To boost trade between Ghana and Nigeria: implement existing commitments

Most people seem to think that intra-African trade could be substantially larger than it currently is. This would explain the recent statement of the heads of the African Union to “boost” intra-African trade substantially and to create an Africa-wide Free Trade Area by 2017.

But have we not seen decades of regional integration schemes being launched all over Africa? There seem to be so many that it is nearly impossible to distinguish between the different abbreviations that these initiatives have. Why have they not “boosted” intra-African trade already? And how can we expect the most recent initiative to be any different and more successful?

The commitments undertaken in many of the existing regional integration agreements seem to cover pretty much everything that is needed to integrate markets. Fully implemented, they would allow for the free flow of regionally produced goods and services, investment, and in many cases the movement of citizens within each region. But traders continue to face substantial hurdles and barriers when they want to trade regionally. This is because despite all the agreements made, much remains to be implemented.

Now, specific, credible, and realistic initiatives by governments are needed to implement commitments already made.

In a recent Africa Trade Policy Note we highlight some of these factors hindering intra-regional trade in West Africa. Take West Africa for an example. The Economic Community of West African States (ECOWAS) with its 15 members has, since the 1980s, agreed to:

1. Allow the free flow of regionally produced goods within the region
2. Simplify transit arrangements to allow goods from coastal countries to reach the land-locked countries easily and at low cost (and to allow exports to reach the ports at low cost)
3. Give all citizens of the region the freedom to reside and set up businesses in any of the member states, treated equally to the nationals of that country.

But these commitments have never been implemented: Products can only circulate freely within the region after they have been registered in a complex process that can take up to 6 months and needs to be repeated for every individual product (i.e. for orange juice, and again for pineapple juice).

And in cases where products meet the criteria, are registered, and are accompanied by all relevant paperwork, they still risk being blocked at the border until additional (and informal) payments are made. At times, they never cross the border as import bans are applied to specific products, as is often the case in Nigeria.

Traders face multiple roadblocks and have to pass burdensome procedures to meet badly published standards before being able to export to neighboring countries. They have to pay transit fees which they should not. Investment and other laws often continue to discriminate against ECOWAS citizens as compared to nationals. And processes usually do not follow well-established rules, but are frequently ad-hoc and open to abuse. All of these barriers result in reduced regional trade and job creation, as existing exporters in West Africa keep pointing out.

Unlike their Ghanaian counterparts, traders from Nigeria, for example, need to meet stringent investment criteria and minimum capital requirements when setting up a retail business in Ghana. Such criteria and measures effectively prevent citizens from  choosing where to set up a business. This is an issue that has been hotly debated both in Nigeria and Ghana for the last couple of years, even at the highest political level. Still, only very limited progress in resolving the issue has been made.

Clearly, there is a lack of implementation of decisions taken at high-level meetings, be it for lack of commitment at lower political levels or knowing “how-to” implement the needed reforms. It is not a simple task to overhaul operations at the border, increase collaboration among border agencies, simplify procedures, improve transparency, predictability, and reduce corruption. Undertaking the necessary political reforms can often create resistance from those that benefit from the current situation. Often, the benefits for reforms are spread widely, while those losing rents and benefits are fewer but better organized, and closer to the ears of policy makers.

Africa does not need more negotiations, commitments and targets to integrate regionally. What governments need to do is start implementing commitments on the ground. By showing that they can actually deliver on what they have promised in the past, governments will be able to demonstrate their readiness to engage in more ambitious objectives.

By Mombert Hoppe
Source: blogs.worldbank.org