Need to level the ‘Playing Field’ now

…the new Ghana International Trade Commission – Replacing the old Tariff Advisory Board.

The issue simply put is this. The Association of Ghana Industries (AGI) has asked for a long time that local industry is protected against unfair trade practices that have proven to be significantly debilitating.

One of its members, Aluworks Limited, a manufacturer of aluminium flat-rolled semi-finished products, based in Tema has suffered terribly for the last 10 years and more from the encroachment on its markets by cheap aluminium goods.

These have been made cheap by way of the Chinese Government’s deep export rebates given to Chinese producers and traders, thus enabling them to de-stabilize our markets by foisting price wars that simply decimate local competitors.

Aluworks has campaigned strenuously over the last 10 years and more for successive Governments to take appropriate and necessary remedial action. With the changing world conditions Aluworks Limited believes the time is now to take action. It is time to act for Ghana.

There has been much delay in setting up and in inaugurating the Ghana International Trade Commission (GITC) so they can do the needful. No more delays.

Not everyone likes Mr. Donald Trump, the current President of the United States of America, nor his ideas. But the one thing no one is against is that he looking to increase manufacturing, business and jobs in his country.

That is because everyone acknowledges, friend or foe alike, that the economy and social well being of any country is dependent on its people having jobs and personal income from which to pay taxes and thus contribute to society.

Very recently President Trump announced that he was imposing new and additional tariffs on imports of steel and aluminium products into the USA. This, it was thought, was mainly a reaction to imports from China. Actually these sanctions are nothing new.

The USA, Canada, India and Australia have off and on imposed such tariffs on Chinese imports products based on export rebates, especially on Chinese aluminium foil products. Most of these impositions in the past have been through application to and approval by the World Trade Organisation (WTO).

However in a few cases such as in the India cases, the countries imposed their proposed sanctions well before seeking ratification by the WTO. It is not clear in President Trump’s case whether he will get the WTO involved, but having seriously lambasted that organisation as useless in the past we doubt it.

The world is not always naturally fair and therefore it behooves every country’s government to ensure that it is getting its fair share of world trade, and is not disadvantaged by the might of stronger nations especially of the aid giving type.

If highly developed countries such as the US and Canada have had to seek protection against ‘dumping’ on their industries through implementing WTO countervailing measures, then it makes even more sense for a much relatively weaker and vulnerable country such as Ghana to seek to and to impose such measures too.

Ghana is currently in a position where a lot of unfair trade is upon our doorsteps to the detriment of local industry and local trade, and it has decimated our manufacturing sector.

Statistics: The following statistics are extracted to show the depth to which manufacturing has sunk in this country. In the year 2000, Industry accounted for over 25% of Ghana’s GDP with the Manufacturing Sector carrying 14% of this burden. In 2017, industry output from traditional sources has practically disappeared.

The share of 25% of GDP achieved by the Industry Sector in 2017 was only because the Oil and Gas subsector grew phenomenally last year. Unfortunately the Manufacturing Sector accounts for less than 5% of GDP in 2017, a very steep decline, partly due to the China menace.

 

The statistics merely show the sorry state that the manufacturing sector has been plunged into over the decade and half. Successive governments have simply paid lip service to their own mantra that business is the engine of growth.

 

The manufacturing sector has dwindled to less than 5% of GDP. It actually experienced negative growth for a few years but has grown slightly by about 2% per annum since.

 

Government has projected Industry growth for 2017 at nearly 18%. But manufacturing will continue to grow at only 2% per annum! But Industry is projected to decline again to 9.5% in 2018. Incidentally the strong growth in industry in 2017 was due to the Oil and Mining Sector, with manufacturing remaining at the same low level of growth in recent years. Manufacturing has simply suffered from neglect.

And yet this is where jobs are supposed to come from to meet the ever growing workforce (regardless of skills and quality for now), fed by the growing numbers of school products seeking paid employment.

Social evils such as the recent increase in armed robbery will continue to grow until the powers that be begin to realise that it is due to the lack of jobs opportunities for the many blue and white collar folks languishing in the ever bourgeoning workforce.

If manufacturing is not seriously tackled as a panacea for the growing social menace, the country is doomed to spending its hard earned income on clearing up the social mess after the event.

Early in 2017 Government announced a project to help revive the many failing industries by providing them a resuscitating financial package. It is nearly end of the first quarter of 2018 and no results of this initiative have yet emerged.

Apart from suffering from a lack of real governmental support (other than the talk) the sector has been the victim of the world economic changes over the same period. Significantly the world credit crunch and recession that occurred in the past dried up the traditional world markets serviced by the Chinese.

So more and more they turned toward selling into emerging countries as the easier option. In the case of Aluminium products, China did not simply export to the world, they required to provide huge incentives to their traders who were finding it difficult to penetrate the targeted countries because of high costs involved with transporting the heavy load of metal products around the world and servicing such markets.

That is why they introduced their export rebates to sell their ever growing stock of aluminium. This has had a detrimental effect on our markets. As already stated, Ghana is currently in a position where a lot of unfair trade is upon our doorsteps to the detriment of local industry and local trade, and it has decimated our manufacturing sector and needs urgent redress.

Goods are being illegitimately imported into the country by various nefarious means including:

  • Being made cheap because of the export rebates granted by the exporting country and thus disorganizing the local market;
  • Being made cheap through under-invoicing by unscrupulous exporters through various means;
  • Being made cheap through mis-description on import documents and mis-application of relevant tariff codes;
  • Being declared as in transit to land locked neighbouring countries and therefore not customed but ending up for sale in Kumasi.

All of these constitute trade economic malpractices that impinge unfairly on industry and trade in the country, cause evasion and diminution of government revenue, contribute to the growing lack of jobs, and put pressure on the balance of trade, the currency and overall well being of the populace.

It is for these reasons that the World Trade Organisation has established rules and remedies that countries may apply to alleviate the effects of such malpractices. It is for these reasons that successive governments have sought to organise to be able to apply the WTO recommended remedies. That is why past governments initiated the set up of the Tariff Advisory Board which has today metamorphosed into the Ghana International Trade Commission.

We now await the inauguration of the Commission so that it will be able to begin work towards righting the wrongs that have been foisted on Ghana Industry for so long, and has indeed reduced some sections of industry to close to extinction.

 

The Tariff Advisory Board (TAB):   On Tuesday 1st September 2009, a five-member Tariff Advisory Board (TAB) was inaugurated. It was charged with strengthening institutional arrangements for the implementation of the trade law and policy in the country.

The Minister of Trade and Industry at the time exhorted the members to efficiently utilize their experience and professional ideas so that the board would serve as a focal point in guiding government on tariff-related issues.

The Board was meant to fill an identified vacuum in the Ghana trade policy that limited the ability of government to take advantage of remedies provided under the World Trade Organisation’s (WTO) agreements. The liberalization of Ghana’s international trade regime had resulted in the flooding in of various kinds of imported goods on the Ghanaian market, a condition that had almost collapsed the manufacturing sector.

It was hoped that the establishment of the TAB would provide a clear and transparent institutional framework to assess the impact of tariff policy on the competitiveness of the industry. Specifically, the TAB was charged with

  • Advising the sector minister on tariff and trade related issues.
  • Ensuring, in collaboration with GRA, Customs, Excise and Preventive Service (GRA-CEPS) Division, that, scientific methods of determining tariff are used in the country, to serve a useful purpose in the development and effective implementation of trade policy. Particularly there was needed to clamp down on declaration of “under-invoicing” on the part of importers with the consequent loss of state funds.
  • Ensuring that there are clear guidelines, procedures and appropriate legislation for the determination and implementation of trade contingency measures, namely anti-dumping and countervailing measures, as well as responding to petitions from the private sector.
  • Providing the capacity to generate the depth of analysis required to substantiate claims, consistent with international trade rules that grant rights to respond to unfair trade practices based on appropriate legislation.
  • Sensitising and aiding government to consider the success of the private sector as a barometer of how the government would demonstrate the sector as the engine of growth and the ultimate provider of employment.

The Board had been set up with significant administrative and financial contributions to the activities of the Board by the United States Agency for International Development (USAID), particularly its Trade and Investment Programme for a Competitive Export Economy (TIPCEE), the World Bank, GTZ (Germany) and Danish International Development Agency (DANIDA).

In 2009 the TAB was constituted, with Mr. Tawiah Akyea, Secretary to the Governing Council of Ghana Institute of Management and Public Administration (GIMPA) as Chairman. The other members were Mrs. Ama Jantuah Banful, Chief State Attorney at the Ministry of Justice, Dr (Mrs) Adelaide Kastner, Lecturer at the University of Ghana, Legon, Dr Essel Ben Hagan, Director of the Institute of Industrial Research (IIR) of the Council for Scientific and Industrial Research (CSIR), and Dr Dominic Ayine, Law Lecturer at the University of Ghana, Legon. The Board was later joined by Dr. Gockel from the University of Ghana.

The Board set about establishing itself and becoming abreast with the rather technical matters that their mandate covered, as well as setting up the administrative structures that would enable them to meet the objectives set especially that of the protection of the trade sector from harmful malpractices through external linkages.

The main case that came before it and became its test case was the petition in 2009 directed to the TAB via the Presidency and the Sector Ministry, to investigate and rectify the disorganization of the aluminium products industry in Ghana by an influx of cheap Chinese goods, made cheap through the provision by the Government of China to its traders of very steep export rebates, designed to reduce their costs so that they could price cheap in their target markets and so render local competition incapable of surviving the ensuing price wars.

This strategy was one designed by China for emerging markets where industry strength was observed to be weak and devoid of strong Governmental support. China had built up massive “Aluminium Mountains” when the credit crunch and subsequent recession set in and needed to get rid of the mountains no longer required by the normal developed market partners, hence the strategy towards emerging countries. Ghana’s response was to set up the Tariff Advisory Board to combat this adverse and potentially disastrous situation.

Meanwhile there was an increasing influx of cheap Chinese Goods affecting nearly every industry in Ghana and signalling imminent danger to manufacturing in Ghana. The textiles Industry, the FMCG industry, the Paper Industry and the Cement Industries were variously affected.

However not all were affected by cheap goods occasioned by Chinese export rebates as in the case of Aluminium. Some cheap goods were due to under invoicing, some through avoiding legitimate import duties and some through dubious import practices involving wrong tariff declarations and the wrong application of import clearance rules.

Indeed in 2010 an investigation carried out by the GRA itself, via the Customs Division, showed that a large portion of the aluminium flat rolled products imported into Ghana over the years had arrived at and had been declared for customs purposes at below the price of primary raw aluminium, even though some preliminary manufacturing had taken place in China, and the goods had been shipped all the way to Ghana by sea.

Yet because of the export rebate given, the values declared by the traders were below the primary cost of the metal, for example as could be purchased from VALCO in Tema before any manufacturing. It was proven that despite starting off at the same world cost for the primary aluminium metal, despite preliminary manufacturing in China, despite adding their profits, despite sea freight required to bring the metal all the way to Ghana’s shores, some of this metal was arriving in Ghana, as per GC-Net records, at below the cost of the raw virgin metal!

A further study also showed that due to malpractices at the ports these imports were being sold on the Ghana market at sometimes as low as three quarters of the cost of the finished intermediate products manufactured in Ghana with input raw material purchased from VALCO in Ghana and which had suffered no freight, no duties, and no clearance costs.

That proved to be the turning point for the TAB and accelerated the search for remedial solutions.

In 2011, at one of its meetings, the World Trade Organisation was in favour of solutions recommended by the TAB; it also ruled that no action could be taken until the Ghana International Trade Commission backed by an appropriate law in Ghana to cover these solutions was in place. Government had always intended that the TAB would be in place for three years before becoming a Commission charged with implementation of the recommended solutions.

This meant the Government was required to urgently re-constitute the TAB into the Ghana International Trade Commission and to back it with a law in the form of an Act properly approved by Parliament.

The Ghana International Trade Commission (GITC): Following the ruling by the WTO, the TAB from 2012 set about transforming itself into the GITC. It took several difficult and often frustrating years of preparation, drafting, sensitising the public and stakeholders of the impending bill, and a very long passage through Parliament. Eventually in July 2016, the bill (Act 926) was passed by the Parliament of Ghana.

President Mahama gave assent to the approved bill in October of that year and it became law. Thus the ground was set for the GITC to take off and proceed to begin protection of local Ghana Industry by leveling the playing field with respect to the cheap imports from China.

Delayed Inauguration. At the 17 August 2017 closing ceremony of the National Policy Summit held in Accra, Vice President Dr. Mahamudu Bawumia disclosed that the government was to inaugurate the Ghana International Trade Commission (GITC) to check unfair trade practices in the country.

 

The GITC would provide for the regulation of international trade in Ghana in conformity with the rules and regulations of the World Trade system He also said that the objective of the GITC Act 926 was to promote and enhance the competitiveness of the local private sector and contribute to making Ghana the Industrial hub of the sub-region.

 

He indicated that the GITC would enquire into and determine complaints by the private sector in relation to safeguarding measures, subsidization of imported products by foreign governments, dumping of imported products in the domestic market and tariff adjustments.
On 6th Dec 2017, speaking at the first ever Ghana Expatriates Business Awards in Accra, HE President Akufo-Addo said that a five member Governing Board of the Ghana International Trade Commission had been appointed to institute measures to check the dumping of poor quality and cheap goods on the country’s market. The move he said was to ensure fair trade, protect investors, and to ensure customers got value for money.

With these promises re-iterated over and over, it is only fair for Industry and especially the Manufacturing Sector to anticipate the final set up and inauguration of the Ghana International Trade Commission so that it can begin work to save the Ghanaian manufacturing sector.

It will take time for the new Commissioners to grasp the requirements for the coming exercise, so we hope this appeal will be heeded to by the powers that be so that the Commission starts its work sooner rather than later.

Tempus fugit! Carpe Diem!

(Loosely translated as “Time flies like the wind! Seize the day!”)

 

The Writer is the Managing Director of Aluworks Limited Tema