Trade liberalisation: Any hope for protectionist policy?

| January 9, 2013 | 0 Comments

THERE is a truism that most countries that have had sustained growth and prosperity over the years have opened up their markets to trade and investment through liberalisation, while capitalising on areas of comparative advantage, especially ones where such countries can benefit economically.

With growing concerns over an intra-African trade that has remained consistently low compared to its trade with other continents, the need to salvage the remains of Nigeria’s local manufacturing industries have called for a review of trade reforms that would drive investment efforts in the country, as well as, protect local businesses.

Ahead of the 20th African Union (AU) Summit scheduled for later this month in Addis Ababa, Ethiopia, the target of establishing a Continental Free Trade Area by 2017, as set by African leaders in 2012 remains a challenge to be addressed if the proposed date would remain feasible.

Specifically, industry watchers believe that Africa’s economic development will be more difficult to achieve without a free intra-African economic and trading system.

According to them, key to enhancing intra-African trade is the free movement of people, goods and services.

However, at a time when local industries are in a near comatose state, the need for a protectionist policy has become important if government seeks to revive the industrial sector.

Already, there are efforts to this end in the cement and sugar sectors, which stakeholders expect to be replicated in other key sectors of the economy, like the automobile, textile among others.

Statistics from the World Trade Organisation still show that in most African countries, small-scale manufacturers have difficulty getting the necessary import or export licences, while traders are routinely shaken down at customs posts, with ordinary travellers often having to pay small bribes to get past police checkpoints.

The experts believe that Africa’s economic integration cannot be achieved without adequate infrastructure policy, legal, socio-political and cross-border security frameworks, noting that African nations, therefore, need to strengthen themselves to attain some measure of individual economic and political stability before the dreams of meaningfully enhancing trade can begin to materialise.

Often times, trade reforms, if beneficial to a country in the overall sense, may negatively affect some industries or some jobs and many commentators worry about its negative effects on the environment noting that the solution to these problems is not to restrict trade.

Some schools of thought believe that such negative effects should have been tackled directly from the outset through labour, education and environmental policies, while others believe that trade liberalisation measures should be taken on a multilateral basis and complemented by appropriate employment, labour and education policies, so that the benefits of trade can be shared.

With concerns over unemployment and recession staring many economies in the face, governments are coming under pressure to implement protectionist policies and measures – including tariffs, quotas and various forms of subsidies – as a way of ‘saving’ domestic jobs and enterprises.

Although, protectionist measures have been argued to be counter-productive with high negative impacts on foreign direct investments, some believe the measure is desirable especially at a time when there is an imbalance in the flow of finished products among nations.

According to the United Nations’ Economic Commission for Africa, more than 80 per cent of Africa’s exports are destined for outside markets, with the European Union and the United States accounting for more than 50 per cent of this amount. Asia and China in particular, are also important export markets for African countries.

At the same time, Africa imports more than 90 per cent of its goods from outside the continent, despite its rich resource endowments, which provide the potential to supply the continent’s own import needs.

In a recent chat with The Guardian, recently, the Director General of the National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dr. John Isemede explained that the Trade Liberalisation Scheme was put together by the Economic Community of West African States (ECOWAS) members, who designed and signed into it that goods produced in Nigeria, Ghana, Senegal and all that with reasonable value addition of 35 to 40 per cent should be allowed to trade freely in ECOWAS.

I was fortunate as a young manager at that time to be present at the signing ceremony in Senegal in 1990. The first company to use this in Nigeria was the former Toyo Glass. With the ECOWAS Trade Liberalisation Scheme and with the support of ECOWAS computer centre, I was able to get enough data and register more than 10 companies in Nigeria, Benin Republic, Cote d’Ivoire and Ghana in the late 1990s.

On why trade liberalisation may not be easy in West African states, Isemede said, “in French West Africa states, business is determined by the principle of assimilation as practiced by the Francophone and the principle of indirect rule practiced by the Anglophone. If you can speak English and French, you have no problem in West Africa. If you have a degree or a product registered in Nigeria, you don’t go through the rigour of another registration in the francophone but the picture is different in the Anglophone states. Whatever is allowed here is allowed in francophone. But most of these things in the Anglophone do not work like that.

“Business between Anglophone and Anglophone is complex, business between Anglophone and francophone is equally complex. Business between Francophone and Francophone is like two brothers exchanging handshake. So, let us take it one by one.

“In West Africa, we have over nine different currencies, if we have to add Mauritania. Out of the 10 currencies, only one is convertible, which is the CFA. CFA has been tied to the French Franc as far back as 1941, and what you see in the Anglophone is a total deviation in the sense that in Nigeria, it is Naira, Ghana, Cedi. If you register a product here in Nigeria, when you go to Ghana, you still talk about FDB requirements and all that and it becomes complex.”

He added, “in the past, to do business with EU was three minutes; with America was five minutes but now to do business Anglophone to Anglophone takes three months. Since we lost our national carrier and shipping line, it has become a nightmare for businessmen, the banks were for foreign owners in the past but now things are changing that you can do business within West Africa between the Anglophone within a week if you have the vessel on that route.

“So the Francophone and the Francophone are like two brothers, if you look at the whole scenario, it is the same currency, which is convertible. A Benin man doing business with Togo is like Edo State doing business with Anambra State. The same currency, the same VAT, the same principles and the same trade laws, you don’t have to go through the clearing house.

“Business between Anglophone and Anglophone is regarded as import and export, business between Francophone and Francophone is regarded as “arrivals.” It is just like somebody loading a truck in Kano to Lagos, it is not import and export. Under the Francophone arrangement in France, they all belong to the same family, which members of the sub-region have not been able to understand clearly. ”

He further explained, “from common external tariff, you go to the Economic Partnership (EPA). How can the partnership work? Looking at our GDP, the wealth of a nation is not determined by the population, neither by the number of universities.

“ It is determined by how you are able to manage your resources, how you are able to add value; how you are able to manage your currency. If we are in a country where infrastructure is not there, cost of doing business is so high, we have no shipping line, no national carrier and we are now going to sign an agreement, the few industries we have here would be wiped out by the super powers. We have suddenly found ourselves in a situation where management is now based on fate rather than rational calculation of two plus two equals four.

“Common external tariff has to be looked at critically by the private sector and not by those who don’t give balance sheet to shareholders at the end of the year. There is nowhere in the world where the rich and the poor sign agreements. If they want to sign an agreement with us on the EPA, let them return back and assist us, not only buying petroleum products but they have to have the basic infrastructure and what we need to drive the economy in order to compete both at the domestic and international market.”

Also, the General Secretary, National Union of Textile, Garment and Tailoring Workers (NUTGTW), Isa Aremu, while calling on the federal government for increased funding for the sector, noted that inadequate protection of the sector has led to the dearth of productivity in the sector.

Specifically, the textile sector according to experts was one of the major victims of WTO agreement, which left the nation’s sector unprotected, thus leading to the influx of cheaper textile imports, predominantly from China, as well as second-hand clothing from the United States of America and Europe.

With smuggling activities from neighbouring African states, many have called for a review of Nigeria’s protectionist policies, in order to revive ailing manufacturing firms.

To the World Trade Organisation (WTO), African countries can increase trade amongst themselves if they back the political commitment to integration as contained in various regional trade agreements with the appropriate policies and actions.

“There are so many success stories, which have shown that with the right regulatory frameworks and political will, the potential for trade amongst African countries could be unlocked and contribute tremendously to the growth and development goals of the continent. Africa can and should trade more with Africa if it is to secure its future growth and integration in the global economy,” WTO added.

Culled from :Here

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