Trade Negotiations Insights • Volume 9 • Number 5 • June 2010

An interview with Hon. Alhaji Mohamed Daramy, ECOWAS Commissioner for Trade, Customs and Free Movement of Persons and Goods

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TNI: How far has ECOWAS progressed with the Custom Union?

Daramy: We are currently in the process of finalising the Common External Tariff (CET). We will be meeting on 25 May in Accra to work on the adoption of a 35% tariff under a fifth band. This fifth band will comprise a list of products that we still have to agree on. After that meeting, there will be a meeting of the ECOWAS technical Trade, Customs, Taxation, Statistics, Money and Payments Commission. They will have a look at a proposal, which will be submitted to the Council of Ministers. If the Council approves it, then the proposal will be presented to our heads of state and government. As you can see, it is not an easy process, but we are hoping that we can complete this work by the end of this year.

TNI: What are the main challenges to complete it?

Daramy: Getting the bands and products to be reclassified and accepted by all member states can be quite challenging in itself. The question is what criteria should we use to determine what products go in what band and who should set it up? Once we agree on the criteria, we will be able to move forward on this question of the CET. Countries can have different interests, so simply agreeing at the regional level on these questions is quite difficult. However, certain criteria related to the fifth band, termed ‘products for economic development’, have been agreed upon.

TNI: Can you link up this process defining which products will go into the fifth band and the list of sensitive products in EPA negotiations?

Daramy: Yes, definitely. We have set a list of criteria for defining sensitive agricultural products and sensitive industrial products. We used about eight different methodologies to determine how to get a correct feature. The products that go into the 5th band are those referred to as ‘products for economic development’.

TNI: Do you believe in EPAs?

Daramy: Absolutely. The major advantage of an EPA is the fact that, because we will move away from non-reciprocal liberalisation, we will need to implement reforms, notably indirect fiscal reforms and value-added taxes, which will be beneficial in the long term. But these reforms will not come without an upfront cost, and for this reason we will need to create an EPA regional fund to support this process. Because the EU is partly responsible for the fact that we have to move forward on these reforms, it will have to financially contribute to this fund. This idea is shared by all our member-states.

TNI: One of the contentious issues in EPA negotiations is the community-levy. What is your stance on this question?

Daramy: This is a non-negotiable question. We will not be able to abolish these community levies. The region is partly financing itself thanks to them, and as such they are very important for the functioning of ECOWAS and the UEMOA Commissions. In ECOWAS, community levies amount to 0.5% on imports coming from outside the region. It is necessary, therefore, to define “custom duties” in a way that excludes community levies because this financing mechanism is a predictable source of revenue, which we want to be the main source of financing for the region.

TNI: What about WTO-compatibility of these community levies in an EPA?

Daramy: Well, what we want is a five-year transition period after the signature of an EPA. After five years, we will strive to have in place an efficient indirect taxation system, and we will also aim within this period to move some activities from the informal sector to the formal economy. The certainty and sustainability of financing ECOWAS activities will then be reviewed at this point.

TNI: West Africa and the European Union have missed many deadlines in concluding an EPA. What will be different in 2010?

Initially the EU thought market-access opening will lead to development. We said no. Market-access opening will not lead to development unless the EU provides support to EPADP/PAPED and address the supply-side constraints.

TNI: Is the EPADP/PAPED (EPA Development Programme) a key condition to conclude an agreement?

Daramy: Yes, for us it is. For the EU, the key issue is market opening. Regarding market access, the mandate we received from the ministers allows us to negotiate an offer of 60 to 70%. If you look at the regional average, we are around 70%. Three countries are above the 70%: Nigeria, Liberia and Cote d’Ivoire.

In terms of the liberalisation schedule, we are looking at a period of 25 years with a 5-year moratorium. Why do we need five years? Once we get money for the EPADP/PAPED, we will be able to develop areas such as trade-related infrastructure, production capacities, intra-regional trade and other trade-related needs. This is why we are asking for the 5 year moratorium.

TNI: But, so far, the EU in EPA negotiations has always required at least 80% tariff liberalization over a period of 15 years.

Daramy: We got the mandate from the ministers. We can not go beyond 70% because we have to look at the situation of each of our member states, and each case is different. If we go beyond 70%, some countries within the region will suffer and will not accept it. The EU has to show some flexibility in this regard.

TNI: Do you have any other requirements to conclude an EPA?

Daramy: Let’s work on the CET, and agree on the 70% market offer. Then, we have to get support on the EPADP/PAPED - this is key. If we get sufficient funds for this programme, we will be able to address supply-side constraints. If this is done, there will be no more difficulties. The last hurdle will be to subject the whole regional EPA agreement to a critical review by all stakeholders including our National Parliamentarians.

TNI: On the EPADP/PAPED, are you satisfied with the response that was provided by the Council on the 10th of May?

Daramy: Well, they gave us €6.5bn for the first five years and we were looking for €9.5 bn. If we can get additional support from China, the US, the World Bank, and the African Development Bank - fine! But we are not completely satisfied. If you look at the allocation of funds right now, more money is going to axes which are not priorities for us. The key focus should be trade-related infrastructure, because once we have more efficient infrastructure related to trade, we should be able to develop intra-regional trade and diversify our economy, which is a key requirement in West Africa. In the context of PAPED/EPADP, therefore, there should definitely be a reallocation of funds between axes to respond to demand.

The EPADP/PAPED is the major development tool within the context of the EPA negotiations. We welcome whatever support we can get to counterbalance the potential negative effects of the EPA on our economy (EU general budget, EDF Resources, funds from China, from USA), provided it sees trade as a tool for development..

TNI: What will you do if, once you have negotiated an agreement, one country in West Africa does not endorse the agreement on paper?

Daramy: Based on the advice of their ministers and the work we have done, our heads of states will not do that. As said previously, we believe in EPAs and all countries have an interest in concluding an agreement. The key criteria for accepting or rejecting the EPA will be if it addresses the development priorities of West Africa, poverty reduction strategies and it enables us to diversify our economies and gradually enables our region to integrate into the global economy.