Once upon a time, the European Union dealt with its former colonies (the so-called ACP [African Caribbean Pacific] countries) through the mechanism of the four LomÃ© Agreements. These provided for non-reciprocal trade relations. The ACP countries were given duty-freeÂ accessÂ to EU marketsÂ (with important exceptions), but they did not have to offer similar concessions to the EU goods. More importantly, through STABEX, the EU provided additional funds that helped ACP countries whose earnings from the exports of primary commodities (like cocoa) dropped due to price fluctuations.
Well, this small but significant example of alternative economics came to an end in 2000. Turns out that the World Trade Organization (WTO) had a problem with non-reciprocal trade agreements. Where would we get if we gave African countries a leg up in the global system? The new Cotonou Agreement created a new set of rules that were reciprocal and that were open to all developing countries, not just the ACP countries. The long and short of it was that each developing country had until 1 January 2008 to enter into an Economic Partnership Agreement (EPA) with the EU in order to maintain tariff-free access to the EU market. Of course, they also had to open up their markets to EU imports without any barriers. An EPA is basically a free-trade agreement between a very rich continent and a large number of poor countries. We have seen in the Americas how such systems work to the disadvantage of ordinary people.
Enter Nigeria. Africa’s most populous did not sign an EPA with the EU. Its government must have remembered the last time they opened up their markets in the mid-1980s. That IMF-inspired policy eviscerated the Nigerian manufacturing sector. No wonder, then, that flush with petro-dollars, the country now thinks twice about such agreements. But the people who get caught up in this policy dispute are the cocoa farmers and processors.
Modern GhanaÂ reports that without an EPA, processed cocoa from Nigeria will be subject to a 4.3% duty on cocoa butter and a 6.1% duty on cocoa liquor and cake. With Ghana, CÃ´te d’Ivoire and Cameroon having signed their EPAs, Nigeria stands to loose about $6 per ton.
The story also highlights the discriminatory nature of the tariff structure in rich countries. While unprocessed goods are allowed in duty-free, any degree of processing is penalized by tariffs. Yet it is the additional processing that would permit more value-added to remain in the producer country. It is clear that free trade only exists in economic textbooks and the speeches given by politicians in rich countries. When it comes to actual trade, the rich countries discriminate whenever it serves their purposes.
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