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Background to and issues arising from the establishment of the ECOWAS CET

26 January 2014

A review has been posted by the European Centre for Development Policy Management (ECDPM) examining the process leading up to the decision by the heads of state and government of the Economic Community of West African States (ECOWAS) to implement a common external tariff (CET) from January 2015. It notes that “the technical nature of crafting a CET should not overshadow the hard choices that have to be made” over “which (or rather whose) industries are to be protected, and under what condition” and which (whose) are to be subject to reduced levels of tariff protection.

The analysis highlights the pre-existence of the West African Economic and Monetary Union (usually known by its French abbreviation UEMOA) CET, structured within four tariff bands: 0% for essential social goods; 5–10% for inputs and intermediary products; and 20% for final consumption products. It notes the difficulties non-UEMOA countries faced in simply transferring into this tariff structure.

The analysis argues, “[I]t is not surprising that a country like Nigeria, with significant productive capacities, and a more protectionist trade policy, would find it hard to align itself with a CET designed by countries with different structural features and policy objectives.” This kind of problem, which reaches beyond Nigeria, “led to the creation of the ‘fifth band’, at 35%, for ‘specific goods for economic development’… to assuage the fears of the largely Anglophone non-UEMOA ECOWAS countries”.

Defining what products fell into which categories prompted “heated debates”, particularly for rice and other cereals. Agricultural producer organisations from across the region actively lobbied for rice and other cereals to be placed in the 35% tariff band, in order to nurture national production. The final tariff, however, was set at 10%. A key debate was over what relative importance should be attached to boosting domestic production through protectionist measures (e.g. Nigeria sets tariffs of up to 100% and uses import bans to nurture domestic production) rather than meeting urban consumer demand for cheap food.

To reconcile these differences, it was agreed that, for a transitional period, tariffs applied nationally may vary from the CET (up to 70% from the CET rate, for 3% of tariff lines). This needs to be viewed against the background of a history of non-implementation of agreed regional commitments. Special exemptions from compliance with the CET may also be granted to countries whose bound tariffs are below the new CET.

These special arrangements could potentially throw up the problem of trade deflection under any economic partnership agreement (EPA) (trade deflection occurs where advantage is taken of differing extra-regional duties to export via the low-duty importer to a neighbouring country in the context of a free trade area), with this reinforcing the need for strong monitoring mechanisms, in order not to undermine the already troubled application of the ECOWAS Trade Liberalisation Scheme.

Editorial comment

ECOWAS is now entering upon a path that the East African Community (EAC) has been travelling since 1 January 2005. Under the EAC Customs Union a similar system of national exceptions and discretionary measures has proved problematical, particularly in the food and agricultural sector. EAC business representatives claim that the list of derogations has become so long that “the current CET exists only in book form as each country is now operating its own external tariff, albeit with substantial similarity” (see Agritrade article ‘ Call for fundamental review of the EAC CET’, 4 November 2012). This situation is further compounded by the application of many solely national ‘para-tariff measures’ (e.g. import fees and levies).

In addition the use of special safeguard measures, introduced on a temporary basis, have proved semi-permanent, with concessions once granted being repeatedly renewed in the context of lack of progress in structural reforms in the affected sectors (see Agritrade article ‘ Kenya to seek further extension of COMESA sugar safeguards’, 20 January 2014).

This situation is further compounded by “non-harmonized technical regulations, sanitary and phytosanitary (SPS) requirements, customs procedures and documentation, [and] rules of origin”, as well as informal barriers to trade (e.g. police road blocks) (see Agritrade article ‘ Regional agricultural aspects of the East African Community WTO trade po...’, 21 January 2013).

Private sector bodies have called for a comprehensive review of the EAC CET to:

  • eliminate country-specific exceptions;
  • end arrangements for remission of duty;
  • reduce the scope for the application of discretionary measures that accommodate bilateral agreements with third parties.

The EAC Secretariat has also identified the need for “a legally binding framework” to eliminate non-tariff barriers, and is drawing up legislative proposals in this regard.

To date in West Africa, problems related to the use of non-tariff measures and infrastructural barriers to trade have held back intra-regional trade in agricultural products, which remains low despite moves towards tariff dismantling. The challenges of harmonising standards to facilitate trade, and establishing enforcement mechanisms for agreed protocols on intra-regional trade, will come increasingly to the fore in West Africa.

Against this background, the EAC experience in addressing problems arising from the granting of exceptions, special dispensations and institutionalised safeguard arrangements, could potentially holds lessons for ECOWAS.

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