Our grouse about free trade pacts, by OPS, NLC, others

Nigeria is the beneficiary in the trade liberalisation pacts involving it, and the partnering countries and the economic blocs. From the European Union (EU)-sponsored Economic Partnership Agreement (EPA) to Morocco’s push to join the Economic Community of West African States (ECOWAS);  and now, African Continental Free Trade Area (AfCFTA) agreement, some developed countries and neo-liberal institutions appear determined to open Nigeria to free trade. But, members of the Organised Private Sector (OPS), labour movement and investment experts are apprehensive. They warn that the agreements, if signed, will jeopardise the local industrial sector, Assistant Editor CHIKODI OKEREOCHA reports.

BUT for the sustained agitation by members of the Organised Private Sector (OPS), labour movement, academia, international relations experts and various stakeholders in the economy, President Muhammadu Buhari, would have been in Kigali, the Rwandan capital, to sign the framework agreement for the establishment of the African Continental Free Trade Area (AfCFTA).

As adopted by the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union (AU) in Addis Ababa, Ethiopia, in January 2012, AfCFTA was designed to create a continental trade bloc of 1.2 billion people, with a combined Gross Domestic Product (GDP) of about $3 trillion.

The agreement, seen as an important milestone in promoting Africa’s regional integration and helping to increase intra-African trade, commits countries to removing tariffs on 90 per cent of goods and to liberalise services. It has its main objective as the creation of a single continental market for goods and services, with free movement of business persons and investments.

But, before Buhari’s scheduled visit to Rwanda for the Extra-Ordinary Summit of the AU on March 21, during which he was to sign the AfCFTA, a groundswell of opposition by OPS members, labour and other critical stakeholders in the economy, had trailed the proposed agreement.

The OPS, which included Manufacturers Association of Nigeria (MAN), Nigeria Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMMA), labour movement, particularly the Nigeria labour Congress (NLC), as well as international relations experts, unanimously warned the President against signing the agreement. They insisted that it will hurt Nigeria’s productive sector and the economy generally.

Those pushing for AfCFTA argue that the supposed benefits of the trade pact are too good for Nigeria to ignore. Apart from its inherent capacity to promote economic growth and development, reduce poverty in the partnering countries (Nigeria inclusive), the promoters believe it would expand and diversify trade and increase domestic and foreign investment.

Africa, according to experts, is not trading within itself, despite its potential in terms of population and rich agricultural and mineral endowments. Trade among African countries accounts for a meagre 10 per cent of their total external trade, the lowest of any world region, according to United Nations (UN) Economic Commission for Africa (ECA).

The continent’s share in world trade is also not impressive, standing at less than three per cent. That informed the move to stimulate intra-African trade by at least 25-30 per cent to raise the continent’s share in global trade and competitiveness, African leaders came up with the idea of establishing AfCFTA.

Essentially, their hope was that AfCFTA would lead to a significant growth of intra-Africa trade and also assist Africa use trade more effectively as an engine of growth and sustainable development. It was expected to help Africa participate in global trade as an effective and respected partner.

Other expected deliverables by the agreement include, enhancing competitiveness at the industry and enterprise level, through exploitation of opportunities for scale production; continental market access and better re-allocation of resources; provision of a comprehensive framework to pursue a developmental regionalism strategy for the continent.

 

MAN, labour, others kick

 

But the private sector has refused to be swayed, insisting that the likely negative impacts of the agreement on private businesses and the economy far outweigh its supposed benefits.

Before Buhari’s had a rethink on the trip, the labour movement, led by the NLC, raised the alarm that the AfCFTA, if signed, will turn Nigeria into a dumping ground for repackaged and re-bagged foreign goods from Europe and other developed countries.

The NLC specifically warned the Federal Government not to sign the policy document, warning that it will cripple the economy and leave more Nigerians unemployed.

Besides, it expressed fears that the agreement will expose the economy to foreign intervention, which will allow foreign firms to operate in the local market without employing Nigerians.

NLC President Ayuba Wabba aligned with MAN’s President Frank Udemba Jacobs argument that the proposed agreement lacked the inputs of relevant stakeholders, including the organised labour.

He said ordinarily, proponents of the trade document ought to consult all relevant stakeholders, because of its likely implication on the economy.

Wabba said: “We find it confounding that at a time nations, including the United States (U.S) are resorting to protectionism in defence of their local businesses and protection of jobs, we have the audacity to want to fling open our doors, windows and roof tops.

“We have no doubt that this policy initiative will spell the death knell of the Nigerian economy. Accordingly, we urge Mr. President not to sign this agreement either in Kigali or anywhere.”

According to him, the national interest takes precedent and nothing should be allowed to compromise it.

He said: “The AfCFTA, rather than unite Africa will only divide it the more.  Rather than enrich Africa, it will only pauperise it the more.

“Those pulling the strings of this radioactive agreement are somewhere, well concealed and protected in the metropolis of the world. They have had this all thought-out and profits computed well ahead.”

The United Labour Congress (ULC) faction of the NLC commended Buhari for putting a halt to its hurried signing of the trade deal.

In a statement by its General Secretary, Didi Adodo, ULC said: “Nigeria is not only an importer nation, but also an economy with weak infrastructural base thereby increasing the cost of the products produced in Nigeria.

“If signed, the AfCFTA will only encourage industrialised countries to use other African nations to push their products to the Nigerian market thereby killing locally produced goods. We reject it in its entirety.”

To the Vice President, IndustriAll Global Union, Issa Aremu, the agreement could undermine the country’s development aspirations. He lauded what he described “the vigilance of all stakeholders such as manufacturers, NLC and business in calling for caution on international trade agreements.”

According to him, while intra-African trade could bring economic benefits to member states, there should be broad consultations and participations in the AfCFTA negotiations.

He said it was necessary to avoid “pitfalls of past trade agreements, which have turned to be more devastating and negative.”

Aremu recalled that Nigeria’s membership of the World Trade Organisation (WTO) in the 1990s, with its attendant lowering of tariffs led to the collapse of labour intensive industries, like textile and automobile.

 

Manufacturers fret

 

Dr. Jacobs also expressed worries that the agreement will open the floodgate for the influx of the European Union (EU) and other foreign goods into the local market and turn the country into a dumping ground.

According to him, the Rules of Origin (ROO) in the AfCFTA cannot be adequately enforced to guard against the influx of goods into the Nigerian market.

The ROO are used to determine the country of origin of a product for the purpose of international trade. But, Jacobs expressed fears that the ROO cannot be adequately enforced because goods from the EU can find their way into one of the African countries that have bilateral agreement with the EU.

The MAN chief said: “When the goods get into the African country, they can repackage them, change the label from made in Europe to that of the African country. Those same goods will surely find their way to Nigeria, which is the main target market for the EU.”

He explained that the agreement’s market access was a concern to manufacturers as it leaves low protection to locally produced goods.

“The agreement says that 90 per cent of the tariff plan would be liberalised, leaving only 10 per cent to protect manufacturers. That 10 per cent is too low,” Jacobs said.

Adding that the 90 per cent will remain open and duty-free because people can import, he said: “What we are saying is that the 10 per cent is too small. Even at the current Common External Tariff (CET) regime, we enjoy more than 10 per cent.”

Jacobs noted that although, he and other MAN members were not oblivious of the benefits inherent in the establishing the AfCFTA could improve intra-African trade and enhance economic growth and sustainable development, Nigeria must be cautious before rushing into a free trade agreement with other African countries.

He, therefore, urged the government to renegotiate trade conditions that could impede economic growth in its review of the (AfCFTA) agreement.

Jacobs, who spoke in Lagos, last week, said the trade pact will result in job losses, as most manufacturing companies in the country will close shop.

He explained that the private sector’s agitation was because of the lack of consultation and inclusion of inputs of key stakeholders before Nigeria’s position was presented at the meetings of the AU-Technical Working Group on CFTA in the build-up to AfCFTA negotiation by Nigeria.

Jacobs urged the government to set in motion a process that will enable all stakeholders on the international trade value chain in Nigeria to quickly review the text of the draft AfCFTA agreement and come up with comments on areas that are not in the best interest of the economy and sectors.

He said: “The government should, as matter of urgency, convene a special meeting of the relevant stakeholders, including experts on trade policy, to consider tariff lines rates along the line of efficiency, sectoral and sub-sectoral preferences that would be most beneficial to Nigerian businesses under the AfCFTA dispensation.

“It will also reconsider the national position on EPA vis-a-vis the AfCFTA, especially on tariff lines of products on the sensitive/exclusion list, with a view to ensuring that the EU-EPA is not reintroduced through the AfCFTA’s back door.

“Review presentations and prepare a detailed submission for the Government on ways and means of participating in the AfCFTA in a manner that our national interest and that of the budding manufacturing sector are effectively protected.”

Commending Buhari for refusing to sign the trade deal, Jocobs reiterated that MAN will not support the government’s adoption and ratification of the agreement establishing the AfCFTA until the issues of market access and enforcement of ROO are addressed.

Some of these arguments and opposition by the private sector are believed to have forced President Buhari’s hand to withhold consent to the controversial agreement.

The President, however, explained that his administration will not be in a hurry to enter into any agreement that will make the country a dumping ground and jeopardise its security.

The Nation learnt that at the AU meeting in Rwanda, 44 African countries signed the AfCFTA framework agreement. The continent’s two biggest economies, Nigeria and South Africa, refused to sign.

South Africa’s President Cyril Ramaphosa reportedly said his country will join the agreement when the necessary legal processes are concluded. He said he will sign once the legal and other instruments associated with the trade bloc are processed and ratified by South African stakeholders and parliament.

Morocco’s membership of ECOWAS, EPA also sore points

Although, Buhari said his administration has set up a committee to review the controversial AfCFTA, there are other trade liberalisation schemes being forced down Nigeria’s throat allegedly by some developed countries and neo-liberal institutions bent on opening the country to free trade for which critical stakeholders have been up in arms.

Since June last year, when the ECOWAS leaders were said to have agreed in principle to consider a request by Morocco to become a member of the regional trade bloc, the OPS, especially MAN, has been mounting intense pressure on the government to forestall the North African to join ECOWAS.

Jacobs, who has been the most vociferous in the OPS campaign to halt Morocco’s membership of ECOWAS, noted that by reason of its geographical location, Morocco does not qualify to be admitted into the ECOWAS. Besides, its trade agreement with the European Union (EU) makes it harmful to allow her join the regional body.

Relying on the information that shows an exixting trade agreement between Morocco and the EU, the MAN chief warned that Morocco, if allowed into the ECOWAS, will encourage the infiltration of EU-made products into the local market.

He said: “This is so because Nigeria is the biggest market amongst the 15-menber countries in ECOWAS.

He noted that by extension, admitting Morocco into ECOWAS will be equivalent to signing the controversial Economic Partnership Agreement (EPA) between ECOWAS and the EU through the back door. “This, he said, will negatively affect the Nigerian economy as locally manufactured goods will find it extremely difficult to compete with imported products from the EU.”

OPS members and other stakeholders have been warning Nigeria to resist the EU to sign the EPA, which, according to them, will be counter-productive as it will leave Nigeria, especially industrial sector operators, with the short end of the stick. They argue that endorsing the EPA deal will hurt Nigeria’s industrialisation and job creation drive.

Under the EPA terms, which triggered the suspicions of OPS members, the EU will immediately offer ECOWAS 15-member countries full access to its markets. In return, ECOWAS will gradually open up 75 per cent of its markets, with its 300 million consumers, to the EU over a 20-year period.

That was not all. The EU will also offer a package valued at about Euros 6.5 billion (about $8.94 billion) over the next five years to help ECOWAS countries cushion the effects and costs of integrating into the global economy.

The proverbial carrot notwithstanding, the OPS insisted that the proposed agreement was a union of unequal partners.

They have consistently warned that signing such a pact will undermine the local industrial sector. They, specifically, argued that it will impact negatively on local manufacturing and result in shutdown of industries with heavy job losses, because of the imbalance competition that will follow.

To Jacobs and other real sector operators, Morocco’s alleged surreptitious move to join ECOWAS and the EU’s push to get Nigeria endorse the EPA, are two sides of the same coin.

They believe that admitting Morocco into ECOWAS will give the EU, which already enjoys unfettered access into the North African region, unfettered access to the Nigerian market and probably make it a dumping ground.

Despite the agitation against Morocco’s admittance into ECOWAS, the government said it has not made up its mind on the knotty issue.

The Minister of State for Commerce, Industry, Trade & Investment, Hajia Aisha Abubakar, recently said that the government will in due course, make its position known on it, pledging that government remained poised towards protecting indigenous manufacturers.

Weak industrial base, infrastructure

The weak industrial base and inadequate infrastructure justified the apprehension of stakeholders and operators in various sectors of the local economy. According to experts, the key elements of trade liberalisation within the ambits of most Free Trade Agreements (FTAs) are trade in goods and services as well as investments.

The FTAs also open new export markets and facilitates speedy movement of investment and people. Africa is one of the fastest-expanding economic regions in the world. With a population of 1.2 billion people, Africa is a huge market. And evidently, big market is good for every economy, including Nigeria. Besides being growth drivers, big markets have capacity to foster inclusive economic growth.

The odds against Nigeria

While these portend bright prospects for Africa, the snag, however, is that Nigeria appears to hold the short end of the stick, due to the current structure of her economy. At present, Nigeria is mainly a commodity goods producing country with very limited capability to produce and export industrial goods.

Most of the industries in the country are undeveloped and are plagued by lack of supportive infrastructure. The production plans of industry players are constantly distorted by the interplay of macroeconomic variables such as inflation, exchange rate and interest rate variations.

To manufacturers, AfCFTA, EPA and indeed, other trade pacts may appear to be a good course in their document proposals, they, however, fear that they may be catastrophic if implemented as they will stifle the slowly recovering manufacturing sector in the country. Their implementation could worsen the unemployment situation and the standard of living of the people.

Putting the fears in perspective, Jacobs said that MAN has nothing against free trade, as it could be better done in a situation of equal economic development as any attempt to coerce the country into a free trade arrangement would only succeed in killing the fledging manufacturing sector.

To him, the government’s industrialisation goal, through the Nigerian Industrial Revolution Plan (NIRP) would be a mirage if EPA, for instance, is embraced. Besides, he said it would increase social unrest and insecurity, due to surge in unemployment.

Rather than EPA or any other free trade arrangement, the Director-General of the Lagos Chamber of Commerce & Industry (LCCI), Mr. Muda Yusuf, said real sector operators have been concentrating on promoting competitiveness on a sustainable basis.

He spoke of the need to put in place the right policies and infrastructure either in the context of EPA or ECOWAS to achieve this.

The belief is that with the prevailing state of the economy, the free trade pacts may not mean much to the country. Already, many manufacturing companies have left Nigeria to other neigbouring West African countries such as Ghana where the business environment is considered friendly.

What these mean is that for Nigeria to significantly benefit from the avalanche of international trade agreements being dangled before her, there is urgent need to improve the ease of doing business, for instance, why efforts must be made to address the nation’s dearth of infrastructure particularly electricity supply.

Beyond addressing poor infrastructure and the import-dependent nature of the economy, Aremu said: “It’s time for Industry, Trade & Investment Minister Okechukwu Enelamah to do ‘first thing first’ – prepare to engage all stakeholders on the trade pacts, answer critical questions on the implications of the AfCFTA, for ECOWAS treaty and Common External tariff (CET) and the contentious EPA.”

He said whatever the outcome of the deliberations, AfCFTA should allow Nigeria the domestic policy space so that the policy objectives of job creation and industrialisation, as contained in the Economic Recovery and Growth Plan (EPRG) and Nigeria Industrial Revolution Plan (NIRP), are not jeopardised.

 

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