Tuesday, December 18, 2007

Ghana signs trade agreement with EU: Will others follow?

Ghana has become the second West African country to sign a multi-staged Economic Partnership Agreement with the 25-nation European Union.

The agreement replaces a five-year trade accord most recently signed in Cotonou, Benin in 2000, but declared illegal by the World Trade Organization because it maintained trade preferences to former colonies of Europe from Africa, the Pacific and Caribbean nations. The agreements recognized the vast economic differences between the former colonies and colonizers, and provided aid and trade preferences to the former colonies, which didn’t have to reciprocate. The WTO claimed if the countries want to continue trade agreements each side must further liberalize markets, which will take place under the auspice of the EPAs.

The low-carb EPA
Unlike a full EPA, this deal, according to ModernGhana.com, will allow 80 percent of EU goods into the Ghanaian market duty free, and all goods from Ghana – except rice and sugar – duty free into the European Union. (At least one commentator claims that Ghana’s rice industry – already devastated by previous open trade policies – will be hard hit by the EPA.)

Ghana will have 15 years to liberalize 80 percent of its market, while the remaining 20 percent may never be completely open, depending on Ghana’s development status. This agreement is similar to the one signed by neighboring Cote d’Ivoire just last week. The two countries are the world’s top cocoa producers and they did not want to disrupt these exports, a Ghanaian official said.

Cafeteria-style free trade?
The British non-governmental organization Oxfam asserts that African countries will face stringent rules to keep their products out of European markets. These include rules regarding the true origin of a product, which limits the number of exports that can receive preferential treatment; increasing sanitary standards; higher levies on processed goods (like instant coffee) than raw materials (coffee beans, cocoa beans), which discourages African countries from processing their own materials.

When the trade liberalization begins, Oxfam worries that the governments of Ghana and Cote d’Ivoire will have to choose between taxing European cars (which account for up to 10 percent of government revenues) with protecting staple foods or exempting certain nascent industries from competition or supporting future manufacturing development.

Presently, 60 percent of Ghana’s workers are in the agricultural sector, which provides 35 percent of the country’s GDP.

The rest of the pack
Ghana's decision comes just before other members of the West African economic union decided to an 18-month timetable to negotiate a general economic partnership agreement with the European Union. While Ghana and Cote d’Ivoire’s agreement only cover trade in goods, the full West African block will most likely negotiate an agreement in a host of other areas, such as competition policies, investment strategies and public procurement.

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