Interview

“Ratification of EPAs is a conscious choice made by Cameroon”

- Louis Paul MOTAZE, Minister of the Economy, Planning and Regional Development

At the end of the 14th session of the Ministerial Committee for Negotiations of EPAs (COMINA) held in Douala last 17 June, the Minister of the Economy, Planning and Regional Development, chairperson of the said Committee highlights the stakes of this meeting. In an exclusive interview granted to your newspaper, Louis Paul Motaze sheds light on the to-be carried out actions, expected outcomes as well as impacts on Cameroon’s economy.

Louis Paul MOTAZE

Mister Minister, after this Douala meeting, is the Central African region finally set to speak with one voice on the EPAs?

Central Africa is already speaking with one voice in the sense that all the countries agree that the sub-region should sign a common agreement with the European Union as part of these EPAs. And this is why the Ministerial Committee that has just been convened for its fourteenth session as you mentioned has been set up.

The purpose was to see how negotiations between the European Union and Central Africa could be moved forward as they were at a standstill.Our discussions were extremely technical because there were basically three issues to be examined.

As the leader of the sub-region, Cameroon assumed the responsibility of signing an interim agreement with the European Union which shall be effective next August 4th.The implementation of this interim agreement stands the chance of jeopardizing customs arrangements in the sub-region. This is why Central African States which were reluctant to sign any agreement have agreed to adhere to a process that should lead to a comprehensive agreement that will help safeguard the customs arrangements of the sub-region.

At the end of the meeting, participants reached the consensus that a draft agreement should be prepared on the basis of the agreement signed by Cameroon, supplemented and amended accordingly.This draft agreement shall be first validated by the ministers towards the end of this month of June in Libreville and then forwarded to His Excellency Ali BONGO ONDIMBA, President of the Republic of Gabon who has been designated by his peers as the leader of negotiations.

According to the desire he expressed, this draft agreement will be submitted to some high European officials as the Central African proposal to the European Union, with the hope that negotiations will resume rapidly and be concluded by August 4, 2016, the effective date of the agreement signed with Cameroon, except otherwise provided.

What are the motivations behind the ratification of this Agreement by Cameroon?

Cameroon was resolved to initiate and sign an interim agreement with the European Union (EU) to avoid disruptions in its exports to the EU after 31 December 2007. In this respect, our country enjoyed unprecedented free access to the EU market, as from January 1st, 2008, for its export produce such as banana, aluminum, cocoa-processed produce, plywood, and other raw or processed agricultural produce. In concluding a bilateral agreement with the European Union, Cameroon wanted to preserve its commercial interests, without however losing sight of the negative exogenous shocks likely to weaken the competitiveness of its goods which the country must protect and address appropriately.

Thus, the ratification of the Interim Agreement by Cameroon has been made as part of an overall strategic approach that seeks to win new market shares in the world and above all preserve preferential access of its export goods to the European market, pending the conclusion of a full and balanced regional EPA.

As you are aware, although Cameroon is subject to the Common External Tariff owing to the fact that it belongs to the Central African sub-region, it has the most diversified economy.As a result, the country must expand market outlets for its goods. This option was chosen to enable Cameroon to continue enjoying commercial preferences that the country might have lost pursuant to the rules of the World Trade Organisation (WTO).Unlike some other countries, Cameroon has products to sell. It was therefore imperative to preserve those outlets.

Besides, our country is safeguarding achievements made under regional integration, because Cameroon stands alongside the sub-region as part of ongoing negotiations in the Central African Zone.  As a matter of fact, our country has totally funded studies (that the sub-region had to bear) on the calculation of the net fiscal impact of the entry into force of the EPAs, which is an evidence of its constant involvement in negotiations towards the conclusion of a regional agreement.

Now, let’s talk about the Agreement per se: how can we comprehend it?

Cameroon and the European Union entered into an Economic Partnership Agreement (EPA) on 15 January 2009 which was initiated 13 months earlier (on 17 December 2007). According to its objectives, this agreement stands as a commercial tool at the service of development, and it is a supplement to the Cotonou agreement. It seeks to consolidate regional integration and further match up Cameroon’s economy to the European Community’s economies through gradual and asymmetrical liberalization of trade in goods, formulation and adoption of transparent rules to facilitate and promote trade.

EPAs therefore stand as new agreements that comply with WTO rules which abolish obstacles to trade between the EU and the ACP (Africa, Caribbean and Pacific) countries, and enhance cooperation “in all areas relevant to trade”  (article 36.1). Articles 36 and 37 lay down the reference framework for free trade agreements to be negotiated with the European Union. The objective is to facilitate access of ACP countries to the European markets and consolidate regional economic integration for these countries.

The negotiation of an Economic Partnership Agreement between the EU and Central Africa (Cameroon, Central African Republic, the Republic of Congo, the Democratic Republic of Congo, Gabon, São Tomé and Principe, and Chad) is under way.

However, because of some difficulties associated with the negotiation and conclusion of a regional EPA by the deadline of 31 December 2007 set forth by the Cotonou agreement, Cameroon has proposed an interim agreement which was ratified on 22 July 2014.

What are the main characteristics of this interim EPA?

The interim agreement concluded by Cameroon and the EU is centered on two components: Trade and Development. To date, only the Trade Component has resulted in the first special provisions that helped Cameroon keep a preferential access of its export goods on the European Union market since 1st January 2008. 

In this agreement, Cameroon has agreed to open its market to up to 80% of imports from the European Union. This liberalisation will spread over a transitional period of 15 years, with a moratorium period of two years, and will be achieved per group of products. 20% of products have been excluded from liberalisation.

Now, with regard to the Development Component which is still under discussion with the European Union, it should basically concern the Regional Programme for Assistance to Development under the EPA (PRADA), that is the economic capacity building and upgrade programme for Central Africa. It should also concern compensations for the “net fiscal impact”, that is revenue loss as the result of the openness of the markets of the region.

Concerning the liberalization you are talking about, which goods are concerned by the interim EPA?

               

Imports from the EU that have been liberalized include mainly industrial machinery (pumps, generators, turbines, etc.), vehicles and some chemicals. Overall, these are inputs used by local industries and which are not manufactured in Cameroon. Abolition of duties levied on EU imports will reduce input costs tolocal enterprises and also benefit consumers. Thus, no local value chain will be “killed” by these imports.

Overall, although we should fear the loss in customs revenue as the result of the phasing-out of barriers, trade liberalization is a source of growth and a driver of development. It leads to a reduction of trade costs and increases opportunities for enterprises. Under this agreement, the abolition of customs duties on imports of commodities and industrial equipment from the EU will reduce production costs and enhance the competitiveness of enterprises and the economy, thereby impacting on production and export growth. In this respect, the EPAs can constitute a booster to the upgrade of enterprises provided that the benefits derived from this liberalization are not largely captured by commercial middlemen.

Mister Minister how does the dismantling schedule looks like?

A dismantling schedule has been proposed for a ten-year period (2016-2026), and it concerns three groups of goods:

n The first group concerns household goods (30% of the total of the group) which are staple goods that contribute to poverty reduction. Other products in this group include commodities (19%) and capital goods (27%) to enable enterprises access to commodities and equipment at lower costs, as well as drugs, books, seeds or parent stocks. The liberalization of this group of products will be done in 4 yours as from the first year of liberalization (Year1).

n The second group of products comprises machines and capital goods (35%), semi-finished products (39%) and other commodities meant to back up local industries. I would like to highlight that the liberalization in this group stands to back up investments by enabling enterprises to upgrade their equipment and become more competitive. Products in this group include mechanical machines and equipment (new vehicles, farm machinery), electrical machines and equipment, new tyres, etc. Products included in this group shall be liberalized within 7 years as from the second year of (Year 2).

n The third group of products is made up of high-cost products. These are generally semi-finished products (12%), finished products that are not made locally and for which a potential offer exists.This group also includes commodities and capital goods (34%) which largely contribute to customs revenue. Delays in the liberalization of this group seek to facilitate the emergence of a local industrial fabric in the sectors concerned. Among this group, we can mention building materials, clinker, durum wheat, rubber materials, wood products, household products, household items, etc. Liberalization of this last group of products is scheduled for 10 years as from the fifth year of liberalization (Year 5).

It is important to highlight that there is another group made up of products that are excluded from liberalization. This group includes finished products that are made locally, products that largely contribute to customs revenue, and wastes. These products have been excluded in order to protect local production, preserve employment and customs revenue, and also for the sake of security and for public health and environmental purposes.This group includes food produce (drinks, oil, meat and fancy meats, milk and dairy produce, soft and alcoholic drinks), farm produce (tomatoes, potatoes, onions, cabbages, etc.), second-hand items, clothes and other textile products, wood and paper products, used products, etc.

Does this mean that economic operators or local producers have no reason to be worried about as they are now?

The challenges to be addressed as part of this agreement are numerous and varied, and they concern foreign trade, competitiveness, production, employment, public finance, and regional integration.All these issues constitute areas of reflection for the Government.

But in the meantime, as concerns local production, as I have just mentioned, Cameroon has excluded a number of processed-farm produce and non-agricultural products from liberalization, basically to protect its agricultural or industrial markets which are sensitive and also to preserve its fiscal revenue.

Consumer goods, in particular foods and drinks have been almost excluded from liberalization. 41% of the products excluded from liberalization fall within this group of products.

It is also important to highlight that some products that have a significant development potential have also been excluded from liberalization in order to promote economic diversification in our country.This is the case of raw animal and plant products.

Still in the trade component, there are some provisions regarding trade in goods. Can you give us more information on this?

Provisions on trade in goods cover several areas:

n Immediate duty-free access to the EU market and without quota that is without restrictions on all imports from Cameroon since January 1st, 2008;

nAn asymmetrical and gradual opening of the Cameroonian market to EU goods fully taking heed of the differences in the levels of development between Cameron and the EU;

nThe protection of  domestic trade with bilateral guaranties enabling either party to reinstate taxes and quotas when imports from either party disrupt or threaten to disrupt  the country’s economy;

nAbolition of technical obstacles to trade as well as plant sanitation and phytosanitary measures (SPS), to help Cameroonian exports comply with the EU standards;

nFacilitation of trade thanks to measures like more efficient customs procedures and improved cooperation between administrations and enterprises.

A number of concerns can be raised with regard to Cameroon’s capacity to address the challenges associated with the implementation of EPAs. What is the Cameroonian Government doing to calm those concerns?

With the upcoming entry into force of the interim EPA and aware of the consequences this agreement can have on the national economic fabric, the Government has taken a number of initiatives to enable our economy to appropriately capture the opportunities offered by this agreement.

The Government has resolved to assist and back up the private sector with various types of assistance, including direct support that can be incurred by the public investment budget of the State.The various meetings I have held recently with the private sector in Douala including visits to several enterprises clearly demonstrate the Government’s willingness to make the private sector a driver for industrial revolution and improvement of the living conditions of the populations.

There is this issue of modernization of Cameroon’s economy and its adaptation to globalization. What is being done in this respect?

Concerning this issue, we have focused our attention on three main areas: enhancement of supply capacities, expansion of export capacities, and introduction of institutional reforms and tax incentives.

There is an Enterprise Upgrade Bureau (BMN) which is already operational and assists Cameroonian enterprises that voluntary adhere to the process to improve quality and standardization, and scale up the supply of their products through the modernization of the production tools and optimization of leadership and management.This initiative is backed up by the European Union through the Economic Competitiveness Enhancement Programme (PACOM).To date, several enterprises have been upgraded and many other will go through this process in the upcoming weeks.

Better still, many support bodies are being set up by the State like the Outsourcing and Partnership Exchange (BSTP), the Small and Medium-sized Enterprise Promotion Agency (APME), the Cameroon Investment Promotion Agency (CIPA) and Programmes such as the Support Programme to the Customs Modernization Plan (PAPMOD) which has as objective to enhance the customs department’s capacity with regard to customs revenue and facilitation of customs clearance and transit, the Support Project to the Development of the Private Sector (PASDP), etc. All these structures and bodies contribute to expanding and modernising Cameroon’s economic and productive base in accordance with their respective missions.

As concerns PASDP in particular, if I am not mistaken, the Minister of Small and Medium-sized Enterprises, Social Economy and Handicrafts is expected to travel to Vienna in Austria by the end of this month of June to discuss practical modalities for the revitalization of PASDP with the United Nations Industrial Development Organisation (UNIDO).

Mister Minister, it looks like you are downplaying the risks associated with this agreement?

No, we are not downplaying nor overlooking the risks associated with this agreement. The Government is aware of it and we have even funded the study on the calculation of the “net fiscal impact” that is the assessment of losses associated with the implementation of the EPA, under self-generated resources. However, in a responsible manner, the Government cannot content itself with complaining about the negative effects of EPAs. Its role is also to seek ways and means of cushioning these negative effects while examining positive effects.Today, the stake for Cameroon is to capture opportunities that are brought in and make the best out of them. The ratification of the EPAs by Cameroon is a choice made in full consciousness. As I said, it is a strategic choice that seeks to win markets shares in the world. The purpose is to get the best out of the diversification of our economy to modernise it and to take advantage of the preferential access of our export goods on the European market. By taking up this challenge, Cameroon is resolving to turn away from a resource-based economy by accelerating structural, institutional and regulatory reforms likely to attract investors with ideas and capital who will come and set up in the country, start up businesses, make brisk business and create employment opportunities. The Government’s resolution therefore stands as an individual and collective challenge to the values of efforts, selflessness, and patriotism against a backdrop of legitimate ambition of all economic operators to prosperity. Indeed, far from being a proponent of liberalism advocated across the board, Cameroon should endorse this stance of the former President of the European Commission, Mr. Barroso during the recent international economic conference held in Yaounde from 17 to 18 May 2016 who said: “no country has developed by closing itself into customs barriers.” And that, by contrast, the economic boom of western countries and especially of some of the so-called Asian « dragons » like Korea that was at the same level of development as our countries just a few decades ago, is essentially due to their openness and their gradual integration to global trade.