWAS countries to move away from a tax- collecting system that is excessively reliant on high import duties to a system that depends on domestic taxation.

The shift will facilitate and improve revenue generation and stimulate better budget planning and execution.

In the meantime, it has been reported that there was a breakthrough in negotiations between ECOWAS and the EU representatives.

Last February, ECOWAS and EU negotiators had agreed on a number of concessions for the new EPA. The Dakar meeting reportedly adopted compromises.

For example, it was agreed that ECOWAS member-states should open 75 per cent of their markets to European goods over 20 year-period instead of 80 per cent over 15 years.

According to reports, ECOWAS has asked the EU, under the EPA Development Fund, for 16 billion euros to finance infrastructural deficits before implementing the EPA.

Both the EU and ECOWAS have reportedly agreed on priority needs that have been valued at 6.5 billion euros – for trade, industries, agriculture, infrastructure, energy and capacity building.

The 44th session of the ECOWAS Heads of State and Government meeting in Yamousoukro, Cote d’Ivoire, started on March 28, had been expected to approve the EPA but signing was reportedly put off.

The postponement was triggered by complaints from Nigeria and some West African countries that further negotiations were needed because, according to them, the EPA will not serve the interest of Nigeria and West Africa.

Nigeria stands to lose trillions of dollars in revenue if the EPA was approved and implemented in its present form.

A statement by the National Association of Nigerian traders (NANT) claimed that Nigeria and some other West African countries would be compelled to liberalise their markets beyond 75 per cent to above 80 per cent during implementation.

In Ghana, civil society groups have also protested against signing of the EPA. Their complaint was that the Ghanaian economy would lose millions of dollars of revenue if the agreement was not renegotiated.

Conversely, the EU side has been optimistic about the progress made in negotiations.

“We are very satisfied with the progress at experts’ level achieved during the negotiations in Dakar in January,” John Clancy, an EU trade spokesman, has said.

He added, “The results of these negotiations are still subject to political endorsement.”

“Reaching an agreement is a very good deal for West Africa and a big deal for Europe, “San Bilal, a spokesman for the European Centre for Development Policy Management (ECDPM), has remarked.

The EPA, if endorsed by the Heads of State and Government meeting, will end 10 years of hard and prolonged negotiations and compromises between ECOWAS and the EU.

By: Larweh Therson-Cofie