The countdown of October 1, 2014 as the deadline set by the EU for the signing of the EPA (ie Economic Partnership Agreement) between the EU and ECOWAS has generated mixed reactions.
At a forum organised at the Accra International Conference Centre in Accra on April 17, 2014 to gauge the feelings of stakeholders towards the signing of the EPA, it became clear that while the government representatives at the forum, together with some major industry players mainly exporters to the EU spoke somewhat in favour of signing the EPA, civil society representatives were dead set against signing the EPA.
In the respective views presented, the exporters, mainly tuna and fresh food exporters to the EU were of the opinion that failure to sign the EPA would bring about a possible collapse of their businesses.
This is because they might not be in the position to pay the additional duties which will be levied on their exports to the EU and this will bring in its wake diminished profits and job losses.
Some were so emphatic that the non-signing of the EPA would, in actual fact, lead to the collapse of their businesses.
The government’s views as presented by the Minister of Trade and Industry, Hon. Haruna Iddrisu, and Hon Hanna Serwaa Tetteh was to the effect that the EU already had a preferential access of 35 per cent of its exports entering Ghana duty free and quota free while Ghana presently had a 100 per cent market access to the EU duty free and quota free.
What is, therefore, at stake is a top up of a mere 40 per cent of EU exports. It was also stated that any revenue losses incurred by government in duties forgone would be made up by the EU with the provision of €6.5bn.
What was, however, agreed on by the two opposing divides was that failure by Ghana to sign the EPA would result in recourse to the application of the Generalised System of Preferences (GSP), a trading arrangement by which tariffs are fixed on a case by case basis.
While civil society groups reckoned that the GSP was in operation anyway and recourse to it in the event of failure to sign the EPA in any case would not pose any harm to the country, it was the view of other stakeholders, particularly the government, that recourse to the GSP in the event of failure to sign the EPA by the country might be harmful to the nation’s trading relationship with the EU.
Background to the EPA
The numerous multilateral agreements which culminated in the setting up of multilateral institutions among them; the World Bank, IMF, GATT 1947 and GATT 1994 and particularly the World Trade Organisation which was established on January 1, 1995 to replace GATT was actually disadvantageous to African countries and some former colonies and small states located in the Caribbean and the Pacific who collectively are known as the African, Caribbean and Pacific states (ACP) of which the majority are former colonies.
GATT 1994 and its successor organisation, the WTO, were conferred with the mandate to work among the nations of the world to significantly lower the trade barriers among them.
The key plank of GATT and WTO protocols require countries which negotiate preferential trade arrangements with other countries or trading blocs to offer same to all other countries which are members of WTO without discrimination. This is known as the Most Favoured Nation (MFN) rule.
In the years immediately after the wave of independence in Africa, the Caribbean and Pacific, it was realised by the former colonial powers that these newly independent states needed to be guided to stand on their feet in the turbulent terrain of international economic relations, particularly trade.
Most importantly, it was recognised that a safety mechanism had to be provided for these nations and be propped up on their feet and as it were mentored over time for them to be able to compete favourably in world trade.
Thus, beginning from 1963, the EU, comprising most of the colonial masters of majority of the countries now grouped together as African Caribbean Pacific (ACP), designed favourable terms of trade for the ACP countries.
This was known as the Yaoundé Accord. The agreement was subsequently refashioned in Lome after rounds of negotiations and became known as Lome I, II, III, IV and V.
Under the preferential trade arrangements, the ACP countries were allowed duty free and quota free access to the EU market while they were permitted to levy duties and taxes on European imports and maintain quotas.
It was envisaged that the preferential arrangement would enable the ACP countries, who obviously are not at par with the EU, to build up their infrastructure over time and also prop up their infant industries to enable them to compete favourably in international trade.
Altogether, these special preferential trade agreements which grouped together the EU and ACP countries covered 77 nations majority of who are former colonies of the major EU countries.
The Banana Wars
Even through these preferential trade agreements which were negotiated between the EU and ACP, states proved of immense benefit to the ACP countries, the EU signalled its intention in 2000 to jettison these preferential agreements in the Cotonou Agreement.
This was precipitated by the banana wars which were suits initiated against the EU as a trading bloc by mostly Latin American countries.
Latin American countries have over the years developed a high proficiency in the production of fruits, particularly banana and is home to large banana plantations owned by US firms notably Chiquita, Dole and Del Monte.
Because the banana producing Latin American countries were outside the EU-ACP accords, they were required to pay high duties on their products which were exported to the EU.
This, they deemed discriminatory and as a result, they initiated several suits against the EU at the WTO.
For example, in a trade dispute between the EU and the Latin American countries before the Dispute Settlement Panel of the WTO in 1995, the Latin American countries had complained about the rather high escalation of taxes on Latin American bananas to the EU from 20 per cent to 180 per cent, which coupled with some import restrictions, were designed to limit export of Latin American bananas to the EU in favour of ACP countries.
It was held by the panel that the duty rates applied to the Latin American countries were discriminatory and would impair their export of bananas to the EU as against the ACP countries.
The EPA
Obviously, to curtail any further disagreements with the Latin American countries over their export of bananas to the EU and other countries which also experienced lopsided relations with the EU over their exports, the EU decided to chart a new path in their trading relationship with the ACP countries.
In the view of the EU, this would bring their trading relationship in conformity with the rules of the WTO which require that a Most Favoured Nation (MFN) agreement negotiated with one country or a trading bloc should apply to all other countries and trading blocs.
The import of the EPA in the main envisages the grant of 75 per cent market access to the EU by the ACP countries duty free and quota free while the EU countries also grant a 100 per cent market access to the ACP countries duty free and quota free.
Stakeholder Concerns
The sticking point in the run up to the deadline for the signing of the EPA are the arguments against it which in the main have been championed by civil society organisations.
The main argument by civil society organisations against the signing of the EPA is the potential loss of revenue and the possible closure of our industries in Ghana.
They point out that even in the absence of the EPA, factories in Ghana have been collapsing, owing to the unbridled importation of foreign goods with its attendant consequences.
Moreover, it will also lead to a massive loss of revenue generated from import duties, as well as corporate and excise taxes and also personal income taxes earned by employees of our industries. They also envisage massive job losses with the signing of the EPA.
In short, the vociferous agitations by civil society organisations over the intended signing of the EPA by the government is summed up in the doomsday prediction that it will be the knell of the Ghanaian industry.
In fact, a civil society activist has gone so far as to caution the President to abandon his recent advocacy for the purchase of Made-in-Ghana goods should Ghana sign the EPA.
Notwithstanding the generous offer of aid in the region of € 6.5bn to cushion the government against potential revenue losses, it is deemed that some form of impairment might be occasioned to the Ghanaian industry.
This is for the simple reason of Ghanaian industrial capabilities not being at par with their counterparts from the EU at the present time.
The Way Forward
From my observation, I can envisage that the EU and ACP countries are in a deep conundrum regarding the signing of the EPA.
The EU is at the moment concerned about its continuous violation of the WTO rules with the constant threat of being dragged before the WTO panels.
The ACP countries are concerned about the uneven terrain of their trading relationship with the EU with the prospect of the closure of their industries and their attendant consequences.
Even though the EU must be commended for granting preferential trade terms to the vulnerable ACP countries over the years in contravention of WTO rules, it must be emphasised that possibly, a wholesale immediate implementation of the EPA will jeopardise the industrial development of the ACP states.
A middle course in the circumstances might be the preferred option to guarantee a win-win situation for all the parties.
The writer is a lawyer with specialisation in international business law.
Email: