Review of the Ghana-EU Interim Economic Partnership Agreement (iEPA)
Free
Executive Summary
EU is already Ghana’s biggest market for its agricultural products totally over €5.5bn (EU, 2017). So, this agreement was initialled in 2007 and approved in EU parliament in December 2016 as an initial framework towards a fully-fledged EPA. Both parties developed and signed it as a steppingstone to safeguard their economic interest to avoid the risk of the WTO getting a compatible agreement to replace the Cotonou agreement when it expires. The objectives of the iEPA were: to allow Ghana gain an enhanced market access to the EU without disruption after the expiration of the Cotonou agreement; use it as the starting point to negotiate a full EPA; Help Ghana integrate into the world economy harmoniously without compromising on Ghana’s political and developmental choices and priorities; and create an agreement that is compatible with the article XXIV of GATT 1994.
In terms of product coverage, products listed on chapter 1 to 93 plus products with tariff heading 1006 and 1701 of the harmonised system (HS) will enjoy import duty-free from Ghana to EU whiles products on Chapter 93, will be charged the Most Favoured Nations (MFN) duties. However, if within a marketing year the import of product with heading 1701 are imported in excess of 3.5m tons in to disrupt the EU markets, an MFN duty will be imposed on it. In reciprocity, EU will have a liberalisation scheduled in Ghana where products can be imported to Ghana duty-free with the exception of products that were categorised as sensitive towards, livelihoods, food security, rural development in Ghana. Such goods included agricultural and agro-processing, luxury, and high-revenue goods. Ghana will, in summary, liberalise 80% of its imports from EU including industrial machines, certain types of vehicles, chemicals not produced in Ghana (EU, 2016).
Strengths
Enhanced Market Access to the EU
The iEPA provides Ghana with increased tariff-free access to the EU market, especially for agricultural products. This is crucial as 70% of Ghana's population depends directly or indirectly on agriculture for their livelihood (World Bank, 2017). This agreement ensures Ghanaian exports, such as cocoa and maize, enter the EU market without disruption, boosting Ghana’s foreign exchange earnings and potentially increasing productivity in the agricultural sector.
Opportunities for Export Diversification
The iEPA encourages diversification of Ghana’s export base beyond traditional commodities like raw cocoa beans, focusing instead on value-added products. By improving the Rules of Origin (RoO), Ghana can import raw materials from outside the country, process them locally, and export them to the EU market. This supports the development of key industries such as textiles, fisheries, and agro-processing.
Economic Upgrading Potential
The agreement supports Ghana's upgrading of productive sectors by promoting investment in value-added production. Unlike the previous Cotonou agreement, the iEPA explicitly aims to reinforce and upgrade Ghana’s productive capacity, leading to the development of a more competitive agricultural and industrial sector.
Weaknesses
Significant Revenue Loss from Import Duties
By removing tariffs on imports from the EU, Ghana risks losing approximately $1.3 billion in revenue between 2008 and 2022, which represents 2.35% of its 2013 GDP (Acheampong et al., 2014). Ghana heavily relies on taxes, which account for 79% of its revenue, making the removal of tariffs a significant fiscal challenge (MOFEP, 2017).
Limited Policy Space for Industrial Growth
The iEPA restricts Ghana’s ability to impose tariffs on heavy industrial imports, such as machinery and industrial chemicals, which are critical for industrialisation. Without protectionist measures, domestic industries in these sectors face stiff competition from experienced and cost-efficient EU manufacturers, impeding Ghana’s aspirations for industrial development.
Complex Overlaps with Other Agreements
Ghana’s obligations under the iEPA conflict with provisions in the Cotonou Agreement and ECOWAS trade policies. For example, while the Cotonou Agreement allows Ghana to impose tariffs to protect local industries, the iEPA removes such flexibility. This creates legal and operational uncertainty, making it difficult for Ghana to navigate its commitments under multiple trade agreements.
Non-Tariff Barriers to Trade
Despite tariff-free access to the EU, non-tariff barriers such as sanitary and phytosanitary standards limit Ghana’s ability to export or import specific products. For instance, the EU’s ban on poultry imports from certain West African countries prevents Ghana from sourcing inputs from its ECOWAS partners, undermining regional trade integration.
Opportunities
Increased Welfare Gains
Enhanced market access under the iEPA can significantly improve welfare for farmers, local businesses, and the government. A study by Obeng (2018) showed that a 20% increase in cocoa and maize production and a 10% rise in global cocoa prices could lead to welfare gains of 87.5% for farmers, 21.8% for the government, and 9.2% for EU consumers. This indicates the potential for the agreement to boost livelihoods and government revenues through improved agricultural productivity.
Expansion of Non-Traditional Exports
The agreement allows Ghana to explore new export opportunities, particularly in processed agricultural products, textiles, and fisheries. This diversification reduces Ghana’s over-reliance on raw commodities like cocoa beans, which generate low revenues. Value-added exports bring higher earnings and create employment opportunities in processing and manufacturing.
Facilitation of Trade and Investment
The iEPA promotes Ghana’s integration into global trade by reducing barriers and encouraging foreign direct investment (FDI). Improved access to EU markets and increased competitiveness in sectors such as agriculture and agro-processing are expected to attract investors seeking to leverage Ghana’s preferential market access.
Knowledge and Technology Transfer
By partnering with the EU, Ghana has the opportunity to benefit from knowledge-sharing initiatives and access to advanced technologies. This can help local industries become more efficient and competitive, further supporting Ghana’s economic development goals.
Threats
Erosion of Local Competitiveness
The removal of tariffs on EU goods could overwhelm Ghanaian industries that lack the scale, experience, and resources to compete with EU manufacturers. This is particularly concerning for heavy industrial sectors, which require significant investment to become globally competitive.
Dependency on Raw Commodity Exports
While the iEPA supports agricultural upgrading, it does little to address Ghana’s reliance on raw commodity exports. This limits the country’s ability to generate higher revenues from high-value industrial products, hindering long-term economic growth.
Fragmentation of Regional Trade Agreements
Ghana’s individual iEPA could weaken ECOWAS trade integration, as it creates uneven trade obligations among member states. Non-tariff barriers imposed by the EU further disrupt regional trade flows, reducing the effectiveness of ECOWAS as a trading bloc.
Adverse Economic Disparities
The agreement’s potential benefits may not be evenly distributed across sectors or regions within Ghana. Agricultural and light manufacturing industries may experience growth, while heavy manufacturing and other high-value sectors face stagnation or decline.
Advice & Recommendations
Promote Regional Agreements
Encourage the ratification of an EU-ECOWAS EPA to ensure alignment between Ghana’s trade policies and ECOWAS objectives. A regional agreement would strengthen economic integration, reduce trade barriers within ECOWAS, and create a more unified approach to engaging with the EU.
Offset Revenue Losses
Explore alternative revenue-generation measures, such as expanding the tax base and attracting FDI, to mitigate the fiscal impact of tariff reductions on EU imports.
Support Industrial Development
Implement policies that prioritise heavy industrialisation, such as targeted subsidies and infrastructure investment, to ensure balanced economic growth and reduce reliance on agricultural exports.
Strengthen Regional Trade Partnerships
Work with ECOWAS partners to harmonise trade policies and address non-tariff barriers that impede regional trade. This would enhance Ghana’s ability to source inputs from neighbouring countries and increase the utilisation of the iEPA.
Maximise Benefits of the Agreement
Establish mechanisms such as competitiveness review committees to assess the iEPA’s impact and identify ways to optimise its benefits while minimising its drawbacks.
Community Reactions
Different Opinions
User Last
test
Comments 0
No comments yet. Be the first to share your thoughts.