What you must know about Ghana’s Interim EPA

Ghana and European Union trade has been guided by a non-reciprocal trade regime offering tariff preferences for Ghanaian products entering the EU market under the Lome Convention from 1975 to 2000 and of late the Cotonou Partnership Agreement (CPA) from 2000.

However, the preferential trade system enshrined in the CPA operated  under a waiver from GATT Act 1 which obliged  WTO members  to adhere to the principle of non-discrimination. The Waiver was granted in 2002 for  the maximum period  allowed for such waivers, that is five years starting from January 1, 2003 and to end on December  31, 2007.

It was envisaged at that time that by the time the waiver expired , a new trading arrangement, the EPA, would have been negotiated  to replace the preferential trade regime under the Cotonou Agreement .

The  EPA was to be negotiated  between the European Union  and  the Africa, Caribean and Pacific (ACP) group of states.

For the purpose  of the negotiations, the ACP  was divided into six  negotiating  configurations  namely, the Caribean Region, the West Africa  Region, Central Africa  Region, Eastern and Southern Africa Region, the Southern Africa Development Commission and  the Pacific Region.

The West Africa Region comprises ECOWAS member states and Mauritania.

The summit of ECOWAS Heads of States and Governments held in Dakar, Senegal in December  2002, mandated  the ECOWAS Commission with technical support  from the UEMOA Commission to negotiate the EPAs  on behalf of ECOWAS member states. Thus, negotiations were launched in Cotonou, Benin on October 4, 2003 for the West Africa Region after a year long preliminary discussions at all ACP levels.

By April 2007 it became apparent that a comprehensive EPA could not be completed at the West Africa level by the scheduled date of December 31, 2007. Discussions were therefore initiated to find alternatives to the Cotonou Preferential Trade Regime. This was necessitated also by the fact that the waiver granted by the WTO would expire on December 31, 2007. Ghana therefore had to consider the alternatives very carefully to arrive at one which would serve her best interest and ensure that trade was not disrupted  between her and the European Union  which accounted for over 40% of Ghanaian exports.

Having failed to conclude the EPA negotiations at the West Africa level by the stipulated deadline of December 31, 2007, the options available to Ghana were as follows:

Issues of waiver

In this regard Ghana, alongside other ACP states requested the European Union to apply for a new waiver from GATT Act 1 to allow her to continue to enjoy the preferences granted under the CPA for exports into the EU market. The request was however denied for the following reasons:

– that the EU was not ready to pay the price for another waiver.

– that the waiver  will further  erode  the preferences Ghana intended to protect since non ACP  countries would request tariff reductions  on their export by way of compensation for the injury to trade  the waiver would cause them.

–  that the mood at the WTO  did not favour the granting of another waiver.

– General System of Preferences (GSP)

The system would have allowed Ghana to export to the EU at reduced tariff rates ranging from 4% to 27% for sugar based products. The problem with this option was that the GSP was open to all developing countries some of whom were more competitive than Ghana and would therefore price out products out of the EU market . The sectors of Ghana’s economy to suffer most under this system would have been the processing industries, particularly cocoa and fish.

Factories may relocate resulting in labour loss and its attendant social implications.

– Enhanced GSP

To enable Ghana access this trade regime, it had to meet 27 UN criteria on human rights, governance and international labour laws.

Ghana at present  has met  25 of the criteria  but even then after meeting all the criteria, one had to apply to join a queue which reviewed periodically to  consider new applications . It is worth noting that Nigeria applied for this trade regime back in 2006 but to date the request has not been considered, and it is not known when it will be considered. To ensure predictability within the business community and also considering the fact that it was not certain if any request in that regard would be considered favorably and on time, Ghana could not entertain this alternative.

– Everything but Arms Initiative (EBA)

The EBA trade regime granted duty free quota access to the EU market for export from Least Developed Countries (LDC). Since Ghana did not qualify as an LDC, this alternative was not available. Even though a request was made at the ACP level for the  EU to extend the EBA initiative to all ACP member states, it was turned  down.

– Interim Agreement

Considering that many ACP states, including Ghana could not conclude the negotiations on time, the EU offered to sign interim agreements with ACP  states in a position to do so to cover goods only to enable them avoid trade disruptions and to buy time for the negotiations of  comprehensive EPAs.

Ghana preferred this option for the following reasons:

i) It would provide  predictability for the business community and  avoid trade disruptions with the  EU.

ii) To fulfill the requirement for WTO compatibility for the business. In this regard Ghana negotiated  a 15-year  period for tariff dismantling on 80% of imports from the EU.

iii) To ensure that advantage was taken of tariff liberalization to flood out markets with products which will be injurious to the domestic economy, 20% of all imports from the EU were put in an exclusive list. These imports will not be subject to any tariff dismantling commitment in the agreement.

iv). It gave Ghana duty free quota free access to the EU market for all her exports:

v) Ghana would be provided with financial assistance to address supply side constraints, and other development issues which may arise as a result of implementation of the interim agreement.

vi) The agreement is expected to promote and encourage inward investment flows.

vii) Secure jobs in the horticultural, fishing and processing sectors of the economy.

Negotiations of the agreement was conducted in close collaboration with especially the Ministries of Finance, Agriculture, Association of Ghana Industries, civil society organizations and the Trades Union Congress.

An EPA implementation committee shall be established to monitor and evaluate the implementation of the provisions of the Agreement.

It is therefore certain that tariff reductions would have financial implications for the government. In this regard, the European Union has indicated its readiness to compensate net fiscal losses as a result of the implementation of the agreement. Tariff revenue losses are estimated to be about 50 million euros annually from 2023 when full implementation of tariffs liberation is expected to commence. No additional cost of implementing the stepping stone Economic Partnership Agreement initialed between Ghana and the EU on December 13, 2007 is  anticipated.

By Mabel D. Awuku

The author is the PRO, Ministry of Trade and Industry