This paper focuses on ECOWAS Trade Liberalisation Scheme and its attendant challenges for regional integration in West Africa. The paper draws on academic and policy literatures, empirical evidence and participant observation as well as elite interviews. It submitted that the ETLS launched to facilitate the establishment of a Common External Tariff and the creation of a Free Trade Area had not achieved its intended mandate or objective. Several obstacles still impeded growth of subregional bilateral ties and intra-trade in West Africa and realigning the protocols to suit the economy of member states is therefore inevitable.
Although established to promote intra-trade in West Africa and facilitate accelerated economic progress among member states, ECOWAS Trade Liberalisation Scheme (ETLS) is yet to be fully realised. Scholars have argued that ETLS has recorded significant economic feats for member states in the subregion; but some contended that ETLS performance has been discouraging and this became noticeable with the call by some legislators in Nigeria (the biggest economy in the region) for a ‘technical exit’ of Nigeria from the regional body. More than two decades after the launching of the ETLS, ECOWAS member states still seem to choose products and investments from outside West Africa rather than trade, manufacture and add value within and when they
trade with themselves, economic sabotage, sharp economic practices and abuse of ETLS rules of Origin seems to be the norm, hurting member’s economy rather than building it.
ECOWAS Trade Liberalisation Scheme: An Instrument for Creating Prosperity or a Retrogressive Invention
ABSTRACT
Although established to promote intra-trade in West Africa and facilitate accelerated economic progress among member states, ECOWAS Trade Liberalisation Scheme (ETLS) is yet to be fully realised. Scholars have argued that ETLS has recorded significant economic feats for member states in the sub-region; but some contended that ETLS performance has been discouraging and this became noticeable with the call by some legislators in Nigeria (the biggest economy in the region) for a ‘technical exit' of Nigeria from the regional body. More than two decades after the launching of the ETLS, ECOWAS member states still seem to choose products and investments from outside West Africa rather than trade, manufacture and add value within and when they trade with themselves, economic sabotage, sharp economic practices and abuse of ETLS rules of Origin seems to be the norm, hurting member's economy rather than building it. Hence, this paper focuses on ECOWAS Trade Liberalisation Scheme and its attendant challenges for regional integration in West Africa. The paper draws on academic and policy literatures, empirical evidence and participant observation as well as elite interviews and submitted that the ETLS launched to facilitate the establishment of a Common External Tariff and the creation of a Free Trade Area had not achieve its intended mandate or objective as several obstacles still impeded growth of sub-regional bilateral ties and intra-trade in West Africa and realigning the protocols to suit the economy of member states is therefore inevitable.
Keywords: ECOWAS Trade Liberalisation Scheme, intra-trade, West Africa, Free Trade Area
Introduction
Africa is the second largest continent in the world, after Asia, approximately three times the size of the United States. Yet, seen from the angle of its economy, Africa is small. In 2010, its gross domestic product was approximately $1.6 trillion, compared with the U.S.'s $14.5 trillion Gross Domestic Product (GDP).1 2 Given this fact, it is important that commercial engagements between 2 African countries be improved to accelerate economic growth in the continent. Nwoke had argued that beyond regional cooperation and integration, Africa's option to survive in the hostile international environment is slim and limited. In West Africa, given their small sizes, populations, nature of politics and underdevelopment in all areas of the economy, infrastructure, etc, it is necessary that countries cooperate and integrate for their own growth and development.
The adoption of the Lagos Plan of Action in 1980 was a signal to the world that African countries were desirous of pursuing the integration idea as a development tool. The Treaty of Abuja in 1991; the creation of the African Union; the proliferation of Regional Economic Communities in Africa including the Southern African Development Community (SADC); Economic Community of Central African States (ECCAS); Common Market for Eastern and Southern African (COMESA); and the Economic Community of West African States (ECOWAS), etc all revealed that regional integration in Africa is fast evolving. The realisation of the weak and fragile nature of African states following colonialism and the felt need to pool resources together through regional integration to achieve any meaningful progress on the path to socio-economic development became the compelling factors.
Thus, the Economic Community of West African States (ECOWAS), established on 25th May 1975, with the signing of the Lagos Treaty was a direct strategy employed by its founding fathers to usher in a new era of prosperity and socio-economic growth and development. Since established, ECOWAS has unveiled different agendas to improve trade relations between and among member states. While ECOWAS has fared better in the area of cooperation, it is yet to in the areas of trade.3 Meanwhile, its successes and effectiveness hinges upon the strategic piloting of her programmes. However, trade within West Africa remains poor and abysmally low. For instance, Nigeria's export to the ECOWAS region, which averaged about 7 percent of its total exports between 2001 and 2006, plummeted to 2.3 percent in 2010.4 Likewise, the share of other ECOWAS countries in Nigeria's imports dropped from 4.4 percent in 2001 to less than 0.5 percent in 2010.5
Furthermore, ECOWAS member states prefer manufactured products outside West Africa above trading and investments within the sub-region. These challenges substantially hinder economic integration in the sub-region. Thus, for the citizens in the community to continue to believe in the prosperity that ECOWAS is supposed to offer, ECOWAS programmes that are geared to bring this into fruition must thus be evaluated and assessed consistently.
Ogwu and Alli (2009) fully documented the achievements of ECOWAS on the road to market integration including: Free Movement of Persons, Right of Residence and Establishment, signed in 1979.6 In 1986 and 1990, supplementary protocols on this matter covering in greater details the issues of Right and Residence and Right of Establishment, gave more effect to the free movement agenda. They also mentioned the significant progress made in monetary matters on which protocol relating to the West African Monetary Agency signed in 1993. Other economic matters were encapsulated in the Protocol on Value Added Tax in ECOWAS member states (1996); and the Protocol relating to the ECOWAS Bank for Investment (2001). In 2003, a Protocol relating to the Definition of the Concept of Products originating from member states and the Protocol relating to the Application of Compensation Procedures for loss of Revenue incurred by ECOWAS member states as a result of Trade Liberalisation Scheme (ETLS) was also signed. The Protocol on Energy was signed in the same 2003, among several others signed after that.
Central to our analysis here however is the establishment of the ECOWAS Trade Liberalisation Scheme (ETLS) - a comprehensive trade liberalisation programme articulated by ECOWAS quite early in its existence. All ECOWAS members operate mono-cultural economies which depend on trade in a narrow list of commodities. Thus, it was recognised that for ECOWAS to make progress, attention must be paid to sub-regional trade. This was why the ETLS and the ECOWAS Common External Tariff (CET) were developed.
Article 20(i) of the ECOWAS Treaty states:
...member states shall accord to one another in relation to trade between them the most favoured nation treatment and in no case shall tariff concessions granted to a third country under an agreement with a member state be more favourable than those applicable under this treaty.7
Implementation was to have started in 1979, but it had to be postponed three times before it was finally launched in 1990. The implementation of the programme is designed to occur in the following stages:
i. An immediate and full liberalisation of trade in unprocessed goods and traditional handicrafts.
ii. Phased liberalisation of trade in industrial products, with the phasing reflecting the differences in the levels of development of three categories of ECOWAS member states.
iii. Gradual establishment of a Common External Tariff (CET).
Thus, the trade liberalisation scheme of ECOWAS was conceived as a progressive reduction culminating in the elimination of all tariff and non-tariff barriers against intra-ECOWAS trade.8 The ECOWAS Trade Liberalization Scheme Protocols and Regulations, Article 3, section 2(d) provides for the establishment of a common market through “the liberalization of trade by the abolition, among Member States, of custom duties levied on imports and exports and the abolition among Member States, of non-tariff barriers in order to establish a free trade area at the Community level”.9
Problem Statement
The ETLS is the process identified by ECOWAS leaders to ensure free movement of goods which satisfy the rules of origin of the Community.10 The multiplier effect of this scheme, if fully implemented will be, the creation of common market for exports in the sub-region leading to the creation of more jobs, reduction in poverty level and improvement in foreign exchange earnings. However, in spite of ECOWAS Protocols and commitments, the degree of market integration has lagged behind expectations in the sub-region. The trade liberalization scheme is not yet operational as reflected by inadequate intra-regional trade (<12%). Besides, the ECOWAS Common External Tariff has not yet seen the light of day; although the process has recorded some progress and the economic and financial policies are not harmonized despite the fact that a framework has been defined (WACIP, 2010).11
But this problem is all over Africa such that at the end of 2008, intra-regional trade as a percentage of total trade stood at: 70% in the European Union; 32% in North America; 47% in developing Asia; 27% within Latin America and the Caribbean; and 10% in Africa.12 Africa is losing out in billions of dollars in potential trade earnings every year because of high trade barriers with neighboring countries. The question now is why is it easier for Africa to trade with the rest of the world than with itself?
Although established in 1983, the ECOWAS Trade Liberation Scheme was not launched until 1990 and re-affirmed as part of the ECOWAS Revised Treaty in 1993. However, after more than two decades, the ETLS which is expected to facilitate economic integration in West Africa still faces a substantial number of challenges and lacks implementation in several areas. A lot of factors have been traced to some tariff and non-tariff barriers to the trade. These high trade barriers lead to regional trade fragmentation which deprives the continent of new sources of economic growth, new jobs and sharply falling poverty. But addressing regional trade barriers and strengthening regional integration can help ECOWAS countries integrate into world markets. This is because barriers to accessing markets in the region are often lower than those for accessing global markets.13
Article 2 of the first ECOWAS Treaty states the objectives of the organization as follows:
...to promote cooperation and development in all fields of economic activity particularly in the fields of industry, transport, telecommunications, energy, agriculture, natural resources, commerce, monetary and financial questions and in social and cultural matters for the purpose of raising the standards of living of its people, of increasing and maintaining economic stability, of fostering closer relations its members and of contributing to the progress and development of the African continent.14
Meanwhile, it is imperative to note that the diversion of huge amount of resources to tackle internal crisis and the provision of conflict resolution mechanisms to rid the region of wars, violence and conflicts has hindered the objectives of the sub-region to blossom. Of the 15 West African countries, 12 have been affected by armed conflict since independence. Since 1998, more than 35 armed groups have been operating in, and destabilising two-thirds of the 15 ECOWAS member states: Cote d'Ivoire, Gambia, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal and Sierra Leone.15 The flows of arms, combats and mercenaries, child soldiers, etc. has made the conflicts protracted such that monies that are supposed to be freed for economic integration were used instead to quell uprisings and disturbances thereby slowing down integration efforts.
Yet there are other trends visible such as high level of poverty and inefficiency at all levels of government. Sesay and Moshood16 agreed that endemic drug and human trafficking, environmental degradation and global warming, as well as debilitating diseases like malaria and HIV/AIDS all combine to make the life of the average West African citizen brutish and short.
Therefore, this study will identify several obstacles that impede smooth implementation of ETLS. Barriers to intra-regional trade could hamper economic efficiency and prevent countries to play actively in world markets.
Objectives of the Study
Against the background of the problematique, the broad objective of the study is to reflect and interrogate the adequacy or otherwise of ETLS towards attaining full market integration in West Africa. The specific objectives of this study are to
a. appraise the major components of the ECOWAS Trade Liberalisation Scheme;
b. determine the impact of ECOWAS Trade Liberalisation Scheme on trade in the West African region;
c. analyze the obstacles to the effective liberalisation of trade in West Africa via the ECOWAS Trade Liberalisation Scheme.
Theoretical Framework
This study adopts the intergovernmentalism theory as its analytical framework because the states are at the centre of the whole process of intra-trade in West Africa. This theory conceptualized integration as “a series of bargains between the heads of government of the leading states in a region [Moravcsik, 1991]. Its basic assumption lies underneath the belief that integration takes place within domestic politics and entirely a logical consequence of intergovernmental negotiations while down grading the importance of supra-national institutions in the process of integration. In other words, intergovernmentalism is a theory of integration that recognizes the fact that power in international organizations is possessed by the member states and decisions are made unanimity.
Stanley Hoffman (2006) first presented this theory of intergovernmentalism in The State of War: Essays on the Theory and Practice of International Politics, critiquing the neofunctionalist ideas and presenting his own. This was later built upon by Andrew Moravcsik with his theory of liberal intergovernmentalism. According to Movaravcsik and Schimmelfenn (2009:67), “intergovernmentalism has acquired the status of a baseline theory in the study of regional integration: an essential first cut explanation against which other theories are often compared. The main reason that these two writers believe this is due to intergovernmentalism success at explaining state behaviours and the theory's ability to work with and build on other theories on both integration and behaviour. They also claimed that it has helped to ensure the modernization of integration theory due to its general social science theory.
That the theory of intergovernmentalism recognizes the centrality of state in integration process is not in question. The theory explains the process of integration in West Africa, where the process was initiated and has been sustained by the governments of the member states. Going forward, it is these sets of governments that can drive it to Eldorado as well.
Like all theory however, intergovernmentalism has critics whose main assertion is that politics and economics cannot be divorced and that economic interest do not in fact guide integration. Also, the theory contends that weak states would need international institutions as they are confronted with more expansive and complex issues. The intergovernmentalist basic assumptions placed too much emphasis on heads of states as major players in the integration process without due regard to the importance of several behind the scene events that take place before inter-state bargains. Further, the theory's “two-level game analogy seems too simplistic [Smith and Ray 1993]” while at the same time it could not be “tested empirically and should be seen as an approach rather than a theory [Wincott 1995].
However, ETLS is an initiative that is fashioned to eradicate obstacles to trade in approved goods within ECOWAS with the aim of increasing economic ties between the member states and linking up their economic fortune. These tasks of removing barriers essentially rest on the governments. Thus, the success or failure of the scheme lies in the manner the member state governments manage break the barriers hindering trade in the region and implement the policies consistent with the ETLS mandate.
A Historical Review of Economic Integration in West Africa
Economic integration is an embodiment of customs unions, trade blocs, and free trade area, has the ultimate aim of promoting trade participation of members and in the long-run enhancing economic performance and welfare of their citizenry.17 Clark sees it as ‘intergovernmental cooperation which would lead to vital policy decision, to encourage exchange of goods, services, labour and capital.18 This implies the elimination of economic boarders between countries. Economic boarders are any obstacle which limits the mobility of goods, services and factors of production between countries.
According to Jean-Paul Rodrigue,19 there are five additive levels of economic integration which he identifies as follows: free trade, customs union, common market, economic union and political union. However, the Carter Centre listed six stages of economic integration including the Preferential Trade Market (PTA), Free Trade Area (FTA), Customs Union (CU), Common Market (CM), Economic Community or Monetary Union and Economic Union or Political Federation.20
In the same vein, the concept of economic integration can be used in two different ways. First, it can be used to refer to increased trade and factor flows between neighbouring countries as a result of trade liberalisation or the coordination of economic activities. Second, it can be used generically to refer to growing economic ties among countries which may or may not be geographically contiguous.21
In historical context, integration is not a novel idea in West Africa. Notable historians had note that the pre-colonial era in West Africa shows political and economic integration through limited trade and free movement of factors of production throughout various kingdoms in the region. For instance, Stanislas Adotevi recorded that “...the notion of precise geographic boundaries is profoundly alien to Africa's historical and cultural traditions, because the rigid geographic boundaries of the post-colonial state contrast sharply with the fluid areas of socio-political and cultural integration that existed in the pre-colonial era”.22 Real Lavergne also posited that “West Africans are aware that the kingdoms and cultures of West Africa were relatively well integrated in pre-colonial times, as accounts of the region amply attest and the quest for regional unity is in many respects a search for ones roots”.23
The pre-colonial history is not the only link that West Africans have had leading towards integration. Writing on The Integration of West Africa, Michel (2004) noted that the colonialisation of the African states during the 19th century can be regarded as the background to current historic and economic integration efforts in Africa. Dating all the way back to the 15th Century, West Africans have felt a European presence. By the 17th Century, the French had set up trading posts at the mouth of the Senegal River. It was in the 19th Century, however, that West Africans felt the largest colonial impact by the French. Between 1854 and 1865, the French had captured interior Senegal, southern Mauritania and what is present day Mali. Throughout the 1860s, France was busy setting up trade and military posts on the coasts of Benin, Guinea and Cote d Ivoire as well.24
France in the 1890s established French West Africa comprising Cote d Ivoire, French Guinee, Niger, Burkina Faso, Senegal, Mali and Benin (then Dahomey). In 1905 Mauritania had become a French Protectorate but by 1920 it joined French West Africa as a colony. These nations, as a collective French West Africa, became what is today known as the CFA (Communaute Financiere Africaine-African Financial Community) franc zone.25
It is also important to note that during this period, Britain like France made efforts to amalgamate their respective colonial territories to enhance administration and exploitation. Sesay and Omotosho noted that Britain created the West African Currency Board in 1912 in what is generally regarded as the first economic integration scheme in the region.26 The Board is charged with issuing legal tender in its four colonies; The Gambia, Ghana, Nigeria and Sierra-Leone to ease trade transactions.
Although, while recorded history had shown that the idea of integration is not new to West Africans, contemporary integration designs in the sub-region are essentially a post World War II phenomenon. They are largely inspired by developments in Europe and essentially inspired by the seven-nation European Coal and Steel Community set up in 1951 which later turned to European Economic Community and now the European Union (EU).27 The success recorded by this organisation became a reference point for countries and regions across the world including West Africa who desperately wanted a solution for their economic and political challenges.
However, the coming together of nations in Europe was not the only factor that encourages West Africans to want to integrate; the sudden decolonisation also had a profound impact on integration. It was believed that one way for Africans to empower themselves to avoid being exploited in the new international system was through integration. Gowon, in his Ph.D. thesis stated that as far as November 1958, the leaders of Ghana and Guinea had announced their decision to combine as the nucleus of a proposed union of West African States which would be the first independent attempt at integration in the region.28 The political and economic union of the two states was intended to encourage and direct the anticipated movement by independent countries towards West African, then continental, unity.
Professor Adebayo Adedeji in a paper presented at the Third Meeting of the African Development Forum, Addis Ababa described the period of African countries independence as 29 the “age of integration”. After World War II, the promotion of regional integration became a global phenomenon culminating not only in the establishment of the EEC in 1957 but also the Latin American Free Trade Association in 1960; the Central American Common Market in 1961; the Association of South East Asian Nations (ASEAN) in 1967; and the Caribbean Free Trade Association (CARIFTA) in 1968, etc.
Specifically, Adebayo submitted that there are five phases of integration process in Africa. They are:
i. Putting supra-national pan-Africanism as the rallying point and the vision for political independence and economic decolonisation;
ii. Damage control of the abrupt reversal of French colonial policy of political and economic
integration to one of balkanisation and fragmentation before granting independence in 1960;
iii. The search for larger and sustainable sub regional integration among independent African countries resulting in a breakthrough in sub regional co-operation arrangements in the 1970s and 1980s;
[...]
1 Kimenyi, M. S., Lewis, Z. A. and Routman, B. “Introduction: Intra-African Trade in Context” Brookings Africa Growth Initiative (2011), p. 1.
2 Nwoke, C.N. “Nigeria and ECOWAS” in Ogwu, J.U. (ed), New Horizons for Nigeria in World Affairs (Lagos: NIIA: 2005), p.123.
3 Ibid.
4 Chete, N.I “Dynamics of Trade between Nigeria and Other ECOWAS Countries” Brooking Africa Growth Initiative (2012).
5 Ibid.
6 Ogwu, J. And Alli, W.O. (ed.), ECOWAS: Milestones in Regional Integration , (Lagos: NIIA, 2005), p.9-10.
7 Alli, O.W."ECOWAS and Development Challenges in West Africa" in Ogwu, J. and Alli, W.O. (ed.), ECOWAS: Milestones in Regional Integration (Lagos: NIIA, 2005), p.69.
8 ECOWAS Vanguard, "The ECOWAS Trade Liberalisation Scheme: Genesis, Conditions and Appraisal", 2013, Vol.2 (3).
9 The ECOWAS Trade Liberalisation Scheme brief, Protocols and Regulations (ECOWAS Executive Secretariat, Abuja: 2010), protocol A/P1/1/03.
10 Alawode, C.,2010
11 West Africa Common Industrial Policy -WACIP (ECOWAS Commission, Abuja: 2010) p.17.
12 Ekra, L.J. “Obstacles to intra-regional Trade in West Africa”, Paper delivered at AfreximBank/WAMI Seminar, p.1.
13 Mobert, H. and Francis, A. 2011, p.1.
14 ECOWAS, 2009.
15 Ann-Sofi Ronnback, 2008, p.13.
16 Sesay,A. and Omotosho, M. “The Politics of Regional Integration in West Africa”, WACSERIES, Vol.2, No.2, (2011), p.22.
17 Olayiwola, W., Osabuohien, E and Okodua, H. "Economic Integration, Trade Facilitation and Agricultural Exports Performance in ECOWA Countries",EPAU Monograph Series,No.l, A publication of the ECOWAS Policy Analysis Unit, Dept, of Macroeconomic Policy, ECOWAS Commission (2011).
18 Esekumemu, C.V. "The Economic Community of West African States: the Challenges to the implementation of the Protocol on the Free Movement of Goods, Persons and Establishments", Developing Country Studies (2014), Vol4.No.6, pp.124-131.
19 Rodrigue, J.P."Levels of Economic Integration"http://www.people.hofstra.edu/geotrans/eng/ch5en/conc5en/img/economicintegration.gif (accessed on 15/09/2013).
20 http: www.cartercentre.blogspot.com/2011/06/stages-of-regional-economic-integration.html (accessed on 17/08/2013).
21 Nwoke,C.N."Nigeria and ECOWAS" in Ogwu, J.U. (ed.), New Horizons for Nigeria in World Affairs, (Lagos: NIIA, 2005), p.114-123. Micheal, R. "The Integration of West Africa", Journal of Undergraduate Research (2004), Vol.2, pp.1-5.
22 Ibid.
23 Ibid.
24 Ibid.
25 Ibid.
26 Sesay, A and Omotosho, M. "The Politics of Regional Integration in West Africa", WACSERIES (2011), Vol.2, No.2, pp.10-12.
27 Ibid.
28 Gowon, Y. "The Economic Community of West African States: A Study in Political and Economic Integration", A PhD dissertation submitted to the University of Warwick, United Kingdom (1984) p.38.
29 Adedeji, A. "History and Prospects for Regional Integration in Africa", A Paper delivered at the Third Meeting of the African Development Forum, Addis Ababa (2OO2),pp.l-3.
- Quote paper
- Adedeji Ademola (Author), 2014, ECOWAS Trade Liberalisation Scheme. An Instrument for Creating Prosperity or Retrogressive Invention?, Munich, GRIN Verlag, https://www.grin.com/document/1033891
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