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Revision of the tariffs losses of West Africa in case of a regional EPA: 2020-50

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Contrary to the allegation of the European Commission, the EPA will not exclude all agricultural products from liberalization in the EPA. This will be especially the case for cereals, excluding rice, and milk powder.

SOL | 24 Aug 2016

Revision of the tariffs losses of West Africa in case of a regional EPA: 2020-50

Jacques Berthelot (jacques.berthelot4@wanadoo.fr), August 24, 2016

Summary

After the Brexit it is useful to update the value of imports and losses of import duties (ID) of West Africa (WA) from the EU28 and EU28 minus the United Kingdom (EU28-UK) in case of ratification and implementation of the regional EPA (Economic Partnership Agreement) with the EU28-UK, and this on the basis of the EU exports in 2015.

As the WA Member States do not have reliable customs statistics and as the ITC TradeMap database is not reliable either, we took as a basis the EU28-UK exports to WA, that were supplemented by adding the following data:
- Addition of 30% to the FOB value to get the CIF value in WA.
- Addition of imports and ID due to the growth of the WA population.
- Addition of 25% to the CIF values ​​to reflect the diversion of WA imports in favour of the EU28-UK and to the detriment of imports from the other WA States and from third countries.
- Addition of losses in the value added tax (VAT) on imports since it is levied on the CIF value plus import duties.

We have faced great difficulties to impute the codes of many Eurostat tariff lines to the ECOWAS CET (Common External Tariff) tariff lines, as they are often very different at the 10 digits level. It is likely that the ambiguity in the imputation of the Eurostat codes to the CET codes leads to very different interpretations from one ECOWAS Member State to the other, and even from one customs officer to the other.

On 18 August 2016 the Council of ECOWAS finance ministers stressed that six Member States have not yet implemented the CET theoretically in force since January 2015, while nine others have done. An inappropriate affirmation for Nigeria which continues to prohibit the import of many products – of which meat, eggs, oil, sugar, pasta – and adds to the CET ID specific taxes and excise duties on many products. Senegal has banned imports of chicken since 2006 with great success for local production. Ivory Coast imposed a tax of 1,000 CFAF per kg of imported poultry meat and special taxes on fish, rice, alcohol, tobacco and cigarettes, petroleum products and bans imports of sugar and wheat flour. The implementation of the EPA under these conditions augurs big problems, including EU prosecution for violation of the planned liberalization of imports in the EPA.

The losses of ID on liberalized products results from the comparison of their level at the average rate of 8.6% without the EPA recorded in 2015 with their level with the EPA.

The €26 billion of exports to WA from EU28-UK in 2015 would have generated €2.8 billion of ID (at EU FOB value) at the average rate of 10.7%, of which 17.6% on products excluded and 8.6% on products fully liberalized in T20 (2035). These accounted for 76.3% of total exports and 61% of DD received in 2015. The Brexit reduces 6.7% of EU28 exports and 9.2% of ID.

Taking into account the four additions due to the difference between EU FOB values and WA CIF values, the diversion of imports for the EU, the increase in population and the reduction in the VAT on imports, total imports of liberalized products increase from €35.2 billion in T (2015) to €44.9 billion in T20 (2035) and €55.6 billion in T35 (2050). The diversion of imports in favour of the EU with the EPA would hardly modify total imports without the EPA because those liberalized in the EPA will continue to come from third countries by paying the normal ID. Clearly the absence of import diversion in favour of the EU would no longer penalize the internal imports within WA but, on the other hand, without the EPA the WA growth would be boosted and would foster more imports from third countries despite larger internal imports within WA.

As soon as T10 (2025) 60% of the ID received in 2015 on the liberalized products would be lost and that percentage would rise to 96.2% in T15 (2030). The annual losses of customs revenues (ID + VAT) due to the EPA would rise from €696 million in T5 (2020) to €4.5 billion in T20 (2035) and €5.5 billion in T35 (2050). Cumulative losses would leap to €8.5 billion in T10 (2025), €46.5 billion € in T20 (2035) and €121.8 billion in T35 (2050).

The percentage of imports of agricultural and fishery products liberalized at T20 (2035) represents 37.5% of total imports and 13.8% of total ID. This runs counter to the document "The EPA would liberalize the majority of EU agricultural exports to West Africa" ​​of 26 May for which I made big mistakes of calculation, which I apologize deeply to the readers. The fact remains that, contrary to the allegation of the European Commission, the EPA will not exclude all agricultural products from liberalization in the EPA. This will be especially the case for cereals excluding rice and milk powder whose DD already minimal, at 5%, will be eliminated from T5 (2020).

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 source: SOL