Exports to EU market risk 20% tariffs, if...
Exports from Ghana to the European Union (EU) risk attracting tariffs and duties if the country fails to sign substantive Economic Partnership Agreements (EPAs) with the European Union (EU) by October 1, this year.
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Companies to be seriously affected by any tariff hike of up to 20.5 per cent are worried about the seeming lack of clear direction by Ghana towards the signing of the bilateral trade pact with the EU, barring which their produce to the EU market would be taxed higher, making their exports uncompetitive.
Such producers and exporters include canned tuna exporters from the Pioneer Food Cannery, agro-processing companies such as Golden Exotics, HPW Fresh and Dry, Blue Skies, Barry Callebaut and other cocoa processing companies producing for the EU market.
Already, Tema-based Pioneer Food Cannery says its principals have frozen further investments in the company for the sake of uncertainties of export prospects with the absence of any bilateral trade agreement. The parent company of the firm invests between $4 million and $5 million every year on expansion, new line and maintenance.
Interim agreement
Ghana initialed an Interim EPA in December 2007 to avoid a similar tariff action after the preferential trade agreement they enjoyed under a previous treaty (the Cotonou Accord) expired in 2000.
Since 2000, African, Caribbean and Pacific (ACP) countries had been working with the EU Commission to sign a non-preferential (reciprocal) bilateral trade treaty in which either side would offer both concessions and tariffs, but in a regime that favours the ACP countries more.
Ghana and other ECOWAS member states have thus been working as a regional bloc to sign the pact with the EU before the October 1 deadline, failure of which exports from Ghana, including canned tuna, cocoa products, horticultural products and fresh cuts will all be subjected to varying levels of tariffs.
Industry worries
The General Manager of Pioneer Food Cannery, Mr Nichol J. Elizabeth, told the Daily Graphic that the future of their business in Ghana looked uncertain because in the absence of an agreement, there was no clear road map, at least an interim one to salvage the prospects of their business.
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Pioneer Foods alone employs about 2,000 people in its processing plant, and about 300 others are engaged in its fishing business.
Like many of the companies affected, Pioneer Foods exports about 95 per cent of its produce to the EU market, with only about five per cent (Starkist) directed at the local market.
Mr Elizabeth said should Ghana fail to sign the pact, the company’s exports to the EU market would attract 20.5 per cent tariff which would render the business uncompetitive, especially as there was already a keen competition from South American, Pacific and Caribbean countries which had signed EPA with the EU.
“Since about 95 per cent of our products are exported to the EU market, if we do not get exports there, then we might as well close the factory down,” he said.
Their fears are further heightened because the EU Parliament will rise in August and Ghana could miss out on the ratification of the agreement should Ghana delay any further.
This is not the first time the industry has reacted to demand that the government should sign the treaty with the EU. Similar concerns became rife in 2007 when ECOWAS missed the signing of a substantive agreement.
The EU is currently Ghana's largest trading partner. Trade between Ghana and the EU has been growing since 2000. The volume of trade amounted to €11.2 billion in 2013 against a total value of around €1.9 billion in 2000.
“Currently, we do not think that Ghana is treating the issue with the urgency it deserves, as the country still waits to go with the larger ECOWAS bloc,” he said, stressing that it was important for Ghana to act swiftly to protect itself against EU tariffs which could lead to local companies closing shop.
Background of the EPAs
Ghana, as part of the larger ECOWAS, was billed to sign the EPAs last year. Nigeria, however, chickened out of the pact last month to concentrate on other things.
Cote d’Ivoire has since the IEPA in 2007 signed a substantive agreement which secures its exports to the EU market, duty-free and quota-free on some items such as agricultural and food items.
Under EPA, a list of commodities has been identified for duty – taken off the zero tariff regime – if the country of origin does not have an agreement with the EU under its Market Access Regulation which conforms to World Trade Organisation (WTO) rules.
The WTO rules do not allow developed economies to grant preferential (non-reciprocal) market access to countries not categorised as ‘least developed’. Ghana has left this rank to join the league of ‘lower middle income’ or frontier economy.
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If Ghana signs the EPA, it will be required to gradually eliminate tariffs on imports from the EU as per the market access offer, except for sensitive products – mostly agricultural – which have been listed in an exclusion list.