SHOULD NIGERIA SIGN THE ECONOMIC PARTNERSHIP AGREEMENT?
The Nigerian House of Representatives on Thursday requested that Nigeria’s minister of trade and investment, Dr Olusegun Aganga, appear before it to explain the implication of the country signing the Economic Partnership Agreement. Members raised concerns over the skewness of the agreement in favour of Europe and hoped the minister would provide clarification on its pros and cons.
The Story of EPA
In 2000, the European Commission (EC) and Africa signed the Cotonou agreement aimed at promoting reciprocal trade between both continents. Under the agreement, a new trade regime, subject to the agreement of participating countries was supposed to commence on 1 January 2008. This trade agreement was to replace the existing non reciprocal agreement between the European Union (EU) and Africa, which allows African countries access to the EU market without any reciprocity from Africa. The Economic Partnership Agreement (EPA) will, under the new regime, only allow trade preferences for African goods if Africa also gives EU unfettered access to its markets. Africa is expected to remove 80% of import tariff on goods from EU. Furthermore, the EU also expects Africa to remove restrictions on the export of unprocessed raw materials and also promote liberalisation in other areas such as investment and services.
Opposition led by Nigeria
Following the expiration of the set deadline of December 2007, there is increasing pressure on African countries to sign the EPA. A new deadline of October 2014 has been set, but there is growing resistance from African countries. The current effort to achieve this is facing a brick wall of opposition from countries such as Nigeria. During a session of the Conference of African Union Ministers of Trade in Addis Ababa, Ethiopia in April 2014, the Nigerian minister of trade and investment supported Nigeria’s stance saying: ‘Nigeria’s position on EPA is very clear. Africa is on the rise. It is a very big and strategic market for any trading partner. That is what the EU wants from us but Africa must jealously protect what it has. We should leverage our abundant natural resources and large market to develop our industries; create jobs for our people; increase intra-African trade and achieve regional integration. We must not be in a hurry to give away what we have. We must not sign an agreement without first of all carrying out a robust economic analysis of the overall impact the agreement will have on the region, our children and future generations.’
Some African nations have signed!
Not all African countries are opposed to the EPA. Ghana, which is one of the countries in support of the agreement, is at the frontier of persuading other African countries into joining the EPA train. At a meeting with a delegation of the Economic Community of West African States (ECOWAS) parliamentarians, the Ghanaian president, John Mahama said: ‘I wish to state that Ghana is in favour of the negotiation of a sub-regional EPA. Ghana will continue to play the facilitative role, especially now that we have assumed the Chairmanship of ECOWAS.’ In addition to Ghana, Cote d’Ivoire is the only other ECOWAS country that has initialled an interim agreement. Cameroon, in central Africa has also signed; while all the countries in the East African Community (Burundi, Kenya, Rwanda, Tanzania and Uganda) have signed an interim agreement. These initial agreements are goods-only texts which are mainly tariff schedules, but also envisage negotiations on a further range of outstanding clauses in the EPA. Each of the countries that have signed has managed this on different terms making the existing EPA agreements very heterogeneous. It would thus be beneficial for the EC to agree similar terms with trading blocs within the continent rather than deal with individual countries.
The Danger in EPA
Liberalising 80% of imports imply that African based industries will be competing with EU industries for African markets. Given the infrastructural deficit in Africa and the high cost of doing business, it will be impossible for domestic industries to compete favourably. Africa will likely become a dumping ground for made in EU products and the gains the EPA is supposed to provide for African economies will be eroded. Local industries will close down and there will be consequent job losses. The scenario is similar to the fate of the Nigerian textile industries, most of which have closed down due to unfavourable competition from cheap imports from China and Europe. In the 1980s, Nigeria was the second largest textile producing country in sub-Saharan Africa with about 180 textile mills. Many of the mills are now closed or operating at suboptimal capacity. In 2010, there were only 25 textile industries operating in Nigeria. Hundreds of thousands of people employed in the industry have lost their jobs with only 24,000 employed as at 2010. Perhaps Nigeria is at the frontier against the EPA because of the lessons learnt in the past.
There is also the risk of signatory countries becoming only exporters of raw materials with less diversified economies. The different economic zones’ effort at promoting borderless economy and intraregional trade is also in jeopardy. Selective agreement with individual countries with regional free trade agreement can foster tension between signatory countries and non-signatory countries.