The subtle pressure by the European Commission, EC, may have spurred the ECOWAS Commission to renew negotiations of the Economic Partnership Agreement, EPA, which has been stalled due to many contentious issues. The EC, last September, threatened to withdraw free market access to the European Union, EU, market by January 1, 2014 from countries that have signed an interim EPA with the EU but failed to ratify and implement it fully. If the EC carries out its threat, Ghana and Ivory Coast, the two West African countries, which signed an interim agreement with the EU in 2007 will be affected. But the two countries cannot implement a full EPA because the negotiations are being done on a regional basis, with ECOWAS negotiating on behalf of its member states. As ECOWAS prepares to resume the negotiations, Ken Ukaoha, a barrister and vice chairman, Federal Government Technical Committee on EPA Negotiations, in this interview with Helen Eni, deputy editor, maintains that the regional body should be cautious of the EU’s carrots. Ukaoha who is also the president, National Association of Nigerian Traders, NANTS, explains why the negotiations had been stalled and how Nigeria and other members of the ECOWAS group can benefit from the free trade agreement. Excerpts:
The negotiation between ECOWAS and the EU has been in the cooler for a while, what is happening?
The negotiation has been on and off. Sometimes you find some lethargy in the blood of the people that are negotiating. At other times, you also discover that they have exhausted the regional positions. I also know that there are still some divergences on the table which are yet to be cleared for the negotiation to continue. But the latest thing now is the pressure by the EC.
What is the implication of the threat by the EC on the withdrawal of market access?
This decision by the EC, which has been endorsed by the European Parliament, has put West Africa under intense pressure because apart from Nigeria, the only two non-LDCs (least developed countries) that exist in the sub-region are Ivory Coast and Ghana; all others are LDCs. Ironically, one has signed interim agreement and the other has initialled it and so they are in the category of countries to be affected. Therefore it appears there is a dismantlement of the regional cohesion in the negotiation and it is putting some pressure on the negotiators as well as the ECOWAS heads of state.
What are the two countries doing about the development?
The two countries are looking at ECOWAS because there have been some decisions earlier within the sub-region that West Africa would not negotiate unilateral agreement where member countries go to the EU to negotiate but that West Africa must negotiate as a region, as an entity. Towards the end of 2007, these two countries walked away and went into the interim agreement. Nigeria was rattled because prior to that, on 27th November 2007, Nigeria had requested and applied for a GSP+ agreement (Generalised System of Preferences) to the EU to cover Nigeria, Ivory Coast and Ghana and we were surprised to find that Ghana and Ivory Coast had gone ahead to negotiate and get into an interim agreement with EU. However, in 2008, Nigeria took a major step to reintegrate the two countries into ECOWAS EPA negotiation so that we don’t disintegrate our regional integration effort since 1975. ECOWAS’ decision then was that once we’ve gotten a regional EPA, whatever they have signed or initialled would be vitiated. It is on that basis that they have been in the mainstream of the negotiations. Of course you will also observe that the current Ivorian president is the chairman of ECOWAS and there is no way they can pull out at this point. ECOWAS is under pressure to do everything possible to sign an agreement with the EU. But the question remains, what kind of agreement are they going to sign – a conclusive agreement, an agreement that is development oriented, which the people of West Africa say they want, or an agreement that still has facet of inconclusiveness and divergences between what they want and what the EU want. So these are the issues.
You said earlier that some progress has been made, can you tell us some of them?
Let me start from the internal progress. If you look at West Africa, we never had anything like a Common External Tariff, CET, but today we have it, courtesy of the EPA pressure. We have the CET which has recently been adopted and you know it is one of the things that should be put in place for the region to negotiate as a bloc. Another progress that has been made is that some of the inconsistencies in the proposed text of the agreement have been cleared. Also both parties have agreed that there is a need for funding for the implementation of EPA, including the EPA Development Programme, DP. This EPA would have been concluded long ago if the EU had not remained very dogmatic about some salient issues in the negotiation.
What are these issues?
The market access offer, for instance; the EU wants market access of between 80 and 90 per cent, arguing that that was what they got in other regions they are negotiating with. But as trade analysts, we have discussed that for West Africa, they cannot get 80 to 90 per cent from us because West Africa is one of the poorest regions in the world and therefore we need some level of protection for the region’s manufacturers, industries, etc. West Africa has moved from its initial offer of 60 per cent market access to 63.7, 65, 67, and now 70 per cent and we say we can’t go up any further. And all this while, the EU has maintained its stance.
Why do you think the EU has refused to shift ground and consider the concerns of ECOWAS on the need to maintain some level of protection for its critical sectors?
The EU bases its argument on Article 24 of the General Agreement on Trade and Tariff, GATT, which talks about ‘liberalising essentially all trade.’ That article did not mention a specific percentage. Based on my own interpretation – whatever opening you are going to give to the other party must be based on your development status. The EU has to understand that these are developing countries and among the 16 countries negotiating EPA under ECOWAS (including Mauritania which has joined ECOWAS on EPA), only three of them are non-LDCs, apart from Cape Verde that is trying to come into the non-LDCs status. All the other 13 are LDCs and these are highly indebted countries so they do not only need goods coming in or consumer welfarism; they also need some level of protection for the private sectors to grow their economies. We can’t afford to allow full market access, which is what the EU wants. With the EU having more than 50 per cent of the world’s multinational corporations, it would be impossible for these developing countries to develop their industrial capacity to match its partners’ exports of goods.
My argument is that even the World Trade Organisation, WTO, under which the creation of the original free trade agreements, such as EPA falls, provides for SDT (special and differential treatment), which in a layman’s language means you must treat these people differently in consideration of their poor status. But these things are not being taken into account by the negotiators of EU, who are banking on the interim agreements they secured with Ghana and Ivory Coast where they got above 80 per cent. They are now finding it difficult to come down and now think if they have secured this with the two countries, which are two of the biggest countries in West Africa, then why don’t others allow the same percentage. But Nigeria cannot afford to expose her economy to such market onslaught. You have 300 million population in West Africa and about 170 million of that population is from Nigeria and that tells you that is where the market is. So Nigeria is the main target of any negotiation with West Africa. But Nigeria has come out to say, we have our industrial policy, we also have our industrialisation strategy, and all these things talk about import substitution so as to give protection to our industries, economy, the farming community, etc. Look at how much Nigeria is putting into agriculture. It is huge and it is not something you can sit and allow your market to be swindled, drowned, no. Look at the massive importation of food products Nigeria is contending with, and the country is trying to curb this by promoting local production – increasing productivity at the domestic market so that once you increase that you reduce importation. Other countries may not have this as their strategy but Nigeria has it and cannot afford to lose it. Once it does, then it means it has lost all the funds it has put into these critical areas and initiatives designed to boost agro-allied, manufacturing and other critical sectors of her economy.
Is market access the most contentious issue at state in the negotiations?
It is the most contentious issue. The second issue is that of the provision of funds, which I mentioned earlier, the EPA DP. The fund is meant for the implementation of EPA in line with Article 37, Paragraph 3 of the Cotonou Agreement, which is the mother of EPA. It is meant for capacity building, provision of infrastructure, because you need a lot of infrastructure to be able to implement EPA. The EU is proposing €6.5 billion as against €16.5 billion demanded by ECOWAS. In West Africa, you cannot see a railway line crossing from Nigeria to Benin Republic. Interconnectivity of airlines is still a big challenge. About three years ago when we were negotiating the EPA, the then economic adviser to the president and myself were travelling from Nigeria to Ouagadougou in Burkina Faso, we couldn’t get a regional airline to take us there. We had to fly Air France to France and then took another Air France to Burkina Faso. So these are the problems. Look at the shipping lines. If I want to bring a 40ft container from Hamburg in Germany to Nigeria, I will pay €650 but if I want to move the same 40ft container from Lagos Port to Accra, Ghana, I will spend about €1,350. Most of them are foreign shipping lines and so they determine the charges. How many shipping lines do we have in West Africa? Without these critical infrastructures, regional trade will remain trifled and Europe and other countries targeting the regional market will be the main beneficiaries.
So what benefits would accrue to West Africa from EPA?
Recall that an impact assessment was conducted on Nigeria prior to the full negotiations of the EPA by a firm called Enterplan Limited, a UK-based international development consultancy firm commissioned by the EU to undertake this study on Nigeria. And this firm came out with the report of their study. Some of the contents of that report said if Nigeria was to sign the EPA by December 31, 2007 and start implementation by January 1, 2008 as provided by the WTO, at the end of one year, Nigeria would have lost €487 million on tariff alone. During the same one year period, EU would have gained €700 million in the area of tariff gains and market access gains. This is so because Nigeria does not have anything in its basket. Apart from oil, which is not part of the negotiations anyway, what commodities do we export to the EU? Even the cocoa we export does not have value addition. So we are almost dependent on import for food, dairy and other consumables. So the result of this study, which they commissioned, opened our eyes. This would be the same outcome in all the countries of West Africa if the study is carried out there. I told them at that meeting that I had read the Cotonou Agreement and it stated three things as the objectives of the EPA – regional integration, poverty reduction and sustainable development. The poser now is if this study showed that Nigeria would be losing so much on tariff alone in one year while EU would make so much, how would the objectives be achieved?
So what happened to the report?
EU rejected that same study which they commissioned in the first place and paid for. I told our people on the negotiating table that it was at that stage we should have abandoned the negotiations. It was at that point of rejection of the report that Nigeria began to re-examine the documents critically.
Now that ECOWAS is poised to resume negotiations of EPA this year, what advice would you give the regional body?
As at now, ECOWAS does not have a common trade policy. If you don’t have a common trade policy, what then are you negotiating with; where then do you bring your objectives and strategies for negotiations? EU has a common trade policy, a common communication policy, a common investment policy, a common market that is operational. Even common positions on areas like services. So I’ll advise them to consider this issue because it is very critical. I’ll also advise them to begin their charity at home. Intra-regional trade in West Africa needs to be substantially improved for them to benefit much from trade with other regions. Our intra-regional trade in West Africa is about 10 per cent. But intra-regional trade within the EU is between 40 and 50 per cent. So that means they trade significantly among themselves. But we trade more with other regional economic communities, essentially Europe and America. We are not taking advantage of the inherent benefits of regional trade, yet we are busy negotiating trade with other regions.
My worry is that Nigeria is getting bigger and we are making new friends every day. Look at the BRICS (Brazil, Russia, India, China, and South Africa) today; these are emerging markets. Once we close up ourselves in this EPA agreement then we have ostracised ourselves unwittingly from all these because we don’t know tomorrow.