Who dares forbid the ECOWAS to protect  its agriculture ?

In the coming months the Economic Community of West African States, ECOWAS, will be making decisions that will have a lasting effect on its populations. It is absolutely vital that all citizens of all the countries concerned be informed and that a public debate be launched. The ECOWAS is in fact involved in negotiations with the European Union that could end in an Economic Partnership Agreement. This does however require the setting up of  a Common External Customs Tariff  -  CET,  (see further details below) and a list of sensitive products to be excluded from the free trade area that would be opened by such an agreement.

The ECOWAS has 15 members states, 8 of which also belong to the West African Economic and Monetary Union  (WAEMOU). All these countries wish to set up  a common market, i.e. an area of free circulation for people and products, but in which they can jointly protect themselves against  imports from the rest of the world and for which they can work out a joint policy, in particular the common agricultural policy, called the ECOWAP. This is an important undertaking that requires the co-operation of all. Among matters which must be resolved there is the question of  how this area will conduct its trade with the rest of the world. All nations have ways of protecting themselves, for example by  taxing imports, most of the time at a fixed rate. These are called customs duties, or even (according to the experts!) customs duties ad valorem, calculated as a percentage of the value of the imported goods at the point of arrival  (a port, airport or inland border crossing). Every country, or group of countries such as the ECOWAS  and the WAEMOU  will thus establish the  customs tariff to be applied to each potential import product. The entire compilation of these rates is called the CET, the Common External Tariff. For the purpose of simplification some of the products are grouped together under a small number of headings. Thus in the year 2000 West African countries of the CFA franc zone decided to get together and set up a joint tariff for all imports. They divided products into four different categories, taxed at O%, 5%, 10% and 20%.  For imported rice, for example, the rate was 10% and for milk powder 5%. It was hoped that  such low import taxes would enable the urban population to feed itself at the cheapest possible price.

Initially the population did indeed turn massively to cheap imported rice. It was however often old and of second rate quality. It certainly allowed poor families to cook “denkakia”, which in the jula language stands for “large family”, once or twice a week. But at what cost to the health of their children? Such rice takes up a lot of water during cooking. It provides a bellyful but the satiety is illusory. And also at what cost to the country’s rice growers? In 2004 the rice stores in the Sourou district were full, but the rice could not be sold at a decent price that would give the farmers a small profit. They ended up by abandoning their rice, as in a chronicle of an announced death: what was bound to happen happened.

In 2008 prices of rice shot up on the world market. What was the reaction of the Government of Burkina? It simply abolished all import taxes on rice for a three month period. It was a way of introducing, without explicitly declaring it, a variable import duty, or a variable import tax as we will refer to it here.  It did not have much effect, because it was introduced in haste and improvised.

The WAEMOU common external tariff thus proved inadequate. For a number of years the import tax on rice turned out to be too low. Then in 2008, with the food crisis, the same tax rate became too high and the government decided to abolish it temporarily. At first the wider ECOWAS seemed tempted to adopt the WAEMOU tax rate, but fortunately decided to give itself some time to think it over.

At present the sharp ups and downs of farm prices and the exchange rate of the CFA franc against the dollar makes  agriculture in ECOWAS more vulnerable. Farmers can no longer invest in total safety.

Moreover, now that world prices have already fallen a good deal and will probably continue to do so as a result of the world crisis, the ECOWAS members which have reduced or done away with their fixed customs duties are even more unwilling to raise them again. This would hit impoverished consumers and farmers will not feel confident enough to increase their production.

It is therefore urgent to draw a lesson from the WAEMOU CET experience (which turned out to be inadequate) and to recognise the need to protect West African agriculture from the excessive volatility of world market prices and the fluctuations of the dollar.

The ECOWAS  could inform the World Trade Organisation and its major partners that it intends to adopt the following trade rules for  the common market it plans to set up with its member states and Mauritania:

The ECOWAS will consolidate its external customs tariff at 150% for agricultural products. This is the formal way of saying that the ECOWAS retains its right to raise all customs taxes to a ceiling of 150% (and that it likewise undertakes not to go beyond that level). This 150% rate should not cause any difficulty at the WTO, because it is applied by a number of ECOWAS countries, among them Nigeria, which represents 50% of the population in the area..

1.    Subsequently the ECOWAS will draw up a list of farm and/or food products (for instance rice and whole milk powder)  which are to be subject to a variable tax, always below the consolidated 150% level.

2.    Let us take a look a rice. The ECOWAS will calculate the average cost for its producers per tonne of rice. Based on this it will work out an entry price, so that rice imported to the ECOWAS area will be slightly more expensive than domestic rice. When the world market price of rice is lower than in the ECOWAS, it will be taxed (at a flexible rate following world market variations) in the following way: Tax + world market price = entry price The entry price is calculated so as to give producers a fair profit, but still not be  too high for urban consumers. When the world market price is higher than in the ECOWAS there will be no tax.

3.    This does not exclude the need  to add a 5^th tariff band of fixed customs rates of 50, 65 or 80 % for other products or for less sensitive farm products.  The transition from fixed to variable rates make take place gradually.

But  one questions remains open – and not the least! Will these protective measures be accepted by the World Trade Organisation (WTO) and ECOWAS trading partners? Our answer is yes. Even if the WTO is not keen on variable taxes (Variable  Levies in the expert world) there are some good arguments for having them recognised. This is the right time to recall the special and differentiated treatment foreseen for products of developing countries and for the LDCs ( Least Developed Countries) in particular.

In addition the International Pact on Economic, Social and Cultural Rights of 1966, Article 1 states: “The right of all populations to decide for themselves … In order to achieve their objectives, all populations may make free use of their wealth and natural resources … In no case can a population be deprived of its own means of subsistence”. Article 11 reads “Each one of the States which are parties to this pact, recognising the fundamental right of every human being to be protected from hunger, will on its own and through international co-operation adopt the necessary measures”.

It should further be noted that in May 2008 the CILSS (the Permanent Committee for the Fight against Drought in the Sub-Saharan region) network for the prevention of food crisis  emphasised: “The persisting concern is to find out if regulations or mechanisms are also planned in order to withstand a possible price crash in the coming years. A situation of unprofitable price levels could endanger food security and undermine the livelihood of family farms which are the main providers of food for the region”.

Who dares stop the ECOWAS from protecting its agriculture by variable import taxes and condemn its populations to misery, hunger and urban violence?

Koudougou October 5^th 2008

Maurice Oudet

Director, SEDELAN