The signing of a free trade agreement between ECOWAS and the EU in 2014 marked a milestone for the West African bloc after years of negotiations. The Economic Partnership Agreement (EPA) will give ECOWAS members almost completely tariff-free access to EU markets with only a partial reciprocation. The new trade deal was ratified in October 2014.
Looking To Trade
Access for consumers to affordable imports is important for markets like Ghana, particularly as household consumption rises. According to the Ghana Statistical Service, imports surged to GHS27.8bn ($7.7bn) in 2014, up from GHS25bn ($6.9bn) in 2013 and triple the total for 2010. Similarly, given the importance of exports as a source of foreign currency and revenue, ensuring market access is a priority. Exports reached GHS30.97bn ($8.6bn), up from GHS24.68bn ($6.8bn) in 2013 and an almost six-fold surge from 2010. Kojo Hastings, chairman of business services firm Genelec Holdings, told OBG, “As much of Europe shifts from aid towards trade, governments like the UK are often most willing to get involved in the UK export of worthwhile services by facilitating key elements of a project, such as project financing guarantees.”
Exports from Africa are dominated by natural resource commodities, while imports largely consist of value-added products – about two-thirds of the total in 2010, according to the World Trade Organisation. Ghana certainly fits that profile, with gold, oil and cocoa being the three primary exports, and manufactured goods being among the primary imports. On a regional basis the most common imports are fuel, which comprise about a quarter of the total annual import value, according to ECOWAS data, followed by vehicles, industrial gear, appliances and cereals.
The EPA is part of the EU’s efforts to offer tariff-free access to its own markets and reduce barriers in those it exports to in all countries under its Africa, Caribbean, and Pacific Group of States classification. Many of these are categorised as least-developed countries, and as a result already enjoy tariff-free access to the EU for what they export. However, as a middle-income nation Ghana did not have that status and therefore the trade pact offers improved market access. In exchange for that access ECOWAS states will open up 75% of their markets in a phased implementation over a 20-year period.
However, the threshold and pace of opening represent a compromise. ECOWAS had originally offered to open up to 70% of its market over 25 years, whereas the EU had aimed for 80% in 15 years, according to a report from the International Centre for Trade and Sustainable Development. Nonetheless, the deal has raised concerns in Ghana, in particular from trade unions and civil society groups over the ability of local industry to compete. However, it may be partnerships that prove more fruitful for both sides. Hastings told OBG, “Particularly in the field of social development initiatives, a Ghanaian business partner can advise on local requirements. They can also prove essential in community engagement. For example, in land disputes it is often most effective when a local stakeholder interfaces with a community member.”
Ghana is also looking to boost trade with neighbours closer to home under the ECOWAS framework – the bloc today provides a potential customer base of up to 300m people and is estimated to rise to 500m by 2030. Within the ECOWAS region Ghana, along with Nigeria, Côte d’Ivoire and Senegal are the only countries whose exports account for more than 1% of the total. Nigeria dominated at 73%, followed by Côte d’Ivoire at 10%, Ghana at 4% and Senegal at 2%. While a common trade policy framework has been in place for several years, execution has been spotty, subject to non-tariff barriers and exchanges fairly limited. ECOWAS member states agreed in 2008 to a Common External Tariff regime, with five bands of tariffs ranging from zero to 20%.
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