Why Ghana must not sign the EPAs in its current Form – Kwabena Nyarko Otoo

There are plenty of reasons why Ghana must not sign the Free Trade Trojan horse packaged as Economic Partnership Agreement.

Two reasons stand out as they encompass the rest. These are the history of Africa’s Development Cooperation with the European Union and the Future we must have for our countries. The present is important but we also know that it is a sorry present that has been shaped principally by the history we have shared with Europe. It is imperative that we move away swiftly from the present situation by building a future that bodes prosperity. We cannot do that by repackaging our shared history and using our present unenviable situation to justify a continuation of the past relationship.

What has been the history of our relationship with Europe and the European Union? As we know, it began with slavery, moved on to centuries of colonialism and ended with paternalistic and obnoxious attempt at neo-colonialism, which is where we are. In the neo-colonial era, Europe knows too well what is best for Africa and Ghana for that matter. We have listened to them and done their bidding for half a century. This combined with our own mistakes at mis-governance has brought us to this unpleasant present. Colonialism had already done much of the grounds work on which the neo-colonial relationship had been anchored. Our economy had been assigned a unique role of hewers of wood and drawers of water, producing raw materials for the industry of the colonialists. In return, we received manufactured products from metropolitan industry. The great disadvantage of this colonial pact division of labour is that, as we have come to know it, at all times in the history of mankind the terms of trade between industry (manufactures) and agriculture (raw materials) has favoured the former. Thirty years ago, a ton of cocoa buys one VW. Today one needs more than twenty (20) of cocoa in order to buy one VW.

This colonial set up was bound to be uprooted as colonialism drew to a close. Europe knew this better so it strategized. As usual, we failed to look ahead. Therefore, before the first black African country – Ghana – could walk out of colonialism in 1957, Europe put together the Treaty of Rome, signed between six European countries and the then independent countries of the Africa, Caribbean and the Pacific (ACP). This involved a programme of economic and social development including structural reform in trade, monetary cooperation and technology transfer. The Treaty of Rome was replaced by, the two (2) Younde Conventions of 1963 and 1969. These were signed between European Economic Community (EEC) and 18 French-Speaking countries. The Younde Conventions covered trade, financial and technical cooperation. Slowly but steadily, the neo-colonial economic and political institutions were being set-up. In fact, the Younde Conventions were already being accused of reinforcing the colonial pact’s division of labour where the ACP countries produced raw materials in exchange for manufactures from the EEC.

In 1973, the United Kingdom (UK) joined the EEC bringing along the Commonwealth group of countries. Two years later in 1975, the series of Lome Conventions commenced. Lome I was signed between nine (9) members of EEC and 46 ACP countries. The focus was on development cooperation and unilateral preferences for ACP exports to the European market. The Georgetown Agreement of 1975 institutionalized the ACP as a group with a permanent secretariat. Lome II was signed in 1979 and it involved 58 ACP countries. It reinforced the system of unilateral preferences for ACP exports. Unilateral in the sense that, ACP exports were exempted from custom duties in the EEC but ACP imports from Europe attracted custom duties.

This notwithstanding, the ACP had by this time, realized that its export revenues were not only falling but also fluctuating badly. The trend decline of the terms of trade for primary products was beginning to bite. Even with this grim realization, Europe managed to outsmart the ACP. How they did it, is significant as the debate over the EPAs goes for the home stretch. Instead of encouraging and supporting the diversification of the production structure of ACP economies, Europe smartly proposed and ACP sheepishly accepted compensation for the revenue shortfalls and continued with its primary commodity exports. Thus, the first two Lome Conventions included the initiative called STABX – a System for the Stabilisation of Export Earnings. In fact, Lome II added SYSMIN, a mechanism of the same type as STABEX but relating specifically to mineral products.

Our export revenues stabilize momentarily and we prodded on. Lome II was signed in 1984 between 10 European Countries and 65 ACP countries. This Convention focused on policy dialogue, progressive shift from project funding to sectoral funding and gave priority to infrastructure funding. Lome IV was signed in 1989, between 68 ACP states and 12 European countries. Lome IV dramatically changed the official portrayal of EU-ACP relationship as economic as the relationship became openly political with emphasis on human rights. The Berlin Wall was on its last wobbling leg and the end was insight for the communist empire, so Europe made no secret about its political intentions for the ACP group. In fact, Lome IV saw a deepening of the more liberal understanding and approach to development that had actually began in Lome III. Officially (with emphasis) it placed importance on diversification of ACP economies, promotion of the private sector, and the need for regional integration. In reality, however, the ACP’s reliance on raw materials became pronounced.

The mid-term review of Lome IV led to the signing of a new agreement in Mauritius in 1995 between 15 European countries and 70 ACP states. At the end of 1995, after series of reviews, the European Commission produced what it called “Green Paper on relations between European Union and the ACP countries on the eve of the 21st century – challenges and options for a new partnership”. Among the key issues raised in the Green Paper were:

• A modification of the geographical configuration with the cold war over
• Addressing the shortcomings of the unilateral trade preferences in the light of the emergence of the WTO.
• Addressing the increasing conflicts and humanitarian crisis in the ACP region.

These considerations propelled the two parties – ACP and EU – to enter into the Cotonou Partnership Agreement (CPA). The CPA was signed on 23rd June 2000 with a validity period of 20 years renewable every five years and was between 15 European countries and 77 ACP states. In broad terms, the CPA addresses two issues. First, that development is first and foremost political, and second, that globalisation cannot co-exist with poverty, inequality and exclusion.

As indicated earlier, within the context of the Lome Convention, trade was based on the unilateral preferences by which ACP states could export everything to the EU duty and quota-free. It was unilateral in the sense that while ACP faced no tariff barriers on their exports to the European Union, European exports to the ACP faced tariffs. This unilateral preference system continued under the CPA, but it now required a waiver from the WTO to sustain it.

Therefore, as part of the CPA, ACP and the EU agreed to formulate a new trade framework that is compatible with WTO rules. The new trade arrangement was to be completed by 31st December 2007 since the last waiver granted to the EU expired on that date. The CPA is not trade agreement in itself but a ‘commitment to agree’ at a later date on a new trade agreements, called Economic Partnership Agreement that is compatible with the rules of the World Trade Organisation.

In the 12 years since the launch of the negotiations, the ACP and the European Commission (EC) have differed in no trivial terms on just how to operationalize WTO-compatibility. Part of the problem is that the WTO rules that govern regional and bi-lateral free trade agreements are unclear and frequently opened to different interpretations. The EU has exploited this to its advantage while we look on helplessly. Those of us in Civil Society who have followed the discussions since 2002 have sought at all times to interpret the different proposals put forward by the European Commission in the light of the broader historical context as enumerated above. We have endeavoured to do a historical reality check of what European countries did (and in some cases continue to do) in the area of trade policy when they were as poor as we are today.

In the last three decades, Africa’s share of global trade has almost halved from over 6 percent to less than 3 percent. This is also the period Africa was made to abandon autarkic policies embedded in Import Substitution. Many countries including Ghana formulated and implemented export-led growth strategies. We also enjoyed preferential market access to the European market. In reality, however, that market access was contrived. As the tariff barriers came down on our exports they were rapidly replaced by a stream of non-tariff barriers including what the World Bank at one point referred to as “unreasonable” phyto-sanitary measures. The huge subsidies the European Commission doles out to European farmers and industries meant that our exports beside commodities are actually uncompetitive on the European market. Above all any attempt to manufacture was met with tariff escalation, where tariffs increase in proportion to the level of processing. All this meant that we could only export commodities, a return to our status as the hewers of wood and drawers of water.

A reform of our trade relations with the EU seems inevitable in the long run in the light of WTO rules. But the EPA package as currently conceived is not inevitable for WTO-compatibility. The EPA as currently structured is dangerous for the future of our national development; it is simply another vehicle to carry forward neocolonialism. Any analysis of it that ignores the history is likely to yield the kind of recommendation put forward by IMANI in its “Evidence-based support for Ghana to ratify the EPA”. By history I am referring to the EU-ACP shared history of trade and development, the history of the negotiations since 2002 with all the twist turns and of course the history of the role of trade policy in national developments.

I conclude with a quotation from the Republican campaign platform of 1896:

“We renew and emphasize our allegiance to the policy of protection as the bulwark of American industrial independence and the foundation of American development and prosperity. This true American policy (protectionism) taxes foreign products and encourages home industry; it puts the burden of revenue on foreign goods; it secures the American market for the American producer; it upholds the American standard of wages for the American workingman; it puts the factory by the side of the farm, and makes the American farmer less dependent on foreign demand and price; it diffuses general thrift, and founds the strength of all on the strength of each”.