Nigeria & Economic Partnership Agreement (EPA) – To Be Or Not To Be

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Since countries in Africa gained independence, their trade with the former colonial powers in Europe have been governed by series of agreements which are designed to give the former colonies, preferential access to European markets in order to strengthen their economic independence. One of such agreements is the Economic Partnership Agreement (EPA).

Economic Partnership Agreement is a scheme to create a free trade area (FTA) between the European Union and the African, Caribbean and Pacific Group of States (ACP). It is in response to continuing criticism that the non-reciprocal and discriminating preferential trade agreements offered by the EU are incompatible with WTO rules.

“ West Africa accounts for 40% of total trade between the EU and all the ACP regions”

This is a trade agreement that is meant to safeguard ACP countries’ preferential access to EU markets, which had previously been granted through the Lomé Convention. EPAs are changing this preferential access from non-reciprocal to reciprocal access, meaning that ACP countries will be required to open their markets to EU imports and furthermore, require liberalization in other areas such as investment and services.

Unlike other International Agreements, the EPA has generated serious concerns and heated debates in recent times. On one hand, the European Union (EU) believes that the Agreement is in the long-term interest of both the ACP (especially African) countries and the EU; that the agreement should have now been signed by all African countries, and wonders why a country like Nigeria has not signed the agreement. But on the other side of the argument, international observers and trade experts contend that the agreement is not in Africa’s future best interest. While most West African countries have signed the agreement (under alleged intense pressure), Nigeria and Gambia remain the only countries not to have signed the EPA. The non-signing of the agreement by Nigeria has continued to generate controversy.

European Union (EU) has maintained that EPAs provide a unique mutual benefit to both consumers and producers in Europe and ACP countries; that a properly managed trade can help development by creating employment, giving access to a wider range of good quality products, reducing average prices and generating income.

EU has also listed a number of benefits for ACP countries through EPAs to include:

  • More markets, more sales – by opening the EU market fully to imports from ACP countries, strengthening and boosting trade between ACP countries themselves.
  • Better infrastructure, administration and public services – to increase and improve productive capacity, training opportunities and knowledge transfer.
  • More transparency /political and economic stability – political dialogue has become an integral part of the ACP-EU relationship, aiming to uphold democratic standards, good governance and human rights.

However, many ACP countries and international observers are not totally happy with EU’s proposition and approach on the EPA. The consensus belief is that EPA restricts their development options. Various arguments against the agreement include: A disadvantaged cost benefit analysis, Failure on part of EU to recognize and address the concerns of African countries, and the approach of The EU to get African countries sign the EPA.

Cost-Benefit Analysis:

Analyst would argue that there is a disadvantaged cost-benefit analysis of the Economic Partnership Agreements (EPAs) between African countries and the European Union by comparing the cost of signing the EPA (measured as tariff revenue losses), versus the ‘gains’ of signing an EPA, measured as duties African countries would avoid paying if they were to export to the EU market under the EU’s Generalised System of Preferences (GSP) scheme. The major question therefore is whether the tariff revenue losses resulting from the EPA outweigh the duties that countries would have to pay in a non-EPA scenario? Do the losses of EPAs outweigh the “gains”? 

There is a valid argument that even with this simple cost-benefit analysis (looking only at one dimension of the costs), for most African countries, the tariff revenue losses are higher than the duties at the EU boarders if there is no EPA. Conclusion is that the costs of an EPA are therefore greater than the gains! These countries include all African LDCs, and non-LDCs: Congo, Cote d’Ivoire, Cameroon, Gabon, Ghana, Kenya and Nigeria. The EU has not addressed this concern.

Failure on part of EU:

International observers have continued to express that there is a failure on the part of the EU to address the serious problems with EPA provisions identified by developing countries; especially on how EPAs will affect intra-Africa trade specifically, and global trade in general. Also, developing countries have long argued that there is insufficient focus on development and have in the past, resisted a number of Commission proposals, such as the inclusion of the ‘Singapore issues’ of investment, services, procurement and competition. The Commission’s approach is also in direct contradiction to the spirit of the Cotonou Agreement which commits the EU to leave ACP countries no worse off under new arrangements than under previous regimes, and to provide alternatives to EPAs. 

EU Tactics to get EPA signed

Perhaps the greatest criticism levelled against the EPA is the manner EU eventually got Africans countries to sign the Agreement. Contrary to the original understanding that EPA would be negotiated and signed between EU and each regional bloc, EU decided to sideline the ‘bloc’ concerns of the regions and opted to negotiate directly with individual countries within the region, This was achieved by applying intense pressure and threats of removing other economic supports (that were previously granted) for non-compliance, and negotiations were conducted in a not very transparent manner behind closed doors. Eventually all the countries in West Africa have now signed, except Nigeria and Gambia.

It is clear that this tactic has led to countries within African and Pacific regions having widely varying arrangements with the EU. This has potential grave implications for working towards regional integration, which African countries have identified as crucial to achieving developmental goals. Vastly differing trade arrangements would make an already complex process much more difficult. The implication is that in the event of a dispute arising from the signed EPA, individual ACP countries (for example Kenya acting alone) would have to contend with the combined 27 EU member states working together.   

Should Nigeria Sign the EPA?

The consistent and mounting pressure on Nigeria to sign the EPA is understandable. West Africa accounts for 40% of total trade between the EU and all the ACP regions, and the market size of Nigeria accounts for more than half of the West African market alone. However, Nigeria has not come up with a position on the issue, and many observers believe that this is why it has been difficult for African countries to stand their ground in negotiating with the EU. Nigeria is genuinely seen as the economic giant of Africa, and widely regarded as a mirror image of USA in Africa. African countries therefore look up to Nigeria for leadership, strength, and inspiration; especially on the EPA agreement. Whatever Nigeria decides to do, there is an urgent need to quickly come up with a position that will strengthen trade and foster regional integration.   The EU has always claimed that EPAs are a tool for development. If this is genuine, then it must fashion a way to accommodate and address the growing concerns of ACP countries that EPA is supposed to help. Or what is the wisdom in imposing an agreement on your partners which on the long-run, would be damaging to all the involved parties. For the long term mutual benefit of all the stakeholders, onus is on the EU to bring Nigeria and other stakeholders to the table and find a way of achieving the original vision of EPA…to create      a mutually benefiting Free Trade Area (FTA) between the European Union and the African, Caribbean and Pacific Group of States (ACP).

 

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