Tanzania’s former President, Benjamin Mkapa, has warned Nigeria to resist pressure to sign the Economic Partnership Agreement with the European Union, because, according to him, such contracts “are counterproductive.” Mkapa sounded this warning as the guest speaker at the 45th Annual General Meeting of the Manufacturers’ Association of Nigeria on September 14, 2017, in Lagos.
The former President noted in a post-event media interview “that such agreements are not in line with the aspirations of African countries”. Consequently, Mkapa encouraged African countries to “undertake some degree of industrialisation to add value to their agricultural and primary products as well as natural resources to substantially increase government revenue.”
According to the former President, “When raw materials are exported and value is added outside the continent, and then, the finished products are re-imported without tax, you are invariably depriving (your own) government of revenue.”
Incidentally, South Africa’s former President, Thambo Mbeki, earlier, had also sounded the same warning, as guest speaker, at MAN’s AGM, two years ago.
Furthermore, while speaking at this year’s AGM, MAN’s President, Dr Frank Udemba-Jacobs, without mincing words, stridently opposed the admission of Morocco into ECOWAS, as this would be “equivalent to signing the EPA through the back door.”
Udemba-Jacobs explained that “we are aware that Morocco and the European Union have a trade agreement, which means if they become part of ECOWAS, products that come into Morocco from the EU will end up in Nigeria; so, we are vehemently opposed to Morocco being admitted into ECOWAS because it will badly affect the productive sector of the economy. (See, “MAN warns against admission of Morocco into ECOWAS,” Daily Independent, September 15, 2017)
The above title, “EPA as Enslavement Partnership Agreement” was first published on October 13, 2014. A summary follows hereafter; please, read on.
“Under the terms of the EPA, ‘the European Union will immediately offer the 15 member Economic Community of West African States full access to its markets. In return, ECOWAS will gradually open up 75 per cent of its markets, with its 300 million consumers, to the European Union over a 20-year period. Furthermore, the EU will also offer about EU6.5bn over the next five years to help ECOWAS countries, cushion the effects and costs of integrating into the global economy (see, ‘FG seeks review of economic partnership agreements’ — The PUNCH Newspaper, January 9, 2014, Pg. 36).
Nonetheless, MAN sees the EU’s appetising carrot as a dagger directed at the heart of Nigeria’s industrial sector. The association has therefore warned that signing the agreement, in its present form, would impact negatively on local manufacturing and result in a shutdown of industries with heavy job losses, because of the unfair competition that would evolve. The immediate past President of MAN, Chief Kola Jamodu, also noted that, “no country can develop without protecting its industries”, and therefore cautioned that “Nigeria stands the risk of having its market flooded by European goods with a resultant negative effect, on local industries and the economy, if the EPA is approved in its present form.”
The Minister of State for Finance, Bashir Yuguda, had, at an earlier interaction with MAN also echoed the above concerns, when he stated that “government is actively encouraging the African Union and ECOWAS to reconsider endorsing the EPA in its current state.” Yuguda declared that “the Federal Government was negotiating a strong Common External Tariff Agreement with its ECOWAS partners to protect strategic industries”.
Nonetheless, proponents of EPA argue that the objective of ECOWAS Common External Tariff is to “build bridges of development, investment and trade cooperation, between members of the community and also between ECOWAS as a trade bloc and other such regional or third party trade and economic unions. Furthermore, the pro-EPA lobby are optimistic that the operation of the Common External Tariff would create a level-playing field for imports into our sub-region and thereby significantly reduce the distortional spectre of smuggling and re-export of third party imports into Nigeria, because of more favourable duty differentials of our neighbours. It is also speculated “that the product of CET will be reflected in reduction of import duty leakages and contraction of opportunities for bribery and corruption at our ports.”
Nonetheless, despite the listed benefits, MAN remains, clearly uncomfortable with the adopted classifications of customs duties under the CET. For example, essential social commodities including pharmaceuticals, books, newspapers, etc attract zero per cent duty; basic goods and raw materials attract five per cent, while intermediate goods attract 10 per cent. Furthermore, finished consumer goods attract 20 per cent duty, while an additional tariff band of 35 per cent was created for those goods currently under Nigeria’s Absolute Import Prohibition List.
However, MAN recognises the difficulty in evaluating these categorisations appropriately, because of the fairly loose class definitions adopted. For example, Nigeria has a growing pharmaceutical sub-sector which could become uncompetitive with zero per cent tariff for drugs and medicaments imports, from countries with lower cost of borrowing and superior supportive infrastructure.
Furthermore, MAN is equally concerned that food and agricultural imports from such better endowed competitors may also reduce our chances of success in our attempts to be self-sufficient, in rice and maize production, for example.
The manufacturing community also noted that although the tariff rate for raw materials and production machinery had been set at five per cent, it would probably be more appropriate for these sets of imports, for which there were no potential local substitutes to also attract zero per cent duty, as this would further reduce production cost and cushion the adverse impact of high cost of funds and power on made in Nigeria products.”
Similarly, manufacturers expect that it will be challenging to finely compartmentalise imports under the 10 per cent and 20 per cent tariff classifications, as what may appear to be an intermediate product could well be a finished product. For example, an automobile tyre is an intermediate good by a vehicle assembly plant, but for the car owner, it is clearly a finished product. Presumably, these goods under Nigeria’s current import prohibition list may form the bulk of items under the highest duty category of 35 per cent, since the 45 currently listed items under prohibition include sectors in which Nigerian manufacturers already have a foothold with significant potential for growth, employment and ultimately increasing government revenue.
Nigeria’s manufacturers are obviously unimpressed by the promised EU package of over EU6.5bn, as MAN estimates that the Nigerian treasury could lose over $1.3tn revenue from a significant reduction in import duties within five years, if EPA is endorsed in its present state.
MAN’s opposition to EPA is apparently premised on the reality that our different levels of economic strength and industrialisation would put Nigeria and other ECOWAS members at a trade disadvantage, in a manner that is sadly reminiscent of the one-sided terms of slave trade era.
The above, notwithstanding, MAN is also aware that it is hard to find African countries that have achieved unusual industrial transformation just by virtue of its membership of a regional trade group, such as ECOWAS. In reality, economic and industrial growth, according to the association, are the products of the country’s leadership’s abiding vision and application of appropriate monetary and fiscal frameworks that accommodate lower single digit interest and lower inflationary rates, with stable and sustainable exchange rate regime and supportive social and industrial technology and infrastructure. Regrettably, these features have remained alien to the Nigerian economy and invariably negate the expected benefits of the ECOWAS Common External Tariff.
Besides, we may be forgiven to ask why the EU is actively promoting free trade with industrially weaker nations in ECOWAS, while it actively denies free movement of labour within the same partnership.”