ECOWAS and trade barriers

The Economic Community of West African States (ECOWAS), an accord by a 15 member regional grouping is expected to eliminate all tariffs, restrictions and quotas and by so doing, facilitate free movement of people, goods and services and thereby promote social and economic harmonisation, deepen trade and encourage large-scale investment.

But for 36 years that ECOWAS has been in existence, the regional group is still far from achieving its goals, particularly that of creating a strong economic union. The subject of trade barriers has been a recurring issue in the industry. The debate on this topical issue came up recently again in Lagos at the initiative of Lagos Chamber of Commerce and Industry (LCCI).

The forum emphasised the need for African countries, West African countries in particular, to trade with each other. The issue has even become one of global concern with US Secretary of State, Hillary Clinton, calling on African countries to increase trade with each other to realize the enormous potential that exists within the continent. Although ECOWAS have made strides towards free trade, full market integration remains an ambition.

Intra-regional trade remains a relatively small part of the ECOWAS economic activity, accounting for about 10 per cent of the total trade of the member states. In 2008, the total ECOWAS intra-regional trade was valued at US$6.9 billion, while total ECOWAS trade with the world was valued at US$64.4 billion.

The value of ECOWAS intra-regional trade has over the years been increasing from US$3.2 billion in 2002 to peak at US$9.9 billion in 2006 before it nose-dived to US$6.6 billion and US$6.9 billion in 2007 and 2008 respectively.

With regards to Nigeria’s level of ECOWAS intra-regional trade, the aggregate non-oil exports stood at US$189.96 million in 2009 declining from US228.81 in 2008 and representing 9.7 percent of Nigeria’s non-oil export in 2009 account to the 2009 CBN Annual Account.

The low level of ECOWAS intra-regional trade, is largely traced to some tariff and non-tariff barriers, some of which include lack of appropriate / adequate infrastructure in the region that is characterised by lack of poor rail systems, roads, energy etc. This is more compelling when viewed against the empirical evidence that cargo volumes have leaped about 300 per cent from 4.7 million tonnes in 1998 to 13.4 million tonnes in 2008 without corresponding increase/improvement on basic logistical infrastructure; barriers to movement of goods and services, due to multiple check points/border posts with attendant consequences of time and cost overruns and eventual uncompetitive pricing of goods at market destination.

There are other underlying constraints that have, over the years, stood as stumbling blocks to the realisation of the ECOWAS goals. There is deep seated distrust among member states, which fundamentally limit the depth and progress in regional integration. There are systemic problems that hamper the development of national economies and invariably impede the regional integration. There is the reluctance to adhere to integration programmes due to concerns over losses and uneven gains. Insufficient analytical and technical support also limits implementation of some integration instruments, for instance, the trade liberalization scheme.

Trade experts have advanced that trade can be a powerful force for growth and poverty reduction. They argue countries that have increased the share of trade in their GDP have grown faster and reduced poverty more rapidly. They have therefore stressed the need for trade facilitation to reduce the complexity and cost of the trade transaction process and ensuring that all these activities take place in an efficient, transparent and predictable manner.

Important players in the process of trade facilitation include government/government agencies, transporters/logistic providers, finaciers/insurers, and traders. Since trade facilitation reduces transaction costs, allows for faster delivery/clearance, predictable trade rules, increased foreign investments, reduced corruption, increased revenue and increased compliance, these important players must ensure that the process flies high.

Business Day