Posted: Monday 28th April 2014 at 12:01 pm

Rejoinder To IMANI’s Report On Evidence-Based Support For Ghana To Ratify The EPA

The on-going debate around on the Economic Partnership Agreement (EPA) in my estimation has been very fascinating especially with each party expressing divergent views supposedly for the betterment of Ghana.

As part of its contribution, IMANI has waged into the discourse by issuing a report justifying its support for Ghana to ratify the agreement.

I do commend IMANI for this exercise as well as others who have delved into the issue at stake on different platforms. This is how it ought to be – making inputs into national development programming

This paper is in direct response/reaction to IMANI’s report published on April 15, 2014. As a youth leader in Ghana, I feel obliged to make my personal inputs as active youth participation in decision making processes has been encouraged at all levels of the development processes .

Generally speaking, I am not convinced with most of the arguments raised by IMANI.

In the 3rd paragraph of their introduction, IMANI stated that the Interim Economic Partnership Agreement (IEPA) stipulates that 75% of imports from the EU would be duty free in exchange for 100% EU market access for Ghana (except rice and sugar). The slicing of EU tariffs is to be executed over 15 years, with the first 5 years seeing no change in tariffs. The 25% of imports from the EU that would incur tariffs is to protect the agricultural produce and products currently manufactured in Ghana.

First of all, IMANI was silent on the rice and sugar restrictions. Is it because, EU wants to protect her industry or Ghana is unable to meet the required standards? Furthermore, IMANI did inform us that Ghana cannot export rice and sugar according to the agreement but was silent on what EU can equally not import into Ghana. Is IMANI aware that some imported products from EU are detrimental to our environment such as second-hand fridges?

In any case, it is no secret that Ghana is very active when it comes to accenting to agreements or contracts; but not adhering to them is also our stigma. What has changed to convinced IMANI that this tariff agreement will be observed to the letter especially when we have been bedeviled and saddled with judgment debt menaces within the last decade or so?

Eventhough, Ghana is largely labeled as an agrarian economy we have failed to really analyze the current – and future – impact of climate change effects on the sector. The shortening of the growing season also has severe impact on food security in areas which practice rain fed agriculture. Until appropriate measures are put in place to pursue agriculture as a source of livelihood, food security can never be achieved. Infact, it can lead to a disastrous situation in-country since agriculture is regarded as our economic back-bone.

IMANI states that initial feedback after signing the IEPA has been positive from the exporters of non-traditional products and these groups of industries endorse the passage of the ECOWAS EPA which was to have taken place in March 2014 at a meeting of the ECOWAS Heads of State. It however has been postponed to May 2014 in order to rectify technicalities in the contract.

I find it extremely strange that these groups of industries did endorse the passage of the ECOWAS EPA only for it to be shot down due to those technicalities. Clearly, this means our groups of industries woefully failed to do due diligence on the document. Is it because they lack understanding of the issues at stake? I rather choose to applaud those who with laser eyes and sharp minds were alert enough to spot those technical challenges. For the sake of posterity, IMANI is encouraged to publish the names of those exporters or groups of industries from Ghana. At least, I am aware that Association of Ghana Industries (AGI) has publicly opposed the EPA.

One of the main critiques of EPA by civil society organizations is that it will cause a loss of revenue to government running into hundreds of millions of dollars in import tariffs from the EU, and it will ruin the local industries that will be unable to compete with the influx of cheaper products from the EU. In defense, IMANI posits that with a total EU import portfolio for 2012 valued at EURO 3,614million (USD 5,023million), the slashing of tariffs will result in an average savings of 7.4% for consumers of these commodities. The net savings should also compensate for any increments in taxes on incomes and profits by the government. It is also important to note that, the shift to reliance on domestic taxation is inherently better because it is more predictable, facilitating the attainment of a more resilient economy that stimulates better budget planning and execution practices.

Based on IMANI’s logic, government can give out something with its ‘left hand’ and cleverly collect back with its ‘right hand’. What difference does this make to the very consumers that IMANI seem to be concerned about? Again, the reliance on domestic taxation as inherently better in anycase is a foregone conclusion. Every government depends largely on the taxes of its citizenry for development purposes. If indeed, it is true that domestic taxation leads to better planning and execution practices as IMANI seeks to confirm, then I am yet to see that manifested in Ghana.

Another argument against signing the IEPA and ECOWAS EPA Agreements is the collapse and erosion of the local manufacturing industries that will be unable to compete. IMANI by way of evidence provided a chart of the top eight imports from the EU to Ghana claiming that they make up nearly 60% of the total imports. And yet IMANI is happy with pushing it to 75% as captured in the EPA without recourse to the consequences on local industries. To further buttress this argument, IMANI decided to dive into the option of doing a side by side comparison to domestic industries producing same commodities as follows:

1. Petroleum Oils
IMANI states that “Petroleum oils make up a more than 30% of imports. …Unfortunately, TOR has been unproductive for a great majority of the past four years due to repeated shutdowns. Secondly, TOR has been saddled with indebtedness which has threatened the survival of both the refinery and the Ghana Commercial Bank, its primary creditor. The government intervened, paying a total of GHS 1 billion, covering approximately 75% of the entire debt portfolio. Therefore, suggesting that the TOR is the ‘competition’ that needs to be protected is an overstatement”. Indeed, I totally agree that TOR presently is in crises but “na who cause am?” Did government contribute to the crises? TOR’s problems are virtually as a result of incompetence and complete mismanagement of duty bearers. It is government’s responsibility to also resuscitate and re-position TOR.

2. Manufacturing and Agricultural Products
IMANI asserts that the sector for manufacturing of machinery and equipment and of transportation equipment is not occupied by any major local entity, thus removing tariffs has a net benefit of lowering costs of these commodities to consumers, and in fact, lowering the cost of production of local industries.

IMANI cannot be sure about this assumption. The same way IMANI argued earlier on that government can raise taxes on incomes and profits to make up for tariff loses, I would have expected them to acknowledge that removing tariffs on manufacturing and agricultural products will help cushion local industries to stay afloat in business in the light of the ever increasing utility bills and high interest rates (as the case is) and not necessarily lead to reduction in production cost. Needless to say that companies have already collapsed and others are on the verge due to such unfriendly business climate.

Another argument by IMANI is that, the fourth largest import, being foodstuffs and beverages will continue to bear tariffs, as part of the agreement. Agricultural products that are considered sensitive are all in the exclusion list of the Market Access Offer (MAO). This is a list of items that are excluded from any tariff liberalization. It includes all agricultural produce and products manufactured in the country. Ghana is under no legal obligation to reduce or remove tariffs from these items at any time. Foodstuffs and Beverages imported from the EU, representing about 4.7% of total exports falls within the 25% Exclusion list, and thus will incur import duties. This trading/market arena thus remains unchanged.

I wish IMANI could clarify if the EU’s 4.7% total export of Foodstuffs and Beverages is only limited to Ghana. Can IMANI further advocate for Ghana to increase its tariff on items excluded from the tariff liberalization or there is the fear that EU might divert such products to other jurisdictions?

3. Textile Industry
The main challenges of the Textile industry today are cheaper products and also fake products from China. In spite of the import tariffs imposed on the imported textiles, the local industry is still on the ropes. This scenario makes it clear that imposition of tariffs is not in itself a solution to the high cost of production in Ghana. According to IMANI, the onus falls on government to assist local industries to improve their competitiveness which will enhance their productivity and lead to better competitiveness. IMANI has admitted that eventhough government had imposed import tariffs on the imported textiles the local industry is still suffering. Influx of cheaper and fake products from China has been the huge monster terrifying the textile industry in Ghana. Interestingly, IMANI is unable to provide pragmatic alternatives to this situation (leaving it at the doorsteps of government) and yet on the otherhand thinks that slapping tariff on agricultural produce from EU will protect Ghanaian local industries. IMANI should come again!

4. Anti-EPA arguments will protect unproductive industries
According to IMANI, failing to sign the EPA as a way of protecting unproductive industries is causing the government billions in bailouts and subsidies. I think government pumping out bailouts and subsidies to protect unproductive industries, it is no news. It is the duty of government to save its dying industries as demonstrated by the United States of America. Again, IMANI failed to disclose what has made our industries unproductive. Arguably, it is largely the state-owned institutions that are unproductive. Since Ghana entered her 4th Republic, I have heard and read about hundreds of state-owned companies that were either diversified or sold out but I am unable to comprehend any significant benefit of such reckless exercise to the nation.

I am yet to see which measuring standard or scale IMANI is depending upon to proclaim that the Non-Traditional Exports (NTE) industries are currently productive, profitable and making growing contributions to GDP thus it’s not financially prudent to collapse them. A nation that glorifies sub-standards or mediocrity has nothing to be proud of! Nascent industries just like existing ones also deserve support to breakthrough and succeed in this turbulent world economic situation. If investing in such industries can be labeled as gambling with questionable future profitability, then IMANI need to caution government on its quest to establish and finance entrepreneurial initiatives especially among young people.

5. Non-Traditional Exports are doing well, will do better with EPAs
I have no reason to doubt IMANI’s statement that in the NTE sector, total value of exports has quadrupled from approximately $500m to over $2billion between 2001 and 2012. And that in 2012, the sector contributed over $2bn to the country’s GDP, bringing in hard currencies as well as enhancing the country’s balance of trade.

But it beats my imagination that inspite of all this case study that IMANI is trumpeting, Ghana is currently wallowing in economic crises. Corruption cum gross mismanagement or misappropriation of state resources has been the order of the day.

Ghana’s projection of a total value of non-traditional exports in 2013 is pegged at 3.3billion USD which I think is quite audacious. We have not been told what exceptional plans have been employed to warrant such projection inspite of the fact Ghana is still at the mercy of the adverse and prevailing macro-economic factors.

Conclusion
Until reality grabs all of us, every argument either “for or against” the ratification of EPA (including IMANI’s position) is equally intangible and conditional – perhaps cosmetic.

IMANI has indicated more publications will emerge to buttress their argument. I am eager to see how they will confront various issues around for example “Standstill Clause [Article 15, IEPA]; Elimination of export taxes [Article 18, IEPA]; Rules of Origin [Article 14, IEPA]; Most Favoured Nation Treatment [Article 17, IEPA]; Development Support; Commitments not related to trade – Liberalisation of services and investment [Article, 44]; Premature Commitments; Interim Agreements and Ghana’s regional interests”.

Ideally, every business deal or transaction by extension the EPA is expected to result in a win-win situation for all players. I am convinced that EU with proper working systems and structures shall reap all the benefits it envisages unlike Ghana. It does not take rocket science to know that current systems and structures in Ghana are virtually non-functionally. Several calls have been made by notable personalities including President Barak Obama for institutional strengthening in Ghana yet this appears to be a hopeless case.

I strongly posit that Ghana must not rush to sign the agreements without exhausting all the issues raised by concerned stakeholders.

Our priority should be weeding out corruption and managing state resources judiciously albeit limited. Until that happens, signing the EPA will as usual amount to fetching water with baskets. With lazy minds and incompetent duty bearers still at post, we may as well go to sleep!

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