Interview: Cecilia Malmström
Which parts of the ECOWAS economic partnership agreement (EPA) proved to be most difficult to negotiate, and how were they finally resolved?
CECILIA MALMSTRÖM: You have to bear in mind that the West African EPA group has the largest number of countries of all groups, with 16 countries that are diverse from economic and development points of view. Reaching common positions among such a large number of diverse participants was a big challenge, especially since this EPA is also a truly regional one, with only one common West African market access offer for all countries.
A deal became possible when ECOWAS agreed a common external tariff in 2013. Twelve ECOWAS countries are least-developed economies, making the development cooperation provisions of the EPA a crucial part of the deal. Designing an EPA Development Programme (PAPED) with strong EU commitment to support the region was extremely important for West Africa. On both market access and development cooperation all parties had to show flexibility and compromise in order to conclude the negotiations.
To what extent do you expect to see an increase in EU exports to West Africa, and in which sectors?
MALMSTRÖM: The EPA is an agreement with an important development objective, and the treatment of exports reflects this. While the EU opens its market fully and immediately, market opening in West Africa is partial and spread over a 20-year period.
Of course, EU exports will no doubt increase, but this is not the main objective. This will only take place towards the end of the implementation period. Increased EU exports will probably consist mainly of products used in West Africa as inputs for production processes, for example machinery and chemicals.
We’re expecting that increased imports of EU inputs will lead to an increase in locally added value. We’re also expecting West Africa to become more integrated into global value chains, and to increase production and exports of processed products.
What is the view of the EU on the levying of import tariffs to increase local competitiveness?
MALMSTRÖM: Import tariffs on intermediate and capital goods have quite the opposite effect – they make local manufacturing more expensive and therefore less competitive. In some West African countries, protectionist policies have been in place for quite some time and have harmed rather than helped the respective economies. In many cases, governments keep tariffs in place in order to raise money because they are easier to collect than, say, certain taxes. The EU is supporting countries transitioning from a tariff-based revenue system towards a more neutral domestic taxation system. Nonetheless, where competitiveness is not a realistic prospect – or not just yet – tariffs may be important to protecting sensitive sectors, such as agriculture.
How does the EPA increase opportunities for foreign direct investment (FDI) in African countries?
MALMSTRÖM: Africa’s market for FDI is increasingly dynamic, shifting from traditional extractive sectors to infrastructure and services including construction, renewable energy, telecoms, transport and financial services. This reflects the diversification of African economies and the rise of the African middle class.
There are clear opportunities for European companies. European FDI can be encouraged through a better business climate, including a more favourable regulatory framework. EPAs contribute to this by establishing the right trade incentives and rules. It is often overlooked that EPAs are as much about trade between the countries in an EPA as they are about trade with the EU. The EU’s overall strategy is to support regional integration to help African regions come to grips with broader economic integration.
Read More from OBG
