A new regime for trade with West Africa

The EU and West Africa completed an economic agreement in 2014 that will link the two blocs closer together. But the deal itself, its positive outcomes and the criticism towards it remains a fairly untold story.

For many Europeans images of poverty stricken children, Ebola devastated villages and spam mails from Nigerian war lords are the first thing that comes to mind when hearing of West Africa. But believing that to be the actual state of the region would be a drastic mistake.

A growing economy, a steady democratic course and high numbers of young people ready to strengthen the workforce in coming years, makes West Africa more important than ever. Perhaps that’s part of the explanation for the EU and 16 West African countries to have finalized an Economic Partnership Agreement ( EPA ) after more than ten years in the making.

Total trade between the West African countries and the EU have risen steadily ever since 2003, when trade talks were initially started. The majority of imports from Africa are minerals while the EU mainly exports industrial products.
Total trade between the West African countries and the EU have risen steadily ever since 2003, when trade talks were initially started. The majority of imports from Africa are minerals while the EU mainly exports industrial products.

The deal itself contains a number of different aspects, however, one stands out compared to the current situation. While the EU is already – for the most part – giving complete market access to the West African countries, this deal will ensure European companies better access to the West African Market.

Customs barriers remains a major obstacle in todays free market economy. Countries and trade blocs impose heavy customs and tariffs on foreign goods in order to create revenue and to protect local markets. But for European products heading to West Africa, some of those tariffs are about to be removed.

With the EPA agreed upon, the West African countries will have to remove 75 percent of their customs and tariffs on products coming from the EU over the next twenty years.

According to the European Commission, this deal is beneficial for both economies, but they do emphasize the opportunities for West Africa:

“In a true partnership, everybody wins. The agreement fully takes into account the differences in the level of development between the two regions and is therefore asymmetrical in West Africa’s favour. The EU will provide West African firms with conditions that are more advantageous than those that apply to European exports to Africa,” the spokesperson for Trade, Daniel Rosario says and continues:

“But at the same time, this Agreement opens new business opportunities and increases legal certainty for EU investors in the region. It also gives both partners major tools for further trade cooperation and problem solving. The EU considers the outcome balanced and mutually beneficial,”

Debated in West Africa

While European debate has been very limited towards the agreement, it has been a hot topic in West Africa. One example is the fact, that Nigeria – by far the biggest of the West African states – has been somewhat reluctant to sign the agreement.

After EU and the negotiators from the “Economic Community of West African States”  agreed on the terms in February last year, Nigeria appeared to be reconsidering the agreement over spring and early summer. Concerns were mainly based on fear of giving too much access to European companies.ECOWAS

According to Sylvanus Afesorgbor, PhD Fellow at Aarhus University and founder of the Ghanaian think tank Centre for Trade Analysis and Development, those concerns were understandable but shouldn’t be enough to keep the West African countries from signing the EPA.

“Some of the fears are genuine. They feel, when looking at the EU, that they are at a lot better level economically with their firms more productive and  West African firms can’t compete with them in some areas,” he says and adds:

“I am however not worried, because removing tariffs and customs on 75 percent of all products will still allow  West African countries to protect  their local and sensitive industry with the 25 percent window that they wouldn’t have to remove.”

Another aspect of opening up their markets, according to Mr. Afesorgbor, is, that it is something the West African countries will eventually have to do in any case. “A necessary evil” in a global world, he argues, is to be productive and not being overprotected by government.

The risk of losing revenue from the tariffs and customs has also been an issue in West Africa. While the dependency differs between the countries the average revenue from tariffs on European goods stands at 18 percent of the total government revenue in West Africa.

Trade for Aid

While there have long been a scheme called “Aid for Trade” for developing countries with the objective of improving developing countries capacity for trade, in the final phase of the EPA things were a bit different.

On the 17 March 2014, after negotiators had concluded their work but before any state leaders had signed, the EU announced they would give at least €6.5 billion in order to support West African countries “stimulate growth and job creation,” and prepare to join the new economic partnership with Europe.

The funding wasn’t all new, and some of it was already earmarked as a part of the EU development fund, but adding more funding while making it a part of the EPA  sparked some criticism.

“It is aid conditionality [adding the criteria that aid-money should be used for consumption in donor country]coming in again. It shouldn’t be that you qualify for aid because you sign the EU agreement,” Mr. Afesorgbor says and makes it clear, that although he’s against the principle, he doesn’t believe it to have been a major issue in these dealings.

According to him, in a global world with other big players, the EU could not put so much negative pressure on West Africa as some of these countries have other options or alternative sources of aid/external funding. Nigeria for example receives the majority of its – already limited due to their oil rich underground – aid from the US and Ghana is also negotiating $3 billion loan from China.

The process of agreeing to terms

Despite being reluctant at first, Nigeria, as well as the other fifteen states, signed the EPA in early October after a process that’s lasted since 2003.

Although free trade talks usually taking a long time to close, this was unusually long in the making. The process was complicated by it being the first of its kind for the West African countries combined. Previously they had all been a part of a standardized scheme between the EU and developing countries in Africa, the Caribbean and the Pacific (ACP).

That changed when the World Trade Organization decided the arrangement was distorting trade, and around the millennia, the EU and the APC countries changed their ways. The new agreement meant that the EU would negotiate different free-trade terms with six different blocs within the APC countries.

The ACP countries is mainly former colonies of the Member States of the EU. West Africa trade with the EU makes up 40 percent of total trade from the ACP countries. Click here to read more on aid to developing countries.
The ACP countries is mainly former colonies of the Member States of the EU. West Africa trade with the EU makes up 40 percent of total trade from the ACP countries. Click here to read more on aid to developing countries.

According to Dr. Clara Weinhardt from the Global Public Policy Institute in Berlin, it’s dealing in these blocs that made it difficult to conclude a fast deal. While the Caribbean states had experience from conducting trade talks together, and thus quickly struck a deal with the EU, this was a brand new exercise for West Africa.

Eventually though, a deal was struck. While originally asking only to remove 60 percent of all barriers – raised to 70 percent before the final negotiations – the EU and West Africa agreed to 75 percent before the negotiators on both sides were satisfied.

Success not imminent

Despite recent signings by African leaders and the Council of ministers, and the fact that neither the European Parliament or any national parliaments have come out strong against the deal, the success of the EPA is not yet a given.

According to Dr. Weinhardt, implementation could cause issues.

“If nothing happens on the ground there’s not going to be a whole lot of trade. And I don’t see a quick implementation,” she says and adds that the somewhat halfhearted support from some of the West African countries could become a problem.

“If we don’t have a buy in from the very beginning. If we have countries reluctantly signing on to the EPA agreement, there’s not a whole lot you can do afterwards in order to convince them to implement everything – except for highlighting that there are legal obligations.”

Whether or not those legal obligations become relevant, is a question for the future.

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