- It won’t develop indigenous industries to take on Africa
Even though the interim Economic Partnership Agreement (iEPA) is not necessarily a bad move, striking such a deal at a time when the African continent is in the midst of creating its own market and local industries are still struggling is premature, international trade law expert Maame Awinador-Kanyirige has said.
Her comments come after news broke last week that the iEPA, which will see Ghana progressively reduce its tariffs to zero for 78 percent of its imports from the EU by 2029, has finally become operational after years of back and forth which halted the deal.
According to the trade expert, the African Continental Free Trade Area (AfCFTA) agreement’s purpose is to strengthen indigenous African industries to expand their access to markets on the continent in order to bring prosperity to the African people. However, though the agreement is in force it has not gained any ground as certain parts have still not been finalised.
Therefore, she says, bringing the iEPA into effect at this early stage of the AfCFTA will harm the goal, as the former will provide a gateway for European companies to flood the African market with their products with the profit repatriated back to Europe leaving the continent disadvantaged.
“The idea of going into the AfCFTA was to strengthen the capacity of our local industries so that we can compete effectively within Africa, and also on the continental scale. And before the EU interim agreement came into force, we had also signed this UK trade partnership which also opens our market to the UK.
“Trade partnerships of this nature are called reciprocal trade agreements. What it means is that you are saying you and the developed economy are at par, forgetting we are the weaker economy because those economies have already strengthened themselves through trade with the EU.
“Looking at the AfCFTA, we have not fully implemented the agreement; we are still negotiating to know what kind of goods will be allowed in our economies – rules of origin, among other things. And at the same time, we are signing agreements with the same people we are competing with. Imagine a small nation like Ghana having a reciprocal trade agreement with Europe, which has more developed factories and infrastructure.
“Even though the AfCFTA is supposed to help African countries, agreements like this will allow advanced countries to enter and take advantage of the AfCFTA by having their goods on the market. So, in the end, the main purpose of having the AfCFTA to strengthen our businesses to compete so that African countries benefit will be defeated. The only way this can be averted is that such partnerships should not be established yet, not until the AfCFTA is in full effect,” she said in an interview with the B&FT.
Asked how the iEPA would impact the rules of origin, which essentially cover where the product actually comes from, Ms. Awinador-Kanyirige said the AfCFTA has flexible rules of origin that will not illegitimise foreign countries producing in Africa and exporting through AfCFTA – the more reason she is worried the iEPA has come into force at this time.
“One of the things that was negotiated in the AfCFTA was to have rules of origin that are not too rigid, taking into consideration the fact that African economies are not much developed; especially with the industrial sector. The rules of origin are governed by two things – wholly produced or substantially produced.
“But there was a recognition of the fact that because we haven’t advanced so much, some of our products cannot be necessarily fully produced here – so there should be some kind of leniency for the rules of origin concept. So, with the iEPA coming into force, when you have certain products coming into the Ghanaian market from the EU but branded as Ghanaian goods, they can easily be exported to other African markets. But when you look at it from who will benefit from the profit, it will be the company in the advanced market,” she said.
For her, the iEPA would have been better if the AfCFTA has been operational for some years, allowing time for local industries to boost their capacity to a level where they can effectively compete with their foreign counterparts.
“Yes, we need investment – but not necessarily trade partnerships of this nature that allow for our market to be completely open when they are already fragile, because we don’t produce much. Negotiating something of this nature would have been fine if only we had fully tried to establish the AfCFTA by focusing more on the agreement to strengthen ourselves first; and to protect ourselves first before trying to have an open and free market with more advanced economies,” she added.