MARKET DEVELOPMENT
Nigeria and the EU/West Africa Economic Agreement
Nigeria and the EU/West Africa Economic Agreement
15/04/2014 (THISDAY Live) - Three weeks ago, Nigeria rejected the European Economic Partnership Agreement. Crusoe Osagie writes that the rejection of the deal puts the country in pole position to determine its economic future without exogenous interference.
Elementary lessons in history will give any African the chills on hearing of any form of economic partnership with Europe.
Being from the Bini ethnic group in Nigeria's South-south region, the story of the massacre of about 400,000 Binis, the torching of their city and the massive looting of the tribe's rich repository of artefacts in the so-called 'Benin Punitive Expedition' which began on February 9, 1897, is a sad story still told from generation to generation, to keep the people aware of the possibility of inhuman and savage behaviour of Europeans, when they are prevented from having their way in economic negotiations.
So, when about three weeks ago, Nigeria refused again to endorse the proposed reciprocal, free trade agreement with the European Union (EU), it amazed many Nigerians who noticed that the EU representatives felt disappointed with the west African giant's caution and pessimism.
If Benin City, a small but prosperous kingdom with an established governance system was attacked and ravaged in 1897, simply for the purpose of enjoying unbriddled benefits from its Palm oil, rubber and art wealth, then the EU, which in contemporary times can be considered a reflection of the old British empire should know that it has to make a lot more sacrifices to convince Nigerians and other Africans that in the proposed EU-west Africa Economic Partnership Agreement (EPA), its interests go beyond the pecuniary need to control the economic wealth and prospect of the subregion.
The EPA
The Economic Partnership Agreements (EPA)are a scheme to create a Free Trade Area (FTA) between the EU and the African, Caribbean and Pacific Group of states(ACP). They are a response to continuing criticism that the non-reciprocal and discriminating preferential trade agreement offered by the EU are incompatible with the World Trade Organisation (WTO) rules. The EPAs are a key element of the Cotonou Agreement, the latest agreement in the history of ACP-EU Development Cooperation and were supposed to take effect as of 2008, but as at three weeks ago the negotiations failed with major opposition from Nigeria.
the EPAs' key feature is their reciprocity and their non-discriminatory nature. They involve the phased out removal of all trade preferences which have been established between the EU and theACP Countries since 1975 as well as the progressive removal of trade barriers between the partners. In order to fulfil the criterion of being a non-discriminatory agreement, the EPAs are open to alldevrloping countries thereby, supposedly terminating the ACP group as the main development partner of the EU.
The establishment of a reciprocal trade agreement confronts the EU with the problem of how to reconcile the special status of the ACP group with the EU’s obligation to the WTO. The solution proposed for this dilemma is an agreement which is only as reciprocal as necessary to fulfil WTO criteria. In reality, the ACP countries is expected to have some room to manoeuvre and to maintain some limited protection of their most vital products. The extent to which trade must be liberalised under the new EPAs is still a widely debated issue.
Nigeria's Latest Block of the EPA
EU three Saturdays ago made another spirited effort to close the EPA deal with West Africa, Nigeria thew a clog in the wheel and prevented its smaller west African neighbours from accepting the EU's terms of the agreement.
In the meeting, west African leaders failed to agree to open their economies to free trade with the European Union as Nigeria forcefully voiced concerns and again making the decade-long talks end in deadlock.
Negotiations over the EPA stalled two years ago after countries of the Economic Community of West African States (ECOWAS) resisted lifting tariff barriers over fears they could crush nascent industries unable to cope with European imports.
However, an agreement in October to gradually implement a long-delayed west African customs union put a possible deal back on track as ECOWAS agreed to bring their rules into line with countries like Ghana and Ivory Coast that have EU free trade deals.
The communiqué from the meeting said while the summit endorsed an agreement in principle, some member states - in particular Nigeria - voiced concerns over technical issues.
The bloc set a two-month deadline to eliminate lingering areas of disagreement.
"We need to negotiate an EPA that is beneficial to our sub-region and will contribute to the prosperity of our people," said Ghana's President John Mahama, who assumed the bloc's rotating chairmanship at the two-day summit.
"We can only do that united as a sub-region," he said.
Under the EPA, the European Union would immediately offer the 15-member ECOWAS and non-member state Mauritania full access to its markets. In return, ECOWAS would gradually open up 75 percent of its markets - with their 300 million consumers - to Europe over a 20-year period. But the question has always been; what finished goods can these African countries sell successfully to Europe, considering the mismatch of the two regions in terms of technology and manufacturing experience?
Technical negotiations were however wrapped up last month with the EU offering a 6.5 billion euro (5.37 billion pounds) package over the next five years to help ECOWAS shoulder the costs of integrating into the global economy.
The Deadlock
Regional leaders were to finalise the deal at the meeting in the Ivorian capital Yamoussoukro days before a summit between African nations and the European Union in Brussels.
However, according to officialsl who were party to the talks, Nigeria voiced lingering concern over the potential negative impact of the deal on its industrial sector if certain products were allowed tariff-free entry into its market.
Failure to finalise a deal would have only a limited impact on most ECOWAS countries, which already benefit from full access to the EU market as low-income countries, although most of what they sell to European countries are primary products to which no industrial value has been added. With a country like Nigeria having some of the largest population of young people in the world and most of them unemployed, only policies that will help the country develop its capacity to produce industrial goods, thereby creating decent jobs are reasonable.
But Ivory Coast and Ghana, which send the bulk of their exports - including most of the world's cocoa - to Europe risk being hit hard as their interim bilateral deals expire.
Ivory Coast and Ghana may be able to retain tariff-free access to Europe by extending their existing agreements. However the two countries, both gateways for imports to West Africa, had hoped to use the EPA negotiation to harmonise the region's economies to foster increased integration.
The European Union, which had expressed confidence the EPA would get the green light at the summit, voiced caution.
"We have to analyse the way forward now, and they have to look at what they want," said a EU official. "There are solutions. This is now a political choice."
Why Nigeria Declined
Nigeria's Minister of Industry, Trade and Investment, Mr. Olusegun Aganga, had explained the reason Nigeria refused to sign the trade liberalisation agreement being pushed forward by the European Union (EU) under the Economic Partnership Agreement (EPA) with the Economic Community of West African States (ECOWAS).
Aganga said certain provisions of the agreement, which Nigeria was expected to sign were not in the best interest of the economy. “The EPA agreement is not ready for endorsement by the Heads of State and Government. Nigeria raised 10 objections to what was presented to us and the Summit of Heads of State ratified it.”
According to him, a committee from Nigeria, Cote D’Ivoire , Ghana and Senegal looked at the issues raised by member-states, particularly Nigeria, and came up with a proposal, adding that when the country went into the meeting, the idea was to endorse it, but there were reservations concerning the agreement based on model and feedback from the private sector.
He said: “One major reservation was that the way the agreement was done, which of course they expected us to sign, would not be in the overall interest of the Nigerian economy over the long term. For instance, in the area of market access, the EU wants us to open our market by 75 per cent over a 20-year period.
“This appears harmless because over the first five years, there will be no major impact because they will open all their doors for us to export to Europe. However, the problem here is that, currently, we are not exporting much to Europe and so the benefit will not be significant.”
The minister explained that, given Nigeria’s condition as an import-dependent economy, it would be counter-productive to open its doors to imports without first of all developing its industrial sector to compete globally, especially in those sectors where the country has comparative and competitive advantage as provided for in the Nigeria Industrial Revolution Plan recently launched by President Goodluck Jonathan.
“Another major point we raised was that those items that were in Category D, and excluded in the 25 per cent, should include those areas and sectors that we want to develop in line with the Nigerian Industrial Revolution Plan. Some of those areas are already under Category C and D, meaning that they are the sectors that the EU wants us to liberalise imports. If we do that, it will have a very negative impact on the NIRP.
“Nigeria is the biggest country in the ECOWAS and we are already producing some of those goods that they want us to liberalise their importation. Also, what this means is that, not now, but from 2025-2026, based on the items that have been included and excluded, there will be significant loss of revenue to the government. There will be loss of jobs, investment and loss of even the ECOWAS market,” he stressed.
Aganga, however, said it was important to remain as one in the ECOWAS region, saying: “Even if they import those items into our neighbouring countries, they will end up in Nigeria and this will have negative impact on the Nigerian economy. So, it is important for us to work together as ECOWAS members and not to allow EPA to divide us.”
Moving Forward
This is not the 19th century, so it may not be possible for the EU to directly concoct phantom reasons to begin a military expedition against Nigeria for its decision not to endorse the EPA as did the British when the Benin Kingdom terminated trade relationship with its trade agents in the 1890s.
Also, If the EU is considering indirect economic sanctions against Nigeria as a way of punishing the country for daring to speak up against an agreement it is uncomfortable with, then the western giants should remember that one way to earn Africa's forgiveness and possibly gain its trust again is to allow the region have its own say without feeling bullied by the giants that may have impoverished it by its influence in past centuries.
Elementary lessons in history will give any African the chills on hearing of any form of economic partnership with Europe.
Being from the Bini ethnic group in Nigeria's South-south region, the story of the massacre of about 400,000 Binis, the torching of their city and the massive looting of the tribe's rich repository of artefacts in the so-called 'Benin Punitive Expedition' which began on February 9, 1897, is a sad story still told from generation to generation, to keep the people aware of the possibility of inhuman and savage behaviour of Europeans, when they are prevented from having their way in economic negotiations.
So, when about three weeks ago, Nigeria refused again to endorse the proposed reciprocal, free trade agreement with the European Union (EU), it amazed many Nigerians who noticed that the EU representatives felt disappointed with the west African giant's caution and pessimism.
If Benin City, a small but prosperous kingdom with an established governance system was attacked and ravaged in 1897, simply for the purpose of enjoying unbriddled benefits from its Palm oil, rubber and art wealth, then the EU, which in contemporary times can be considered a reflection of the old British empire should know that it has to make a lot more sacrifices to convince Nigerians and other Africans that in the proposed EU-west Africa Economic Partnership Agreement (EPA), its interests go beyond the pecuniary need to control the economic wealth and prospect of the subregion.
The EPA
The Economic Partnership Agreements (EPA)are a scheme to create a Free Trade Area (FTA) between the EU and the African, Caribbean and Pacific Group of states(ACP). They are a response to continuing criticism that the non-reciprocal and discriminating preferential trade agreement offered by the EU are incompatible with the World Trade Organisation (WTO) rules. The EPAs are a key element of the Cotonou Agreement, the latest agreement in the history of ACP-EU Development Cooperation and were supposed to take effect as of 2008, but as at three weeks ago the negotiations failed with major opposition from Nigeria.
the EPAs' key feature is their reciprocity and their non-discriminatory nature. They involve the phased out removal of all trade preferences which have been established between the EU and theACP Countries since 1975 as well as the progressive removal of trade barriers between the partners. In order to fulfil the criterion of being a non-discriminatory agreement, the EPAs are open to alldevrloping countries thereby, supposedly terminating the ACP group as the main development partner of the EU.
The establishment of a reciprocal trade agreement confronts the EU with the problem of how to reconcile the special status of the ACP group with the EU’s obligation to the WTO. The solution proposed for this dilemma is an agreement which is only as reciprocal as necessary to fulfil WTO criteria. In reality, the ACP countries is expected to have some room to manoeuvre and to maintain some limited protection of their most vital products. The extent to which trade must be liberalised under the new EPAs is still a widely debated issue.
Nigeria's Latest Block of the EPA
EU three Saturdays ago made another spirited effort to close the EPA deal with West Africa, Nigeria thew a clog in the wheel and prevented its smaller west African neighbours from accepting the EU's terms of the agreement.
In the meeting, west African leaders failed to agree to open their economies to free trade with the European Union as Nigeria forcefully voiced concerns and again making the decade-long talks end in deadlock.
Negotiations over the EPA stalled two years ago after countries of the Economic Community of West African States (ECOWAS) resisted lifting tariff barriers over fears they could crush nascent industries unable to cope with European imports.
However, an agreement in October to gradually implement a long-delayed west African customs union put a possible deal back on track as ECOWAS agreed to bring their rules into line with countries like Ghana and Ivory Coast that have EU free trade deals.
The communiqué from the meeting said while the summit endorsed an agreement in principle, some member states - in particular Nigeria - voiced concerns over technical issues.
The bloc set a two-month deadline to eliminate lingering areas of disagreement.
"We need to negotiate an EPA that is beneficial to our sub-region and will contribute to the prosperity of our people," said Ghana's President John Mahama, who assumed the bloc's rotating chairmanship at the two-day summit.
"We can only do that united as a sub-region," he said.
Under the EPA, the European Union would immediately offer the 15-member ECOWAS and non-member state Mauritania full access to its markets. In return, ECOWAS would gradually open up 75 percent of its markets - with their 300 million consumers - to Europe over a 20-year period. But the question has always been; what finished goods can these African countries sell successfully to Europe, considering the mismatch of the two regions in terms of technology and manufacturing experience?
Technical negotiations were however wrapped up last month with the EU offering a 6.5 billion euro (5.37 billion pounds) package over the next five years to help ECOWAS shoulder the costs of integrating into the global economy.
The Deadlock
Regional leaders were to finalise the deal at the meeting in the Ivorian capital Yamoussoukro days before a summit between African nations and the European Union in Brussels.
However, according to officialsl who were party to the talks, Nigeria voiced lingering concern over the potential negative impact of the deal on its industrial sector if certain products were allowed tariff-free entry into its market.
Failure to finalise a deal would have only a limited impact on most ECOWAS countries, which already benefit from full access to the EU market as low-income countries, although most of what they sell to European countries are primary products to which no industrial value has been added. With a country like Nigeria having some of the largest population of young people in the world and most of them unemployed, only policies that will help the country develop its capacity to produce industrial goods, thereby creating decent jobs are reasonable.
But Ivory Coast and Ghana, which send the bulk of their exports - including most of the world's cocoa - to Europe risk being hit hard as their interim bilateral deals expire.
Ivory Coast and Ghana may be able to retain tariff-free access to Europe by extending their existing agreements. However the two countries, both gateways for imports to West Africa, had hoped to use the EPA negotiation to harmonise the region's economies to foster increased integration.
The European Union, which had expressed confidence the EPA would get the green light at the summit, voiced caution.
"We have to analyse the way forward now, and they have to look at what they want," said a EU official. "There are solutions. This is now a political choice."
Why Nigeria Declined
Nigeria's Minister of Industry, Trade and Investment, Mr. Olusegun Aganga, had explained the reason Nigeria refused to sign the trade liberalisation agreement being pushed forward by the European Union (EU) under the Economic Partnership Agreement (EPA) with the Economic Community of West African States (ECOWAS).
Aganga said certain provisions of the agreement, which Nigeria was expected to sign were not in the best interest of the economy. “The EPA agreement is not ready for endorsement by the Heads of State and Government. Nigeria raised 10 objections to what was presented to us and the Summit of Heads of State ratified it.”
According to him, a committee from Nigeria, Cote D’Ivoire , Ghana and Senegal looked at the issues raised by member-states, particularly Nigeria, and came up with a proposal, adding that when the country went into the meeting, the idea was to endorse it, but there were reservations concerning the agreement based on model and feedback from the private sector.
He said: “One major reservation was that the way the agreement was done, which of course they expected us to sign, would not be in the overall interest of the Nigerian economy over the long term. For instance, in the area of market access, the EU wants us to open our market by 75 per cent over a 20-year period.
“This appears harmless because over the first five years, there will be no major impact because they will open all their doors for us to export to Europe. However, the problem here is that, currently, we are not exporting much to Europe and so the benefit will not be significant.”
The minister explained that, given Nigeria’s condition as an import-dependent economy, it would be counter-productive to open its doors to imports without first of all developing its industrial sector to compete globally, especially in those sectors where the country has comparative and competitive advantage as provided for in the Nigeria Industrial Revolution Plan recently launched by President Goodluck Jonathan.
“Another major point we raised was that those items that were in Category D, and excluded in the 25 per cent, should include those areas and sectors that we want to develop in line with the Nigerian Industrial Revolution Plan. Some of those areas are already under Category C and D, meaning that they are the sectors that the EU wants us to liberalise imports. If we do that, it will have a very negative impact on the NIRP.
“Nigeria is the biggest country in the ECOWAS and we are already producing some of those goods that they want us to liberalise their importation. Also, what this means is that, not now, but from 2025-2026, based on the items that have been included and excluded, there will be significant loss of revenue to the government. There will be loss of jobs, investment and loss of even the ECOWAS market,” he stressed.
Aganga, however, said it was important to remain as one in the ECOWAS region, saying: “Even if they import those items into our neighbouring countries, they will end up in Nigeria and this will have negative impact on the Nigerian economy. So, it is important for us to work together as ECOWAS members and not to allow EPA to divide us.”
Moving Forward
This is not the 19th century, so it may not be possible for the EU to directly concoct phantom reasons to begin a military expedition against Nigeria for its decision not to endorse the EPA as did the British when the Benin Kingdom terminated trade relationship with its trade agents in the 1890s.
Also, If the EU is considering indirect economic sanctions against Nigeria as a way of punishing the country for daring to speak up against an agreement it is uncomfortable with, then the western giants should remember that one way to earn Africa's forgiveness and possibly gain its trust again is to allow the region have its own say without feeling bullied by the giants that may have impoverished it by its influence in past centuries.