Contrary to concerns that the coming into force of the interim Economic Partnership Agreement (iEPA) between Ghana and the EU may affect the country’s commitment to the African Continental Free Trade Area (AfCFTA), economics professor at the University of Ghana, Peter Quartey, says it rather gives the economy competitive advantage.
Speaking to the B&FT in an interview, Prof. Quartey said the fact that Ghana has subscribed to AfCFTA and even host the secretariat does not mean the country shouldn’t take advantage of opportunities offered by other markets, especially, if those trade pacts will come with bigger and better value.
“Now we have more options. We must look at which of the options will bring us better gains. If our access to the European market will give us more revenue, why not? And if trading with our neighbours gives us better options, why not? So is a matter of making the right choices. Everything is about maximizing your gains.
We must look at the two markets and take advantage of which will give us give us value. There may be some commodities we will gain more by trading with Europe and there may be some commodities we will gain more by trading under the AfCFTA. It is an issue of which of the areas will have the comparative advantage,” the Director of Institute of Statistical, Social and Economic Research (ISSER) said.
Touching on what the country can do to maximise gains on the European market, Prof Quartey advised that there should be a departure from the norm, where goods exported to other markets are usually in their raw form, as the age-old practice has contributed to the negative trade balance between Ghana and Europe.
“The essence of the iEPA is to offer us better or easy access to the European market. We need export revenue and the iEPA will facilitate that. But, then, trade will beneficial if what you are selling is of high value and if the volumes are also good. Unfortunately for us, we export primary commodities with little value. Inasmuch as it will bring benefit, we are not going to reap maximum benefit from the iEPA unless we change our way of trading.
We should move away from the primary raw commodities to processed commodities which offers higher value, otherwise, our local producers will be outcompeted because these are established markets; their goods will definitely be cheaper than ours and they will dump theirs on us. Though we will be exporting some traditional exports and earn some money, we will not be getting maximum benefits from the agreement,” he said.
Details of the agreement indicates Ghana will progressively reduce its tariffs to zero for 78 percent of its imports from the EU by 2029. The timetable for tariff liberalisation also shows by end of 2021, Ghana will remove duties for products from the EU where tariffs are at 5 percent and 10 percent. Then, in 2024, almost half of the total lines to be liberalised will be at 0 percent; and in 2029, those products currently at 20 percent and 35 percent will be fully liberalised (unless excluded).
However, the agreement makes room for certain industries and products to be exempted. Ghana will not remove import duties for a number of agricultural and non-agricultural processed goods, including: frozen poultry (current import duties at 35 percent); worn clothing (import duty now at 20 percent); sugar (now at 20 percent); margarine (now at 20 percent); and frozen beef (now at 35 percent).
Others include food preparations n.e.s. (20 percent); animal feed (now at 5 percent); non-alcoholic beverages (now at 20 percent); frozen mackerel (now at 10 percent); frozen tuna (now at 10 percent); ceramics (now at 20 percent); and cement (now at 20 percent).
The EPA is coming at a time when the country has also signed on to the continental trade pact which is to connects 1.3 billion people across 55 countries with a combined GDP valued at US$3.4 trillion. It is envisioned that AfCFTA would significantly boost African trade, particularly intraregional trade in manufacturing.
The volume of total exports is expected to increase by almost 29 percent by 2035 relative to the baseline. Intracontinental exports would also increase by over 81 percent, while exports to non-African countries would rise by 19 percent.