AN ASSESSMENT OF THE ECOWAS COMMUNICATION POLICY AND STRATEGY AS IT RELATES TO THE ECOWAS TRADE LIBERALIZATION SCHEME

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1 AN ASSESSMENT OF THE ECOWAS COMMUNICATION POLICY AND STRATEGY AS IT RELATES TO THE ECOWAS TRADE LIBERALIZATION SCHEME BY HASSANE MOUSSA ADAMA ( ) THIS DISSERTATION IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON, IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE MASTER OF ARTS DEGREE IN INTERNATIONAL AFFAIRS LEGON JULY, 2013

2 DECLARATION I hereby declare that this dissertation is the product of an original research conducted by me under the supervision of Dr. Philip Attuquayefio. I further declare that no part of this work has been submitted anywhere else for any other purpose. All references have been duly acknowledged. HASSANE MOUSSA ADAMA (STUDENT) DR. PHILIP ATTUQUAYEFIO (SUPERVISOR) DATE. DATE. i

3 DEDICATION This work is dedicated to my parents for all their support and sacrifices. ii

4 ACKNOWLEDGEMENTS First, I would like to thank the Almighty God whose love and protection sustained me through the entire period of this study. Also, for giving me the strength and motivation to undertake. My heartfelt gratitude to the members of my family for their support and immeasurable contributions to my success in my life. My parents Mr Moussa Hassane, Mr Issoufou Maazou,Mr Laouali Sani, my mother Hadjia Rekia Sani, my late mother Aichatou Sani. Thank you for being there for me all the way. Special thanks go to my supervisor, Dr. Philip Attuquayefio. I am indebted to him for making this thesis possible and for addressing my numerous concerns throughout this dissertation. Profound gratitude goes to Dr. Yao Gebe, Dr. Antwi V. Danso, Ambassador D. K. Osei, Mr. William Awinador, Professor S. K. B Asante, the Director of LECIAD, Professor (Mrs) Henrietta J. A. N. Mensa Bonsu and all the wonderful people of LECIAD, University of Ghana. iii

5 ABBREVIATIONS AND ACRONYMS AEC - African Economic Community ASEAN - Association of South East Asian Nations CEAO - Communaute Economique De L'afrique De L'ouest CET - Common External Tariff CIF - Cost, Insurance and Freight CU - Customs Union ECOWAS - Economic Community of West African States ECPS - ECOWAS Communications Policy and Strategy EEA - European Economic Area ETLS - ECOWAS Trade Liberalization Scheme EU - European Union FTA - Free Trade Area GATT - General Agreement on Tariffs and Trade GDP - Gross Domestic Product ICT - Information and Communications Technology IDC - Information and Documentation Centers LAFTA - Latin American Free Trade Area NAC - National Approvals Committee NEPAD - New Partnership for African Development NGO - Non Governmental Organization OAU - Organization of African Unity PTA - Preferential Tariff Agreement iv

6 REC - Regional Economic Communities SADC - Southern African Development Community SIA - Status of Integration in Africa UDEAO - Union Douarniere entre les Etats de l Afrique Occidentale UEMOA - Union Economique et Monetaire Ouest Africaine UK - United Kingdom US - United States of America VA - Value Added WTO - World Trade Organization v

7 TABLE OF CONTENTS DECLARATION i DEDICATION ii ACKNOWLEDGEMENTS iii ABBREVIATIONS AND ACRONYMS iv TABLE OF CONTENTS vi LIST OF TABLES ix LIST OF FIGURES x ABSTRACT xi CHAPTER ONE: RESEARCH DESIGN 1.1 Background to the Study Statement of the Problem Objectives Scope of the Study Rationale of the Study Hypothesis Theoretical Framework Literature Review Sources of Data Arrangement of Chapters Endnotes vi

8 CHAPTER 2: THE ECOWAS TRADE LIBERALIZATION SCHEME AND REGIONAL INTEGRATION IN WEST AFRICA 2.0 Introduction ECOWAS Trade Liberalization Scheme Coverage of the ETLS Certificate of Origin ETLS Certification Procedure Benefits of ETLS Certification Consolidation of Import Duties and Non-Tariff Barriers Compensation Procedures for Revenue Loss ETLS and Regional Integration Relevance of ETLS on Regional Trade and Economic Integration Effectiveness of ETLS in Regional Integration Non-Tariff Challenges to ETLS Implementation and West African Integration 32 Endnotes vii

9 CHAPTER 3: AN ASSESSMENT OF THE RELATIONSHIP BETWEEN ECOWAS COMMUNICATION POLICY AND STRATEGY AND ETLS 3.0 Introduction Origin of the ECOWAS Communication Policy and Strategy Review of the ECOWAS Communication Policy and Strategy ECOWAS Communication Policy and Strategy and Integration in ECOWAS ECOWAS: Trade Liberalization Scheme and Communication Policy - 48 Endnotes CHAPTER 4: SUMMARY OF RESEARCH FINDINGS, RECOMMENDATIONS, AND CONCLUSION 4.1 Summary of Findings Recommendations Conclusion Endnotes BIBLIOGRAPHY viii

10 TABLES Table 2.1: Time-Table for the Elimination of Tariffs on industrial products (1983)..19 Table 2.2: Tariff elimination on industrial products (Decision A/DEC.6/7/92.20 Table 2.3: ETLS and the Common External Tariffs. 30 ix

11 FIGURES Figure 1. Pictorial sketch of the ETLS approval procedure.22 x

12 ABSTRACT Since its establishment in May 1975, the Economic Community of West African States (ECOWAS) has consistently strived to integrate West African economies towards rapid growth and development, in order to enhance the living standards of its citizenry. However, up till date this agenda has not been successfully attained. It becomes evident in this paper that so many policies, protocols and conventions have been passed and attempted to help the attainment of the regional economic integration desired by Member States. For the sake of specificity, this research narrowed-down to the influence of the ECOWAS Trade Liberalization Scheme (ETLS) and how it is facilitative of regional integration desired by the Community. The ultimate goal of this paper is an assessment of the ECOWAS Communication Policy and Strategy and how it facilitates the ETLS, and subsequently regional integration in West Africa. The assessment was also able to show qualitatively that the ETLS is a viable regional integration mechanism that can speed up regional integration in West Africa when fully implemented. Secondly, it was realized that the slow pace of ETLS implementation can be accelerated through the application of the provisions of the ECOWAS Communication Policy and Strategy. In conclusion, the ETLS and the ECOWAS Communication policy and Strategy are effective regional integration tools if properly handled by stakeholders. Therefore it can be said that the hypothesis that the implementation of ECOWAS communication policy and strategy is critical to the realization of the objectives of the ETLS is a viable statement. Some recommendations for the proper handling of the two protocols are listed as part of the final chapter. xi

13 CHAPTER ONE RESEARCH DESIGN 1.1 Background to the Study Regional integration is a process by which states enter into a regional agreement in order to enhance regional cooperation through regional institutions and regimes. The objectives of the agreement could range from economic to political and environmental. According to Karl Deutsch, integration is defined as the attainment within a territory of a sense of community and of institution and practice strong enough and widespread enough to assure a long time dependable expectations for peaceful change among its population. 1 In terms of relevance, Asante notes that the promotion of regionalism has long constituted a significant aspect of Africa s development strategy. 2 In a report entitled the Status of Integration in Africa, (SIA), Swaleh also notes that regional integration in Africa has been the main focus of African countries since the establishment of the Organization of African Unity (OAU). 3 A number of declarations have been made by member-states to move the integration process in Africa forward. Similarly, the Abuja Treaty, Lagos Plan of Action, African Private Sector Forum among other key developmental plans in Africa all emphasize the need to promote regional integration. 4 The Abuja Treaty in particular for instance stipulates that African States must endeavor to strengthen the Regional Economic Communities (RECs), in particular by coordinating, harmonizing and progressively integrating their activities. This is in order to attain the African Economic Community (AEC) which would gradually be put in place during a thirtyfour years transition period subdivided into six varying stages. 5 1

14 One of the manifestations of the belief in regional integration as a developmental strategy for Africa is the fact that all the sub regions on the continent have at least one regional organization formed to represent their particular interest. The Southern African Development Community (SADC) for instance represents countries in Southern Africa whiles the East African Community and the Arab Maghreb Union represent countries in the East and North Africa respectively. The Economic Community of West African States (ECOWAS) is a regional group of fifteen countries including some of the poorest countries in the World. It was founded by treaty on 28 th May 1975.It was conceived to facilitate economic integration and development as a way of improving economic stability and relations between Member States in the West African sub-region. Since its establishment in 1975, ECOWAS has championed the evolution of a number of protocols and programmes geared towards the achievement of full integration in the subregion. In July 1993, the ECOWAS Treaty was revised in Cotonou to give it a new lease of life. Article 2 of the Revised Treaty recognized ECOWAS as ultimately the sole economic community in the region for the purpose of integration and the realization of the African Economic Community. 6 Among the first set of protocols created by ECOWAS were the Protocol relating to the Fund for Co-operation, Compensation and Development, the Protocol relating to the re-exportation of goods imported from third countries within the ECOWAS and the Protocol A/P.1/5/79 relating to free movement of persons, residence and establishment. Passed in 1976, the former sought to promote the Compensation and Development of the Economic Community of West African States. It stipulated the purpose to include the provision of compensation to Member States who suffer Losses as a result of 2

15 the implementation of the ECOWAS Treaty in force at the time, provision of funds for the financing of national and/or community development research, grant loans to be used for feasibility studies and development projects. It was also an avenue to promote development projects which are carried out in the least developed Member States. As regards the Protocol relating to the re-exportation of goods imported from third countries within the ECOWAS in 1976, the purpose is to implement Article 22 of the ECOWAS Treaty related to re-exportation of goods imported from third countries. One of the main provisions under this protocol is that Customs duty collected by the Collecting State is to be refunded to the Consuming State if the goods are moved to the Consuming State. Under such circumstances, the following shall apply: an administrative fee representing 0.5% of the c.i.f. value of every consignment being re-exported is to be charged by the Collecting State, the Collecting State shall refund to the importer within its territory, the full amount of duty paid on the goods while other costs such as C.I.F., port charges, etc. involved in the importation are to be included in the invoiced price to be paid by the importer in the Consuming State 7. It also allows the consuming state to charge and collect the duty payable on such goods. Since the Community became operational, trade development has been central to the programmes adopted by the decision making organs of ECOWAS. It is certain that the success of West African integration efforts will be judged by the volume of intra community trade, by the degree of integration between the citizenry and also between the business communities. This is why, in 1987, the ECOWAS Authority directed that both the member states and institutions of the community accord the topmost priority to the promotion and development of intra community trade. In 1997, an ad hoc Committee was appointed to establish trade liberalization measures for the establishment of a single Monetary Zone by 3

16 2000. There were an approval of the establishment of a regional bank, ECOBANK Transnational Inc, in 1998 and the inauguration of ECOWAS Travelers Cheque Scheme by the Conference of Heads of State and Government. 8 In 1999, the protocol for the management and settlement of conflicts within the community was approved and the Agreement on co-financing and construction of Gas Pipe Line between Nigeria, Ghana, Togo and the Benin Republic has been signed. In 2000, ECOWAS Jubilee Summit was endorsed to establish a regional Passport and the regional airline, ECOAIR were inaugurated but it has not yet taken off. In 2002 and 2003 respectively, ECOWAS secretariat began implementing NEPAD and the Special Summit of the Conference of Heads of State and Government has launched the West African Civil Society Forum. In 2004, there was a Special Summit of the Conference of Heads of State and Government on trade liberalization, customs union, trade tariffs in Accra, Ghana and a project on energy production in Lagos, Nigeria has been launched Statement of the Problem At its inception in 1975, ECOWAS had as part of its objectives the creation of a common market through market integration. Consequent to this, the ECOWAS Trade Liberalization Scheme was established in 1979 to facilitate the organization s aim at market integration through the elimination of tariff and custom duties.thirty eight years since its foundation, the objective of market integration has not been attained comprehensively. A number of significant researchers have identified various challenges to full attainment of the objectives of ECOWAS including trade liberalization. Asante has for instance noted that gaps in the institutional capacity of the Regional Organization have constituted challenges. 10 These challenges include poor leadership and management, inability to ensure effective 4

17 implementation of integration measures, lack of follow-up by sector ministries on decisions made at the summit of Heads of States and Governments. 11 Antwi Danso also notes that it was easy to assume that forming a free trade area or customs union would give the union a market, large enough to support a large scale producer in each modern manufacturing sector without allowing in manufacturers from the industrialized countries. 12 Other studies have identified custom duties as inhibiting the sub region drive for market integration. 13 Notwithstanding their utility, these generally helpful commentaries appear to have ignored or downplayed the relevance of communication to the ECOWAS Trade Liberalization Scheme (ETLS). Within the EU for instance, the strategy of communication, channeled through a variety of means including the EU website, has been identified as critical to the relative successes achieved in liberalizing trade among EU members. Thus, considering its importance in the European Union for instance, a focus on the ECOWAS communication policy and strategy as it relates to the Trade Liberalization Scheme might reveal some prospects for integration. However, in the absence of research, this can only be speculated. The need to investigate the relevance of the ECOWAS communication policy and strategy as it relates to the trade liberalization scheme constitutes the research problem. 1.3 Objectives The objectives of this study are: To review the status of the ECOWAS Trade Liberalization Scheme in regional integration. To examine the ECOWAS communication policy and strategy, and the extent to which it can enhance the ECOWAS Trade Liberalization Scheme. 5

18 To offer recommendations towards strengthening communication for trade liberalization. 1.4 Scope of the Study The research looks at the ETLS before the establishment of the communication policy and after the establishment of the communication policy as a way of examining the relevance of the policy to the scheme. 1.5 Rationale of the Study In spite of the relevance of communication in a globalized world, the existence of the ECOWAS Communication Policy and Strategy appears to be one of the least popularized of all the sub regions protocols and arrangements. By examining its relevance to the ETLS, the study is throwing light on the communication policy and strategy as well as addressing the challenges to ETLS. The study is also in partial fulfillment of the requirements for the award of the Master of Arts degree in International Affairs. 1.6 Hypothesis The implementation of ECOWAS communication policy and strategy is critical to the realization of the objectives of the ETLS. 1.7 Theoretical Framework The study was conducted within the theory of neo functionalism which is one of the variants of integration theory. The neo functionalist writings of Ernst Hass have influenced the understanding of integration theory. According to Hass, states must strive for development and welfare instead of launching war against each other. In Haas opinion, this task must be 6

19 led by technical experts and political elites. He notes that such technical experts can collaborate along inter-country lines to achieve collective gains. A core aspect of Haas promulgation is the concept of spillover. In this regard, Haas suggests that the successes of technical cooperation in one field will give way to greater cooperation in other fields, thus ultimately benefitting the whole. In adopting this theory, the study relies on the hypothesis that the implementation of the ECOWAS Communication Policy and Strategy is critical to the realization of the objectives of the ETLS. Thus essentially it is presumed that spillovers from the Communication Policy are critical to the success of the ETLS. 1.8 Literature Review In all, the review of literature will revolve around three main thematic issues namely trade liberalization, regional economic integration and the ECOWAS Communication Policy and strategy. In his work, Adjavor wanted to investigate the progress, constraints and prospects of Ghana in the event of the ECOWAS Trade Liberalization Scheme. 14 He explains that the ECOWAS Trade Liberalization Scheme became functional on January 1, At the time, the scheme made provision for tariff reductions on unprocessed goods, handicraft and industrial products that are originally made in the ECOWAS region. The paper goes on to explain that the main objective of the trade liberalization scheme was the free movement of unprocessed goods and traditional handicraft products. Simultaneously, Anadi explains that the removal of tariff barriers is to go with the removal of non-tariff barriers. According to the paper, the scheme seeks the gradual erasure of customs duties and equivalent taxes on industrial products originating from the Community. Trade 7

20 liberalization of unprocessed goods is restricted to intra-ecowas trade involving livestock, fish, plant or mineral products that have not undergone any industrial transformation. Traditional handicraft, as captured by the trade liberalization, refers to the articles made by hand, with or without the help of tools, instruments or devices. However, no compensation for revenue losses shall be granted to Member States for revenue loss resulting from the importation of such articles. At the incubatory stages of the ECOWAS Trade Liberalization Scheme, a protocol relating to the compensation of Member States who suffer tariff losses because of trade liberalization was passed. Therefore Anadi s position is that the compensation referred to in that protocol does not apply to unprocessed goods and traditional handicrafts. Vlad Spanu did a research that attempted to find out the extent to which international trade liberalization affects both developed and developing countries. 15 He admits that so much arguments for and against trade liberalization has been pursued in various circles (in and out of academia). Specifically, the paper indicates that most economists agree that trade liberalization can positively affect economic growth. On the contrary, the question to ask is that at what stage of a country s development should an open market be viable? The paper shows that trade policies of developed countries are not truly liberalization-oriented because they adopt anti-dumping procedures and protectionist policies on agricultural products, textiles, and steel imported from developing countries. 16 The paper goes on to say that it is evident that industrialized countries issue protectionist policies that are detrimental to the growth of developing countries. Therefore one of the goals of international organizations, like WTO, is a shift in the focus on trade liberalization in developing countries to the removal of tariff and non-tariff barriers to trading in Quad countries Canada, the EU, Japan, and the United States. 17 8

21 According to Anadi, the purpose of the integration sought by the ECOWAS is that Member States will be able to attain sustainable economic development and become self-reliant. 18 This according to the paper is conceivable because the Member States are seriously battling with the economic problems of excruciating poverty, underdevelopment and foreign dependency. Therefore the preamble of chapter 2 Article 3 of the Revised Treaty is quoted to buttress the aforementioned point. That is to say that Article 3 posits that the ECOWAS seeks to attain economic integration through intra-state trade liberalization. Therefore, according to the paper, the Revised ECOWAS Treaty seeks the erasure of all impediments to free movement of factors of production and the harmonization of national economic (and fiscal) policies of member states. The paper outlines four main procedures that the ECOWAS seeks to attain economic integration. In the first place, the ECOWAS has attempted to attain a Free Trade Area gradual removal of all custom duties and other charges of similar effect on intra-regional imports and exports. This removal of barriers explained in the paper to include quota and quantitative restrictions as well as other administrative impediments to sub-regional trade. The second step is the gradual movement to a Customs Union that will eventually be changed to a Common Market. Finally, the paper quotes the preamble of chapter 9, Article 54 of ECOWAS Revised Treaty that says that the Community seeks to attain a complete economic union through the harmonization of agricultural, industrial, transport and communication, energy and infrastructural development as well as common economic and monetary policies. 19 In their paper, Ukaoha and Ukpe did a research that sought to enlighten people about the ETLS. 20 In their paper, they highlight some of the obstacles that have prevented the ETLS from facilitating the ability of ECOWAS to attain a full Free Trade Area. Firstly, the scheme 9

22 is restricted by the absence of legal backing at the national level. Therefore the charging of full duties by custom is the order of the day. On top of that, there exists no effective mechanism for molested traders to seek redress as done in the EU. 21 To be specific, the ECOWAS Court of Justice is limited when it comes to strict economic issues; they are outside its jurisdiction. This is not so in the EU, the European Court of Justice is the referee between member states, Institutions and individuals in disputes relating to EU law. Secondly, most companies who are eligible to apply for ETLS concessions may not be able to tap into it because of a lack of the purpose of the Scheme. Some countries even go to the extent of rejecting some approved products that should enjoy ETLS tariff and non-tariff concessions. Finally, Member States continue to stick to their sovereignty because they are technically at liberty to observe or not to observe the ETLS. Europe s market liberalization is a bad model for a global trade agenda according to Erik Jones 22. In the paper, Jones argues that there is the question of conflict between, or across, EU institutional and national jurisdictions. 23 Therefore in each jurisdiction there exist some differences in institutional environments thus creating varying practices and institutional cultures. This means that what works in one market may not work in another. Jones argues further that the challenge for international trade liberalization is three-fold. The first challenge is the removal of institutions that raise the cost of trading between countries. Secondly, there exists the challenge of streamlining the interaction between institutions within national economies. One example is the streamlining of cross-border Customs administrative duties and tariff collection circumstances. The third challenge for international trade is the slow pace of justifying the friction between national institutional jurisdictions. The solution, according to Jones is that those institutions should be reformed so that they can interact smoothly with institutions found in region. The EU policy makers seek to transform 10

23 the traditional multilateral trade liberalization agenda into a more comprehensive framework for global economic integration. 24 But Jones arguments maintain that the fact that the single market succeeded in Europe does not mean it will definitely work when applied globally. To conclude, Jones suggests some methods of attaining global trade liberalization. One of them is that global trade liberalization should focus on resolving disputes between national, bilateral, and regional institutions perhaps best through the World Trade Organization (WTO). The ongoing attempts to attain economic integration in the ECOWAS sub-region will be meaningfully enhanced by the adoption of a sound regional framework for competition law. 25 The paper defines Competition law as laws and regulations that cumulatively sustain the free market system. The basic aims of the ECOWAS Competition law, is to provide fair and equal competitive conditions to all market participants. That means that there is the need to create equal opportunities for all enterprises involved in regional trading so that it will lead to fair competition, promote efficiency in the manufacture of goods and facilitate economic growth and development. 26 Balassa cites Vajda s distinction between market integration and production and development integration. 27 The definition is that market integration is 'the guarantee of unhindered sale of each other s products within the framework of social system of participating countries. On the other hand, production and development integration involves 'raising to an international level and programming the production of those branches of industry which cannot be developed to an optimum size within national boundaries'

24 Ricardo Argüello cites Balassa who defines economic integration as both as a process and as a state of affairs. 29 When economic integration is considered as a process, it encompasses the sum of political and economic policies designed to remove discrimination between economic units that belong to different national states". Balassa, according to Ricardo Argüello, explains that when economic integration is defined as a state of affairs, "it represents the absence of various forms of discrimination between national economies". 30 According to the work of Bella Balassa, economic integration is in various forms and/or stages. The forms are as follows: preferential Tariff Agreement, Free Trade Area (FTA), Customs Union, Common Market, Economic Union and Economic Integration. 31 Preferential Tariff Agreement (PTA) is a form of economic integration that involves tariff concession (reductions) preferentially given to partner countries in some category of products whilst other set of products are still affected by high tariffs. With Free Trade Area (FTA), tariff and non-tariff based barriers are removed among countries of an economic bloc whilst each country is allowed to have its own unilateral policy towards third countries. Customs Union is a more improved version of Free Trade Area. Customs union is simply a free trade area that has a uniform tariff policy against third countries. However, the problem with Customs Union is the slow pace of co-ordination among member states in agreeing on tariff rates set to varying sets of imports categories. The Union Douarniere entre les Etats de l Afrique Occidentale (UDEAO) is a typical example of a customs union formed by Francophone Countries in the West African Sub-region in 1959 to have common tariffs for trade with France after independence. Common Market is another level of integration where trade barriers and factor movement restriction are removed. An Economic Union has been explained be the removal of both commodity and factor movements as well as the involvement of supranational agencies in balancing national economic policies. The 12

25 European Union is a classic example, existing concurrently with the European Economic Area (EEA). The final stage of Balassa s propositions on the stages of integration is the Economic Integration. This level is about the use of supranational agency, like ECOWAS, to unify socioeconomic and political policies. This is the stage where there exist, apparently, no boundaries between member states. Analogically, an ideal example is the US and UK that involves individual states that now has no boundaries, allowing intra-state trade. Bappah cites Poda who argues that for economic integration to be effected, it takes a two-dimensional form. The first dimension is about internal arrangement and consensus building among member states, the second is about the manner in which the union relates to third countries. The internal arrangements between member states involve the following: the removal of barriers that disharmonize free movement of goods, services and capital, harmony of socioeconomic and political policies and the creation of a supranational agency to see to the realization of the integration agenda. The second aspect is about common international relations established through common customs union, common external tariffs, the mounting of common non-tariff barriers as well as the existence of harmony in monetary policies. Balassa s propositions about the stages of integration are confirmed here with the way in which various forms of economic integration sprung up around the time that the EEC was formed. For example, around the 1960 s and 1970 s the following economic integration bodies were established: Latin American Free Trade Area (LAFTA) in 1960 and Association of South East Asian Nations (ASEAN) in All these are establishments that were seen in developing countries. 13

26 1.9 Sources of Data The study was based on data collected from secondary sources. This included book, journals, articles, official records and relevant newspaper posts. These were complemented by data from the It. The secondary data obtained were subjected to a critical review geared towards the objectives of the study Arrangement of Chapters This study is divided into four chapters as follows Chapter one is the research design. Chapter two reviews the status of the ECOWAS Trade Liberalization Scheme in Regional Integration. Chapter three examines the ECOWAS communication policy and strategy and its relevance for the ECOWAS Trade Liberalization Scheme. Chapter four summarizes the findings, draws conclusion and offers some recommendations. 14

27 Endnotes 1 Dougherty, J. E and Pfaltzgraff, R.L Jr., Contending Theories of International Relations: A Comprehensive Survey, 5 th ed., (New York: Longman, 2001). 2 Asante, S. K. B. The Strategy of Regional Integration in Africa. (Accra: Friedrich Ebert Foundation, December,1996), p Swaleh Islam. Status of Integration in Africa. Second Edition. April African Union, p Regionalism and Integration in West Africa.The Way Forward. Golden Tulip, Accra December, 1999, LECIAD, UNDP, NIRP, p Status of Integration in Africa.Second Edition. April African Union, p Anadi Sunday Kachima McDonald.Regional Integration in Africa.The Case of ECOWAS. Thesis presented to the Faculty of Arts of the University of Zurich for the Degree of Doctor of Philosophy 7 Protocol relating to the re-exportation within the Economic Community of West African States of goods imported from third countries. Retrieved from 8 Ibid. 9 Ibid. 10 Asante, S. K. B., Building Capacity in African Regional Integration.Acquiring Some Basic Knowledge of Regionalism. GIMPA. July 2007, p Ibid., p Antwi-Danso, V., Regionalism and Economic Integration in Africa: Challenges and Prospects, LEJIA, Vol. 2 No. 2, 2006, p.9 13 Ricardo Argüello C. Economic Integration. An Overview of Basic Economic Theory and other Related Issues. Borradores de Investigacion. No. 3, March Adjavor Bonaventure. Trade Liberalisation Scheme in West Africa: Progress, Constraints and Prospects Ghana's Perspective. 15 Spanu, Vlad., Liberalization of The International Trade And Economic Growth: Implications For Both Developed And Developing Countries. May Harvard University, John F. Kennedy School of Government 16 Ibid 17 Ibid 18 Anadi, Sunday Kachima McDonald., Regional Integration in Africa: The Case of ECOWAS. Thesis presented to the Faculty of Arts of the University of Zurich for the Degree of Doctor of Philosophy. 19 Ibid pp Ukaoha, Ken and Aniekan Ukpe. The ECOWAS Trade Liberalisation Scheme: Genesis, Conditions and Appraisal. Ecowas Vanguard, Volume 2 Issue 3, Jan Ibid p.7 22 Jones, Erik Europe s market liberalization is a bad model for a global trade agenda. Journal of European Public Policy 13:6 September 2006: Ibid., p Ibid., p Economic Community of West African States. ECOWAS - Regional Competition Policy Framework Ibid 27 Balassa, B. A., Types of Economic Integration. World Bank Reprint Series: Number Sixty Nine. Reprinted from Economic Integration: Worldwide, Regional, Sectoral (Wiley, 1976) 28 Ibid. 29 Argüello, Ricardo C., Economic Integration. An Overview of Basic Economic Theory and other Related Issues. Borradores de Investigacion. No. 3, March Ibid. 31 Balassa B. A., The Theory of Economic Integration. R. D. Irwin, London

28 CHAPTER TWO THE ECOWAS TRADE LIBERALIZATION SCHEME AND REGIONAL INTEGRATION IN WEST AFRICA 2.0 Introduction Since 1979, ECOWAS has sought to implement a Trade Liberalization Scheme with the ultimate aim of establishing a Free Trade Area at the level of the West African Community.This chapter reviews the status of ETLS within the general context of West African Integration. 2.1 ECOWAS Trade Liberalization Scheme The ECOWAS Trade Liberalization Scheme (ETLS) is a scheme designed by the ECOWAS to facilitate cooperation and integration that will lead to the establishment of a Free Trade Area and a Customs Union in West Africa. This is in line with Article 3 of the ECOWAS Treaty that seeks the liberalization of trade by the abolition, among Member States, of customs duties levied on imports and exports, and the abolition among Member States, of non-tariff barriers. One of the goals of the ECOWAS Trade Liberalization Scheme (ETLS) was to remove tariff and non-tariff restrictions on intra-ecowas trade, seek the establishment of a Common External Tariff (CET) and commercial policy against third countries. Some reasons have been cited as the basis for which the ECOWAS seeks to liberalize intrastate trade. It is believed that the ETLS will facilitate trade liberalization, enhance economic stability in the region and facilitate the enhancement in the standard of living of the populace. Therefore the ECOWAS believes that the ETLS needed to create a Free Trade Area to encourage the attainment of the following goals: encouragement of entrepreneurial pursuits in 16

29 the region, increase in intra-state trade, increasing the strength of West Africa to be competitive in international trade and also to increase the GDP of member states. For purposes of discussion, it must be reiterated that the ETLS is made applicable through treaties, protocols, decisions, resolutions and regulations related to the free movement of transport modes, goods and people within ECOWAS. 1 That is how it comes to be difficult to lay hands on a single document that has all the specifications of the ETLS. Some of the objectives of the ETLS were to facilitate the development of the ECOWAS region into a free trade area so as to facilitate the attainment of a customs union. The hope was that through the attainment of a customs union, goods could move freely across national boundaries without tariff and non-tariff barriers. Therefore the ETLS is to facilitate the opening up of crossborder marketing opportunities for goods and services, bringing about increased investment opportunities across the region, eliminating customs duties to make intra-regional trade cheaper, and facilitating faster trade by making it easy for goods to transit at customs, once appropriate technical and sanitary rules are met. 2.2 Coverage of the ETLS The category of goods covered by ETLS tariff waiver has changed since the inception of the scheme. When the scheme was established in 1979, it covered only unprocessed goods and traditional handicrafts. Thereafter, in 1990, the scheme was expanded in scope to capture industrial products that are certified to have originated from the ECOWAS. Another thing that was pursued for the sake of ETLS is the gradual establishment of a Common External Tariff (CET). 17

30 Unprocessed goods include livestock, fish, plant or mineral products and raw materials that have not been industrially transformed. 2 Handicrafts also referred to items that are made by hand including wooden cooking utensils, basket works, fancy goods, small cabinet work, mats, carpets, lace embroidery, bed linen, footwear, headgear, prepared feathers, etc. 3 To be specific, Decision A/DEC.1/5/81 of the Authority of Heads of State and Government of the ECOWAS specifies the trade liberalization concessions granted for traditional handicrafts. The decision was made in Freetown on 29 th May The conditions for this entitlement are that the business entity shall be entitled to total exemption from import duties and taxes, free movement without any quantitative restriction and no compensation for loss of revenue resulting from the importation of the products. Also, entitlement to the above can only be granted upon tendering ones Certificate of Origin for the products in question. In 1990, industrial products captured by ETLS referred to processed and semi-processed products originating from the Community. But before that, some decisions informed the manner in which the trade liberalization of industrial products should be done. Therefore in 1983, decision A/DEC.1/5/83 relating to the adoption and the implementation of a single trade liberalization scheme for industrial products that originate from member states was adopted. The first part of the decision is that an appeal was already made to the Authorities of CEAO to merge the aims, aspirations and programs of CEAO with that of ECOWAS. The view was that it would avoid the duplication of regional integration efforts and deepen the solidarity that can be seen in the creation of the Customs Union and economic integration under the ECOWAS Treaty. 18

31 For purposes of implementing the trade liberalization of industrial products, member states were divided into three sub-groups. Group 1 involved Cape Verde, Guinea Bissau, The Gambia, Upper Volta (Burkina Faso), Mali, Mauritania and Niger; Group 2 involved Benin, Guinea, Liberia, Sierra Leone and Togo whilst Group 3 involved Ivory Coast, Ghana, Nigeria and Senegal. Table 2.1: Time-Table for the Elimination of Tariffs on industrial products (1983) COUNTRY G G1: Cape Verde, The Gambia, Guinea-Bissau, Upper Volta, Mali, Mauritania, Niger G2: Benin, Guinea, Liberia, Sierra Leone, Togo G3: Ivory Coast, Ghana, Nigeria, Senegal Source: DECISION A/DEC.1/5/83, PRIORITY INDUSTRIAL PRODUCTS P1 8 years on the basis of 12.5% reduction each year 6 years on the basis of 16.66% reduction each year 4 years on the basis of 25% reduction each year NON-PRIORITY INDUSTRIAL PRODUCTS P2 10 years on the basis of 10% reduction each year 8 years on the basis of 12.5% reduction each year. 6 years on the basis of 16.66% reduction each year Again, DECISION A/DEC.1/5/83 spelt out the extent to which nationals of member states could participate in the equity capital of industrial enterprises which benefit from the preferential taxation applicable at the time, under ETLS was 40% in May 1986, by May 1989 it was fixed at 51%. Contrary to the above, Decision A/DEC.6/7/92 of 1992 was an amended version of Decision A/DEC.1/5/83 discussed above. Concisely, Decision A/DEC.6/7/92 was related to some changes in the way that industrial products are to be granted ETLS concessions. It was a response to the difficulties encountered in the effective implementation of the previous trade liberalization Scheme for industrial products. Specific implementation problems that were 19

32 encountered include the fulfillment of the rules of origin, the minimum national participation in the equity capital of production enterprises, and the structure of the Scheme involving the categorization of industrial products as priority and non-priority goods. The ECOWAS Trade Liberalization Scheme for industrial products originating from Member States of the Community as well as the time-table for tariff removal from the cited products is detailed below. Table 2.2: Tariff elimination on industrial products (Decision A/DEC.6/7/92) Group Period within which tariffs are to be eliminated Rate of reduction of Customs duties and taxes Group I Cape Verde, The Gambia, Guinea Bissau, Burkina Faso, Mali, Mauritania, Niger. 10 years 10% reduction each year Group II Benin, Guinea, Liberia, Sierra Leone, Togo 8 years 12.5% reduction each year Group III Cote d'ivoire, Ghana Nigeria, Senegal 6 years 16.6% reduction each year Source: Decision A/DEC.6/7/92 of the Authority of Heads of State and Governments Certificate of Origin Goods deemed to have originated from ECOWAS need to pass the Rules of Origin. This was to facilitate the prevention of transshipment of goods through a tariff-friendly state for final shipment to a desirable market destination in the region. The rules of origin which guide 20

33 the defined goods that are considered Made in ECOWAS are stipulated in the ECOWAS protocol A/P1/1/03 of 31st January The protocol defines products originating from Member states as follows: Goods that are wholly produced from raw materials entirely obtained from the region. Goods that are not wholly produced but require the addition of foreign products which is classified under a different tariff category from this product. Goods that are not wholly produced but require the use of raw materials that have already received a Value Added (VA) of at least 30% of the ex-factory price of the finished goods. 4 Valued Added (VA) refers to the total ex-factory price minus CIF Value (or taxes) of raw materials and consumables. Materials that are classified as ex-factory cost price include: raw materials, consumable, packaging and other expenses incurred by the company. However, it must be pointed out that goods manufactured in free zones and have already qualified for full or partial exemption of entrance fees do not qualify for originating products status ETLS Certification Procedure For manufacturing companies and /or importers to enjoy the tariff and non-tariff waivers acquirable under the ETLS, certain procedures must be followed. For manufacturers to show proof of origin of their products, they must obtain a Certificate of Origin. Two main processes are involved in the application for ETLS certification: the Enterprise procedures and the National Approvals Committee procedures. The Council of Ministers agreed on Regulation: REG./3/4/02 on 23rd April 2002 to present a procedure that will make it easier to get ETLS certification. Therefore this regulation initiated the creation of National Approvals Committees in Member States; the committee was tasked with the examination of ETLS certificate applications. The Enterprise Procedure involves the process during which the enterprise completes its application form, attaches all supporting documents and sends them to the ministry in charge of receiving ETLS applications in the specific country in question. 21

34 The National Approvals Committee Procedure is the second stage that involves a series of events that checks and rechecks the application to ascertain the extent to which it is valid. The Ministry/Government agency in charge of receiving ETLS application forwards the documents to the National Approvals Committee. The Committee then meets to discuss and approves or disapproves the extent to which the application is in line with the dictates of the ETLS. The Ministry in charge of receiving applications then receives the approval or disapproval notices. Approval notices are forwarded to the ECOWAS Commission. The ECOWAS Commission reassesses the decision made by the National Approvals Committee and notifies member states of the newly approved enterprises and products. A pictorial sketch of the procedure has been presented below. Figure 1. Pictorial sketch of the ETLS approval procedure. Enterprise sends application to the Ministry. The Ministry passes the documents to the National Appriovals Committee (NAC) The NAC scrutinizes the application Succesful applications are presented to the Ministry Ministry sends copies of the application to the ECOWAS Commission for reassessment The ECOWAS Commission reassesses the NAC decisions and notifies member states The respective Ministry then issues the certificate of origin Source: 22

35 2.5 Benefits of ETLS Certification In all, there are so many benefits that are enjoyed by ETLS certificate holding business entities. The benefits of using ETLS certification in intra-ecowas trade are stated below: It allows exporters to retain 100% of their foreign earnings from exports. Corporate Tax Rebate is granted to manufacturers and persons trading in agricultural products to get tax rebate between 40% and 75% of the applicable tax liability. ETLS certificate allows manufacturers to apply for customs license to have a bonded warehouse for holding their imported raw materials. That implies they can keep the raw materials which are such secured places without the need to pay customs duty. The ETLS allows the importation of selected raw materials intended to be used in producing products for subsequent exportation, within the sub-region. 2.6 Consolidation of Import Duties and Non-Tariff Barriers On 28 th May 1979, in Dakar, Decision A./DEC.8/5/79 was made by the Authority of Heads of State and Government of the ECOWAS. This decision was related to the consolidation of import duties and non-tariff barriers. In all, the main decisions were taken and are stated as follows: Article 1 explained that Customs duty (and other taxes that have equal tariff effects) and non-tariff barriers to trade in goods originating from the Community shall be consolidated from 28 th May, Article 2 goes on further to say that the consolidation process will bring about two main effects to trade conditions. In the first place, during the two-year period after the decision, Member states were not required to reduce import duties. They were however neither obligated to impose new duties and taxes nor to increase existing 23

36 ones. Secondly, Member States were not supposed to create new non-tariff restrictions and also not to increase the intensity of existing ones. It must be noted that all these measures point out that some form of protectionist resistance is shown in integration process, as has already been discussed. Article 3 tasked Member States to furnish the ECOWAS Secretariat with information covering their import duties, as defined in Article 13(1) of the ECOWAS Treaty (operational at the time). They were to submit this information by 1 st July, In addition, the information should contain existing non-tariff barriers, so that they could be studied for progressive elimination procedures to be adopted. In the first place, trade liberalization is one of the most relevant tool that assists the formation of regional economic integration. Through this, countries that had achieved independence also attempted unifying so as to enjoy the benefits of having a joint economic front that is even desired by advanced countries like the European countries. 2.7 Compensation Procedures for Revenue Loss Parties to the ECOWAS made sure that they would get compensation for revenue losses they made as a result of applying the ETLS decisions. Therefore Decision A/Dec.19/5/80 of the Authority of Heads of State and Government of the ECOWAS was drawn. It specified the compensation procedures for the loss of revenue suffered by Member States as a result of ETLS. Under this decision, revenue loss by member States under ETLS referred to the total deficit in receipts recorded by a Member State as a result of trade liberalization within the Community. It was calculated by using the difference between the revenue that would have accrued if the Most Favored Nation rate or the general preexisting rate applicable at the time 24