The EU - ECOWAS Economic Partnership Agreement
The Cotonou AgreementAll available translations. between the EU and the African, Caribbean and Pacific (ACP) countries foresees the signing of regional Economic Partnership Agreements (EPAs), in order to change 30 years of trade preferences that have failed to develop the West African economies. The general philosophy of the EPA is to gradually transform the relationship between ECOWAS and the EU from one of dependency to one of mutual trade partners in the long run. It however recognises the different levels of development of both economic blocks by allowing ECOWAS member countries to apply safeguards to protect their infant industries and sensitive products as well as by foreseeing trade-related support for West African countries under the EPA Development Programme (EPADP - or PAPED in French). Once signed, the EPA will be applied asymmetrically, with the EU fully opening up its market and ECOWAS only over time, while retaining the right to protect a share of its sensitive industries from European competition.
So far, two ECOWAS member states, Ivory Coast and Ghana, initialed bilateral "stepping stone (or "interim") EPAs" with the EU at the end of 2007. The interim EPA with Ivory Coast was signed on 26 November 2008. ECOWAS and the EU are currently negotiating a more comprehensive EPA that will eventually replace the interim EPAs.
But what are the real benefits of the EPA for West Africa? Sierra Leone, which is currently enjoying full access to the European market under the "Everything But Arms" (EBA) arrangement, might for instance see it preferable not to sign the EPA. However, one has to bear in mind that the EBA arrangement is a unilateral arrangement granted by the EU which may be opened to other Least Developed Countries (LDCs) outside the ACP group and could thereby increase competition for Sierra Leone's main agricultural export products like cocoa, coffee, sugar and bananas on the European market. The benefit of the EPA, which will not only regulate the trade in goods, but also that in services and investments, is that it will provide a unique and secure legal framework for West African producers, businesses and banks to engage in trade relations with the EU market, and thereby give them a competitive advantage towards other emerging economies.
Secondly, while the gradual liberalisation of West Africa's tariffs may, over time, increase the flow of European goods into the region, it must be noted that the nature of traded goods between the two regions are different and therefore not in competition with each other. ECOWAS countries mainly import cars, chemicals and other manufactured products from Europe, whereas the EU imports raw products (oil and minerals) and agricultural commodities (coffee, cocoa and bananas) from West Africa. Furthermore, for products where competition exists, the interim EPAs of Ghana and Ivory Coast have for instance excluded the liberalisation of tariffs for products like cereals, flour, oils and vegetables. Reducing tariffs and thereby the costs of importing machinery from Europe will also have benefits for local businesses and industry as trading costs will gradually reduce. This in turn will boost growth, create new employment opportunities and contributes to poverty reduction.
In fiscal terms, the EPA will help the ECOWAS countries in moving from a system of tax collection that is excessively reliant on high import duties to a system that relies on domestic taxation. This will help to make revenue generation more predictable and hence stimulate better budget planning and execution practices. The reduction in import tariffs will be progressive (at least 15 years) and will give a country like Sierra Leone enough time to modernise and improve its tax administration, as it is currently doing under the National Revenue Authority (NRA) Modernisation Plan. The introduction of the Goods and Services Tax on 1st January 2010 is in line with the efforts at ECOWAS level to harmonise fiscal legislation and also takes into account the changes that will be eventually introduced by the EPA.
Finally, other than creating a new dynamic in West Africa's development by facilitating trade and regional integration, the EPA is also about making the new trading relationship between ECOWAS and the EU compatible with WTO rules. Under the current arrangement, the EU is giving preferential treatment only to the ACP group (among which West Africa), but not to other developing countries outside of those regions. The eventual step-by-step implementation of the EPA will however align ECOWAS and the EU with its WTO partners and make the multilateral trading regime much fairer.