West African ACP countries

In Western Africa, the Economic Community of West African States (ECOWAS) plus Mauritania,
is the reference point for the regional country grouping for this SIA. Negotiations between
ECOWAS and the EU were officially launched on 6 October 2003 and are scheduled to conclude
by December 2007. ECOWAS member States agreed to a “road map for EPA negotiations” on
14 November 2003 in Accra and are engaged in a process which includes national impact
assessments of the EPA, and familiarising civil society and the business community with the
potential changes and capacity building needs.
Western African structural pattern: unachieved regional
integration of a geographically fragmented region, mainly
composed of LDCs and economically dominated by Nigeria
Despite recent improvements, from an institutional perspective ECOWAS is far from a well
functioning Customs Union. However, it has the advantage of covering a large geographical area,
and including Nigeria. WAEMU, the institution in Western Africa that is most advanced in terms
of regional integration, only includes francophone countries plus Guinea Bissau, all using the
same currency (the CFA franc) but with limited economic and political significance in the
absence of Nigeria.
ECOWAS represents a critical economic and geographic mass but is not a single and coherent
block. In Western Africa, there is a distinction between Sahel and non-Sahel economies, and
between the countries in the region and Nigeria, which is the major economic driving force in the
region and has an influence on its neighbours’ economies either directly or indirectly through
informal trade.
Informal trans-border trade plays a prominent role in the region, based on the exploitation of
differences between national regulations. Nigeria is a source as well as a destination for informal
regional trade. The prosperity of small neighboring countries (such as Bénin and Togo) can be
explained by their role as warehouse states for Nigeria. But Nigeria is not the only focal point.
Trade corridors also exist around Senegal and its neighbors, and in the Sahel region between
Mali, Burkina Faso and the North of Côte d’Ivoire (in the heart of the cotton production
‘corridor’). Informal trans-border trade can play, as it has in the past, a negative role but its
dynamism can also be an advantage for regional trade once trade networks are ‘formalized’ and a
favorable trade policy climate exists.
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Mainly western African countries are LDCs (except Nigeria, Ghana and Côte d’Ivoire) and have
limited resources of their own and highly depend on external support (with the exception of
Nigeria). However, flows of FDI into Africa are concentrated in the oil and telecom sectors and,
to a lesser extent, transport but are not significant in the manufacturing sector. Despite high levels
of intervention the results of official development assistance (ODA) have been disappointing.
Structural adjustment programs (SAPs) have had some results in various countries but their
negative effects have not yet been counterbalanced by significant positive impacts.
The social challenges facing the countries of Western Africa are first linked to the historic
demographic growth (from 85 to 215 million people between 1960 and 1998) and the growing
connection to world market resulting whose effect has been tremendous on the economic, social
and environmental profile of the region: accelerating regional and international migration flows,
increasing urbanisation resulting in an exodus from rural areas and basic social deterioration in
terms of poverty, health and gender equality in rural and urban areas. The poorest countries and
populations in the region are likely to be made more vulnerable to the trade opening within the
framework of trade agreements because they are deprived from the basic conditions necessary to
be able to take advantage of the opportunities presented by liberalisation.
Western African social challenges are also partly a consequence of the weaknesses of the
economic situation. Agriculture is mainly for subsistence with small farms growing traditional
crops. The levels of poverty are increasing and rural populations are more and more inclined to
migrate to urban centres where a weak modern sector cannot offer enough employment and
revenue opportunities. The informal sector in West African cities is booming as a response to a
social necessity induced by rapid urbanisation with important negative consequences on the
environment and health conditions.
Protection of the environment is not considered a priority by the majority of the population.
Major threats are increasing including desertification in the Sahel, deforestation (in the Upper
Guinea Forest b.e.) with dramatic destruction and fragmentation of habitat and threats for the
exceptionally rich biodiversity, increasing pressure on arable lands and water, increased pollution
in coastal zones and exhaustion of marine resources, deteriorating air quality in overcrowded
urban centres.
Building competitive West African exports: selected sectors
The participation of ECOWAS in world trade declined sharply over the past 30 years and is
presently insignificant. However, inclusion into a global trade flows is not a new phenomenon for
West Africa that is, in fact, already confronted to globalisation since informal trade is able to
offer any product from all over the world at affordable prices for customers with limited
purchasing power. Intra-regional trade may seem limited through the analysis of official data but
is significant if informal trans-border trade is taken into account.
The EU is a major trading partner for West African countries and is the main destination for
exports, and the main provider of industrial products. The main exports from Western Africa to
the EU are based on non-diversified, limited processed products: petroleum oils and petroleum
gas, cocoa, cotton whose prices – dependant of a world market following a downward trend –
impede West African competitiveness. This first group of products are likely to be very slightly
(or not at all) impacted by EPA.
1 ODA: Overseas Development Agencies; SAP: Structural Adjustment Programs.
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Nonetheless, if the Western African countries managed to develop production and exports of
(semi-)processed products instead of raw products (i.e. chocolate instead of raw cocoa, textiles
instead of raw cotton) they could improve the value added of their exports and relieve their
vulnerability to the decline of world prices for raw products. However, the weaknesses of the
infrastructures and of the business environment as well as a limited purchasing power of
customers are important obstacles to adding value to local production. Therefore, creating
favourable conditions, through improvements in infrastructure and the legal environment that
could contribute to increase FDI inflows is an essential pre-requisite for the development of
competitive sectors in Western Africa.
The priority sectors outlined below for possible further consideration in this SIA have been
selected according to their significance from an economic, environmental and social perspective.
Their importance in terms of trade flows in both volume and financial terms are considered
insofar as these sectors would be impacted by trade measures included in a future EPA and as
potential impacts of changes might be expected on sustainability.
Cotton and textiles: at first sight, cotton, a major crop in West Africa and mainly in the Sahel
regions, will not be impacted by the EPA. In Europe, African cotton is in great demand and
there is a growing demand for first-level processed products such as threads and unbleached
fabrics. West African textiles could be competitive. The EPA could favor such an evolution
by granting special conditions to these products given the importance of cotton for West
Africa. As mentioned in the EU “cotton initiative”, free access to cotton and cotton products
is granted and subsidies on EU cotton will be reviewed. As important would be a specific
support in the context of EPA to modernization of the whole sector including research and
development programs at the plantation level to help West African cotton to maintain its
quality and further improve processing abilities to respond the demanding requirements of EU
buyers.
Cocoa: the countries of Western Africa are among the world’s largest cocoa producers, the
Ivory Coast being the world’s largest producer (more than 40% of cocoa bean production),
Ghana and Nigeria being also important producers. Cocoa provides a livelihood for a large
number of farmers, contributes to rural development and to earnings that support rural
infrastructure including roads, storage facilities, schools, hospitals, and first-stage processing
firms. These fundamental linkages to sustainability make this a priority sector in the region.
Trade measures in the EPAs could encourage the continued robust trade in cocoa and its
further processing to achieve higher levels of value added and thereby contribute to economic
sustainability.
Wheat and Meslin. Increasing imports of EU wheat and meslin could have negative impacts
on traditional cereals and on food security (displacement of local production) in West Africa.
Wheat benefits from support in the EU, and local production in Western Africa has difficultly
competing. If tariffs are lowered, the imports from EU could increase and further displace
local production. Where this discourages the cultivation of traditional cereals (such as millet)
and an over-reliance on imports, there could be issues associated with deteriorating food
security, modification of nutrition equilibrium and loss of employment in traditional
production. On the other hand, cheap imports of EU wheat contribute to the overall
availability of food products, such as bread.
The second group of West African exports towards the EU include fish and fish products, wood,
‘out of season’ fruits and vegetables also with limited transformation: Western African countries
could develop ‘niche exportations’ on these products that do not directly compete with European
domestic production.
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Fruits and vegetable: these sectors present opportunities for producers in West Africa
countries due to their relative proximity of EU markets that might be impacted by structural
changes as a result of the EPAs and in particular the phasing out of the commodity protocols.
They offer high-value, substitute commodities for which there are existing and growing
markets in the EU provided producers can comply with legislation and quality requirements
and have access to affordable and efficient infrastructure and logistics.
Fish and fish products is an important economic sector in some countries in Western Africa
(especially on the ‘Atlantic façade’). However, this resource is subject to over-harvesting
which could contribute to deteriorating food security in coastal communities. There are a
number of potentially relevant trade-related measures associated with this sector. Firstly,
tariffs are high in this sector both in the EU and in Western Africa. A second potentially
important trade-related area for investigation is the use of SPS measures in this sector and the
ability of West African countries to meet the requirements and thereby take full advantage of
their preferences with trade with the EU. There may be opportunities for increasing trade in
this sector, particularly in processed products such as preserved fish or fish preparations,
which could contribute to sustainability.
The poultry industry in Western Africa is a viable industry which provides an important
source of employment in urban areas. Poultry is exported from the EU to Western Africa.
Poultry is an important West African agro-industry providing urban population with an
affordable source of protein. In the EU, poultry is a commodity that benefits from high levels
of producer support, which often makes it cheaper to import than to raise domestically in
Western Africa. If tariffs in ACP countries are lowered, EU exports of poultry could expand
further, which could threaten the domestic poultry industry in Western Africa, which has
implications for employment, for production for the domestic and regional market and for
food security. This sector is also linked closely to the maize sector in light of the importance
of maize in poultry feed.
Building an ECOWAS-EU trade partnership
In general, since most of exports from Western Africa already enter the EU duty-free, from a
strict consideration of the impacts of changing tariffs, the EPA is unlikely to have any significant
impact on exports from Western Africa.
Tariff barriers are not so much an obstacle for exports from West African countries since most of
them, being LDCs with the exception of Nigeria, Ghana and Côte d’Ivoire (still accounting for
67% of the ECOWAS economy), will benefit in 2008 from the “Everything but Arms” (EBA)
initiative and enjoy duty and quota free access to the EU market. Non-LDCs will benefit from the
Cotonou preferences and as such have duty free access or preferential tariffs for most of their
exports. The main remaining problem is constituted by non-tariff barriers, SPS (including
traceability requirements) in particular. But in fact, it is more a problem of capacity building and
training that EU support might help to solve.
Imports from the EU are diversified and include industrial and manufactured products, and
medicines that are not produced locally. These imports are necessary for the region. Other
significant imports include agricultural products which, if they are not direct competitors to local
products can be considered as an obstacle to local production. West African consider imports of
2 EBA : Everything But Arms Initiative.
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wheat are an obstacle to the development of local cereals, imported worn closes are a major
impediment to the development of local textile industries, imports of frozen chicken meat are a
threat not only to local production but to the development of local cereals.
Therefore, in such sectors where the EU competition could have destructive effects, gradual
implementation of trade liberalisation would be necessary in order to preserve the Western
African production and enable it to build competitiveness or to specialize in ‘niche’ production
that does not compete with imports from EU.
Access to West African markets varies greatly although harmonisation of tariffs is on the agenda
in the integration processes, but it is only at an early stage. The overall scenario is based on the
full implementation of a free trade area among the countries of ECOWAS by 2004, including a
monetary and customs union (with a common external tariff of between 11 and 12%) in place by
the time that an EPA would be signed in 2007.
In the short term, the principal economic impacts of liberalisation will be on the local offer and
demand and on intra regional trade. For the time being, in a context where regional integration is
still not effective despite progresses, and far from offering a sustainable market base for local
production, moving from import substitution to satisfy a competitive and demanding regional
market as well as adding value to exports will be difficult.
Most broadly, the decline agricultural exports (where West African countries are globally
uncompetitive in EU markets that are no longer protected for them) should generate a relative
decline in some agricultural sectors and a corresponding increase in light manufactures and
services.
The extents to which supply-side challenges can be overcome depend in part on the availability of
adequate infrastructure for, inter alia, storage and transportation. The development of this
infrastructure could be hampered by financial constraints but also local, technical exogenous
problems such as the unavailability of energy for refrigeration, difficulties of respecting strict
procedures, and potential delays related to poor transport infrastructure. Overcoming these
obstacles is closely linked to the extent that flows of investment are encouraged under the EPAs.
Sustainability linkages in West Africa
An overall decline in the agricultural sector could have an immediate impact on employment
causing workers to leave the farm and rural areas in search of alternative employment in urban
areas. Social impacts will depend heavily on whether better paid employment opportunities are
available in expanding sectors and the behaviour of different actors in production, who tend to
respond based on their immediate needs and levels of resources. Rural exodus and faster
urbanisation would both have negative environmental impacts (faster desertification, increased
water pollution, degradation of sanitary conditions, etc.). However, in some cases, the decline in
protected exports production for EU markets could also offer opportunities for land to revert to a
more natural state with attendant increases in environmental supports and biodiversity as well as
incentives to develop ‘niche exports’ markets such as high-priced organic products.
At a general level, an overall decline in exports of traditional crops such as cocoa, coffee, and
vegetable oils could also have important impacts on rural areas of production where the social
equilibrium is already fragile. The consequences of such a decrease could be to encourage social
instability and struggles for control over land and revenue sources, with specific ethnic and
inter-generational problems linked to the exhaustion of rural resources. There may be issues
related to food safety that could aggravate the lack of competitiveness of West African
agricultural products.
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Trade liberalisation enhances competitions on some basic food products of West African
countries that are therefore potentially in competition with basic agricultural products from other
more competitive countries, both in the developed and the developing regions. Western African
countries would, therefore, benefit from modifying their productive sector towards the production
of more processed goods.
A broad trend from agriculture to export-oriented light manufactures could bring about social and
environmental gains if policies are put in-place to avoid the many problems arising from
traditional export processing zones. An additional challenge will be to reduce tariff distortions so
as to allow further processing of goods based on raw materials where West African countries
have a comparative advantage so that more of the value-added can remain in the region. This will
also require the modernization of transportation networks, including intra-regional and urban
systems.
The global impact of trade liberalisation on government revenues is not always clear. In the
region, import duties ranges from 21.09% of government revenues in Benin to 58.73% in Guinea
Bissau. By reducing fiscal external barriers, trade liberalisation agreements generally induce
important loss of public fiscal revenues. The level of this loss however depends of the fiscal
structure of the state concerned and the mitigation of the level effect (lower taxes inducing lower
fiscal revenues) with the volume effect: trade liberalisation is supposed to enhance international
trade and therefore to increase the total volume of taxed trade operations. Designing an
appropriate trade policy in conjunction with tax reform is a key to maintaining tax revenues in the
process of trade liberalisation.
Trade can be an engine for growth provided West Africa can add value to its productions and be
competitive on its own markets and on external markets including the EU. Obstacles to trade
between West Africa and the EU are not so much tariff and non tariff barriers than the overall
weaknesses of the West African economy. In order to improve the situation, West Africa will have
to accept structural changes to maximise its potential and limit its weaknesses, Europe will have
to support these evolutions. In this respect the development side of the EPA will be essential.
The development dimension of the EPA: fostering regional
integration as a prerequisite for enhancing trade flows
The EU approach of development through trade as highlighted by the Cotonou Agreement is
different from previous approaches. Partnership brings a new dimension to relationship with
Europe and that is where EPAs are innovative but also demanding for both sides. From a
development perspective, the ideal scenario would be to facilitate access to the EU of more
processed products from West African countries and limit access of EU goods that could be
produced locally. The background of such a scenario is a well functioning regional market.
Despite institutional progresses made recently to achieve a common market with a single
currency and a common external tariff (CET), major obstacles still remain.
By further enhancing the regional integration process, the EPAs could reduce the disparities in
the trade policies between Senegal, Nigeria and other West African countries, including Gambia.
While most of the West African countries will benefit from this harmonisation process,
‘warehouse states’ for Nigeria (Benin and Togo) would be the losers and therefore will have to
deeply modify the structure of their economies.
With a well functioning Common Market, it would be possible to consider trade as a development
tool. In this regard, the development of the regional integration process under the EPA will have
to focus on defining incentives to encourage local production and added value for both regional
and exports markets.
First, the lack of reliable transport infrastructure in the region will be an important sector to
address. Road transport is the only obvious vehicle for intra regional trade but interconnection by
paved and reliable roads is not yet completed; rail infrastructure is not sufficient and air transport,
after the end of Air Afrique, is still in the process of being constructed. In all these sectors
investments can hardly be financed by declining foreign aid or by local budgets and FDI.
Building Private/Public Partnership could be explored. Western African negotiators will have to
define priorities and devote resources to improve the situation.
Second, SPS measures are one of the main non-tariff barriers remaining on the EU imports of
West African products. The development strategy sustained by the European Union under EPA
would have to involve capacity building programs dedicated to allowing West African exporters
to be able to fulfill the conditions required to access to the European market.
Finally, the political will of governments to achieve an effective regional integration will also be
an important prerequisite. National governments reluctant to engage in a process that is perceived
to involve any loss of sovereignty and some tend to be suspicious of Nigeria. The success of
ECOWAS will depend on the role Nigeria will play over time in favor of regional integration.
Any change in Nigeria’s policies has always had consequences on the whole region. Some
positive changes have been achieved in this direction even if it is under pressure of the coming
negotiations. If it is confirmed, then EPA would have played a major role for the future of West
Africa.