Discussions

The trade profile of the Economic Community of West African States vis-à-vis the Tripartite Free Trade Area

The trade profile of the Economic Community of West African States vis-à-vis the Tripartite Free Trade Area

18 Feb 2015

William Mwanza, tralac Researcher, discusses ECOWAS trade in relation to the SADC-COMESA-EAC Tripartite FTA

The commencement of negotiations towards a Continental Free Trade Area (C-FTA) is slated for June this year. The planning for this initiative started a few years ago and is gathering pace in view of this timeline. As formation of the Tripartite Free Trade Area (TFTA) has proceeded, it has been mooted that this region should form the first building block of the proposed C-FTA. From 2012, the idea of creating a second pole for the C-FTA – consisting of the Economic Community of West African States (ECOWAS), the Economic Community of Central African States (ECCAS), the Community of Sahel-Saharan States (CEN-SAD), and the Arab Maghreb Union (AMU) – was considered. In spite of a number of meetings held to explore this proposal, it has not materialized to date. Given the enormity of the challenge of synchronizing different regional frameworks, this may not come as a surprise if the impending timeline for the start of negotiations is considered. 

What is now seen as a more plausible option to forming the C-FTA was recently proposed to the African Union High Level Trade Committee (HATC) by Mr. Sindiso Ngwenya, Secretary General of the Common Market for Eastern and Southern Africa (COMESA) and Chairperson of the Tripartite Task Force in January 2015. The SG presented an update on the TFTA negotiations, informing the meeting that negotiations on trade in goods have almost been finalised and that the TFTA should be launched later this year. He then proposed that one way of fast-tracking the C-FTA would be to form an FTA between the T-FTA and ECOWAS. Such an FTA would result in a trading block of 41 countries, representing 76% of the African Union’s membership, with a population of 954 million (86% of the AU) and a GDP of US$1.9 trillion (80% of the AU). 

Considerable work has been done on the TFTA in the past few years. In view of this proposal, it is an opportune time to consider more closely what the trade profile of the ECOWAS region looks like, particularly as it relates to TFTA countries. What follows is a snapshot of the region’s trade with the world, within itself, and with the TFTA, based on 2013 data from the International Trade Centre (ITC). 

ECOWAS trade with the world

The ECOWAS region’s exports to the world amounted to US$139 billion in 2013. 73% of these comprised of oil and gas. The other main products were gold (6.4%), cocoa beans (5.2%), iron ores (1.4%) and cotton (1%). 

Nigeria was by far the biggest exporter, accounting for 70% of the region’s exports in 2013. Ghana accounted for an 11.2% share, while Ivory Coast accounted for 8.7%. The remaining twelve countries had shares of less than 2%. 

The top 5 export destinations were Brazil, EU, US, Japan, and South Korea.

The region’s imports from the world amounted to US$110 billion in 2013. These included oil (16%), ships and barges (5.8%), drilling platforms (5.2%), cars (3%), rice (2.5%), medicines (1.9%), wheat and meslin (1.8%), trucks (1.5%), phones (1.2%), fish (1.1%), cement (1%), and sugar (1%).

Nigeria was again the biggest importer at 44.5%. Liberia accounted for 12% of the region’s total imports, Ivory Coast (11.3%), Ghana (9.1%), and Senegal (5.5%). The remaining ten countries shares were each 4% and below.

The region’s top 5 global import sources were China, US, EU, South Korea and India.

Intra-ECOWAS trade

Intra-ECOWAS trade was low, accounting for only 8.5% of the region’s total exports and imports to the World. The main products traded included oil; drilling platforms; cement; palm oil; plastic packing goods; soups; wood products; fish; beauty, make-up and skin care preparations; and fertilizers among others.

The main exporters to the rest of the ECOWAS region were Nigeria (41.2%), Ivory Coast (23%), Togo (10.1%), Senegal (7.8%), Ghana (6.5%). 

The main importers were Ivory Coast (26.8%), Ghana (18.5%), Nigeria (11.8%), Burkina Faso (10.9%) and Mali (8.7%).

ECOWAS trade with the T-FTA

Exports to the T-FTA countries amounted to US$7.3 billion, which represented about 35% of its exports to Africa and 5.3% of exports to the World.

The region’s imports from T-FTA countries totalled US$2.9 billion, which was 21% of its imports from Africa, and 2.6% of imports from the World.

These low figures are representative of the low levels of intra-African trade that are currently prevalent and indicate considerable scope for increasing trade levels.

The structure of exports and imports between the two regions was as follows:

The exports of ECOWAS to the T-FTA region consisted mainly of two products namely, oil and gas (55%) and gold (40.1%). The other top 10 products all had a share of less than 1% of exports to the T-FTA and included aircrafts, bulldozers, cotton, diamonds, scrap metals, cocoa paste, natural rubber, machinery parts, trucks, and beauty and skin care preparations. 

The region’s imports from the T-FTA were less concentrated and consisted of drilling platforms (23%) and trucks (9%).  The other top 10 imports constituted less than 5% each and included polymers of propylene, cars, structures and flat-rolled products of iron and steel, apples and pears, machinery for sorting mineral products, petroleum oils, machinery parts, odoriferous mixtures for industry, liquid pumps, and food preparations. 

As discussed by Fundira (2015), the ECOWAS common external tariff had five proposed tariff bands with essential social goods entering the region duty free; goods of primary necessity, raw materials and specific inputs 5%; intermediate goods 10%; final consumption goods 20%; sensitive products/designated for infant industries 35%. Implementation of the CET started on 1 January 2015. A cursory look at some of the main products imported indicates that they are products that would attract duties of 5% and more. This is in contrast to the bulk of mineral exports from ECOWAS to the T-FTA, which probably already enter duty free.

The broad picture that can be gleaned from these 2013 figures is therefore one of mostly mineral and some capital equipment flowing from ECOWAS to the TFTA, and mostly capital equipment flowing from the TFTA to ECOWAS. This is while products that feed into different manufacturing value chains flow between the regions in less significant amounts. 

These latter products would have to be given much focus if an FTA between ECOWAS and the TFTA countries is to bolster production and trade in a way that generates high levels of employment (particularly for the continent’s bulging youth population) and development more generally. 

One important consideration in this regard would also be the market dynamics that currently exist in the different African regions, particularly in view of other preferential agreements that have recently been concluded with the EU.  

It is worth noting, for example, that some of the products imported into ECOWAS from the T-FTA region in 2013 – such as trucks, cars, petroleum oils, machinery parts, and odoriferous mixtures for industry – were also among the top products imported by the region from the EU, initially signalling the competition that will be prevalent in such a market. A detailed interrogation of the ECOWAS CET and EPA schedule, as well as the T-FTA countries MFN rates and their respective EPA schedules would be essential in determining where exactly products from the three regions will be competing in the context of the C-FTA. 

Overall, the trading relationship in goods between ECOWAS and the T-FTA region sets out an interesting picture; one that is worth exploring in some greater detail as an incremental approach towards consolidating an Africa-wide C-FTA.

.


Sources:

COMESA. (2015). Update on the Tripartite Free Trade Area Negotiations: Statement by Mr Sindiso Ngwenya, Secretary General of COMESA. [Online]. Available at: http://www.tralac.org/images/docs/6974/sg-statement-to-the-hatc-29012015-final-draft.pdf

Fundira, T. (2015). Market Access in Africa: A review of existing tariff structures and the road to a Continental Free Trade Area. [Online]. Available at: http://www.tralac.org/images/docs/6966/s15wp032015-fundira-market-access-in-africa-20150204-fin.pdf

Mwanza, W. (2013). On efforts towards a second pole for African continental integration. [Online]. Available at: http://www.tralac.org/discussions/article/5346-on-efforts-towards-a-second-pole-for-african-continental-integration.html