EUROPEAN UNION; Ghana economic partnership undermines or adhere under AFCFTA

Listen to this Article Now

Ghana pact an interim Economic Partnership Agreement (IEPA)with the European Union in December 2007 (IEPA) and ratified by Ghana in 2016, providing a framework for trade, facilitation of fiscal revenue system reforms, improvement of the business environment, and promotion of the upgrading Ghana’s productive sectors.

The EU describes the pact as a new type of partnership that will boost economic growth and poverty reduction in African nations such as Ghana. Under the Agreement, Ghana’s exports to the EU are granted duty-free and quota-free access. The EU region has been Ghana’s most important trade partner, accounting for over 30% of total external trade. The IEPA’s implementation would result in a moderate reduction in total tariff protection. Ghana agreed to liberalize 80 percent of its EU imports by 2029, accounting for 81 percent of tariff lines^.

It has been observed by trade professionals and academics that the ultimate goal of the European Union is to enhance its trading relationship with countries collectively within the ECOWAS. For this reason, there is a caveat to the EU – Ghana IEPA which states that it is going to be superseded by a future EU – ECOWAS Agreement. The proposed EU – ECOWAS Agreement has faced numerous challenges as the countries within the economic bloc of ECOWAS disagree on how tariffs should be treated.

 Since the creation of AfCFTA in 2018, the community of African countries has shown high commitment and determination to harness the benefits of a trade liberalized system. This is evidenced by the fact that 38 countries have now deposited their instruments of ratification, with Burundi being the latest to do so. AfCFTA’s strategic objectives as enshrined in the enabling Agreement is to “promote and attain sustainable and inclusive socio-economic development, gender equality and structural transformation of the State Parties”. This objective can only be feasible if efforts are made to reduce poverty and boost employment. It is on this score that the World Bank in its analysis observed that by 2035, the AfCFTA would help raise 30 million people out of severe poverty and 68 million people out of moderate poverty, through the progressive elimination of tariffs and elimination of non-tariff barriers to trade and investment. The progressive reduction of tariffs by Ghana to imports from EU obviously provides a gateway for the EU to flood the Ghanaian market with cheaper goods produced in the EU. As a result, many industries will continue to collapse for lack of capacity to compete favorably, and this will lead to massive layoff of workers. AfCFTA expected to reduce poverty among Africans, Ghana should benchmark the IEPA with clearly-defined indicators which would help improve economic welfare of its citizens. There is no doubt that the AfCFTA which is seeking boost intra African trade will be undermined by the preferential treatment given to third-party goods from the EU.

AfCFTA is to boost intra-African trade, and it is therefore recommended that the EU – Ghana IEPA will extend a substantial part of the preferential treatment of duty-free quota-free to all ECOWAS countries which have ratified the AfCFTA. Ensure that Ghana compete favorably with imports of EU products, the exclusion range of products should be expanded to protect infant industries. Since Ghana may lose some tariff revenue under the EU – Ghana IEPA, it is recommended that an agreed amount of compensation is given to Ghana to mitigate the effect of tariff lose under the progressive liberalization. The EU should create a sustainable program of enhancing the industrialization drive of Ghana, by siting some of its major equipment manufacturers in Ghana, to reduce the outflow of foreign exchange.