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ECOWAS Common External Tariff: Examining Pitfalls and Perks

This Day Live, Nigeria

ECOWAS Common External Tariff: Examining Pitfalls and Perks

8 December 2011

The 11th Meeting of the joint ECOWAS-UEMOA Committee for the Management of the ECOWAS Common External Tariff (CET) opened in Cotonou, Benin Republic on December 5, to review the draft CET Nomenclature, based on the 2012 version of the Harmonized System and the draft ECOWAS CET prepared by the two regional blocs in Banjul, The Gambia, last April. Abimbola Akosile examines the issues at the forum and the recommendations contained in a memorandum earlier sent to the Finance Minister by the National Association of Nigerian Traders on the CET

Setting an Agenda
The five-day meeting of the joint ECOWAS-UEMOA Committee, holding within the framework of the implementation of the ECOWAS CET, seeks to also examine the draft instruments related to Accompanying and Safeguard Measures to be adopted by member states during the implementation of the CET, according to an ECOWAS Commission statement.

At a review meeting in June/July 2011 also in Cotonou, the two Commissions assessed the draft regional tariff holistically against the backdrop of the region’s agricultural and industrial policies, as well as West Africa’s Market Access Offer under the on-going Economic Partnership Agreement (EPA) negotiations with the European Union.

Welcoming participants on behalf of ECOWAS Commission President James Victor Gbeho, the Acting Director of Customs, ECOWAS Commission, Mr. Salifou Tientore, urged them to make quality input to the draft documents and to facilitate progress on the outstanding issues, according to the Pan African News Agency (PANA).

Tientore said the adoption of the CET is a major step in the establishment of a Customs Union under the ECOWAS integration agenda, and that without CET, West Africa cannot move forward on the EPA negotiations with the EU.

The negotiations which started in 2004 and were to have been concluded in 2007 are facing challenges over disagreements on some issues, including the scope of opening of West Africa’s markets to products from the EU.

Addressing the Cotonou meeting on behalf of the UEMOA (West African Monetary and Economic Union) Commission, the Director of Regional Market and Customs Union, Mr. Francois-Xavier Bambara, noted that while the two Commissions had come a long way on the CET project, much work still needed to be done.

He, however, expressed the hope that with commitment at all levels, an agreement would be reached by 2012, according to PANA.
The Director of Integration, Benin’s Ministry of Economy and Finance, Mr. Badirou Nassif, who opened the meeting on behalf of the Minister, described the CET as an important trade instrument and challenged participants to come up with useful recommendations to fast-track the process.

Meeting Focal Point
The joint meeting is expected to provide member states with an opportunity to review the draft CET and also afford the ECOWAS Commission the platform to present the proposed CET Safeguard and Accompanying Measures to the member states.
In accordance with Article 3 of the ECOWAS Revised Treaty, successful integration of the region depends on the creation of a common market through trade liberalisation and the adoption of a CET.

Memo of Concern
The National Association of Nigerian Traders (NANTS), led by Ken Ukaoha, sent a detailed Memorandum to the Coordinating Minister of the Economy and Minister of Finance, on issues arising from the CET scenario, with various recommendations for Nigeria in the process.

At the regional level, NANTS is a member of the ECOWAS and Nigeria Negotiating Team on the EU-West Africa Economic Partnership Agreements and has accordingly, been involved in the negotiations of the regional ECOWAS Common External Tariff (CET) at different levels.

Ukaoha recalled that the ECOWAS CET has remained an issue of strong discourse and controversy in West Africa for a long time, especially since the inception of the negotiation of the Economic Partnership Agreement (EPA).

“The ECOWAS CET is an instrument for tariff setting and liberalisation which ought to take care of a common market access within the ambits of regional trade and economic integration in the West African region.

“The decision of ECOWAS Heads of State at their 2001 summit required member states to harmonise their import tariffs with the UEMOA Common External Tariff (CET) adopted by 8 mainly francophone member states in 1998.

“Faced with the challenges and pressure of concluding the EPA with the European Union (EU), close to five years after the 2001 summit, the Authority of Heads of State and Government of ECOWAS during their 30th session held in Niamey (January 2006) observed that close to nothing had been done with regard to the subject matter and consequently, further adopted a fast tracking of the CET harmonisation in line with the UEMOA rate”, Ukaoha noted in the memo.

Effect of UEMOA CET
According to the NANTS memo, the effect of the UEMOA CET will be devastating for Nigerian industries in various dimensions.
These, according to the memo, include further drop in capacity utilisation of Nigerian industries which presently is very low; dismantling of manufacturing base and setback to Nigerian export efforts; and loss of jobs and increase in unemployment.

Other potential effects, Ukaoha noted, are setback to programme of diversification of the Nigerian economy; further reduction in contribution by manufacturing sector to GDP; disappearance of skilled labour as manufacturing sector cannot employ them; and setback to NEEDS programme of massive job creation.

“This may result in a major setback on Nigeria’s realisation of the MDGs, the 7-Point Agenda of government and indeed, the nation’s vision of becoming one of the 20 great economies of the world by 2020. Failure of manufacturing companies will result in their inability to meet their debt obligations to banks and other lending institutions.

“Loan losses from manufacturing sector will put pressure on banking and financial sector. It will make logical sense to European, Chinese and Far Eastern exporters to open ports in neighbouring ECOWAS countries and through them, export to Nigeria taking advantage of ECOWAS Trade Liberalisation Scheme (ETLS) at near zero duty thereby beating even the CET”, the memo added.

Determinant Factors
According to Ukaoha, a legal practitioner, Nigeria’s position on ECOWAS CET debate should be informed by two major considerations: first, its own development objectives and secondly, the need to fast-track ECOWAS as an economic union.

“Central to a West African common market is a common external tariff and common trade policies. Nigeria needs to review her trade policy in line with the desire to see a strong ECOWAS common market. It must also lead the development of a regional trade policy given her dominant position in the region.

Vital Recommendations
The association, in the memo, recommended that some crucial issues be addressed with some urgency.
These include: Product classification, which involves categorisation of all products that would be placed in the various tariff bands; generate a popular and acceptable definition of ‘social goods’ which would be classified under ‘0’ tariff band in order to protect the region’s poor consumer public.

Input Classification: Resolve the tricky issue whereby on the one hand, some goods considered as raw materials in one sector are considered as finished product in another and on the other hand, where a product is considered as finished good in one country (where it is manufactured) and raw material in another country (where it is needed for production processes), e.g. resin.

Harmonisation of tariff on rice: The memo recommended that the tariff on brown and finished rice should be pegged at same band and high enough to protect Nigeria rice farmers “as some importers are known to be taking advantage of the much lower tariff band on brown rice to bring in finished rice disguised as brown rice”.

“More so, with the nation’s transformation agenda built around agriculture, the economic focus on local production should be more than ever encouraged in order to ensure that rural farmers justify the increased funding on the sector and produce optimally to bridge the large importation gap. For this reason, high walls on the sector may be considered.

Non Recognition of Waivers at Regional Level: In appropriate cases and when used transparently, the utility of waivers in growing targeted sectors or even whole economies cannot be over-emphasised, the association noted.

“A common position needs to be sought as currently, the ECOWAS CET does not recognise waivers while the same are statutory instruments in Nigeria”, Ukaoha added.

Calling on the Minister
In the memo to the Minister, the association noted that, “NANTS is not canvassing that Nigeria should pull out or distort the ECOWAS regional arrangement as part of her efforts at facilitating integration of the sub-region.

“We are however asserting the need for Nigeria to employ the wisdom of ‘charity begins at home’. The essence of this is to guarantee that while trying to protect others from sinking, Nigeria is fortified enough to withstand unexpected wind or turbulence that may try to drown her”, the body addeda