Publication: Benefits of the ECOWAS CET and EPA Will Outweigh Costs in Nigeria, but Competitiveness is the Real Issue
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2015-01
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2015-01-20
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This note analyzes the benefits of ECOWAS Common External Tariff (CET) and Economic Partnership Agreement (EPA) will outweigh costs in Nigeria, but competitiveness is the real issue. After decade-long negotiations, the ECOWAS CET and EPA with the EU recently reached decisive milestones. These major reforms should have significant impacts and offer new opportunities to West Africa, but have so far failed to garner a broad consensus, notably in Nigeria. The lack of objective and easily accessible assessments of their likely effects appears to be partly responsible for this situation. Two recent World Bank studies use a simple methodology to assess the potential impact of these reforms on Nigeria. Overall, full implementation of the CET and EPA in Nigeria would result in limited fiscal losses, marginal welfare gains for consumers and higher profits for a majority of manufacturing firms accounting for the majority of jobs in this sector. Almost all firms experiencing negative effects exhibit higher-than-average profitability before the reforms and most would remain profitable after them. The predicted magnitude of both the CET and EPA is small compared to gains that could be achieved by tackling supply-side constraints faced by Nigerian firms. Combining trade policy reforms with an ambitious competitiveness agenda that addresses the most binding constraints and promotes regional trade appears as the best way to maximize the benefits and minimize the potential cost of these reforms.
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“Coste, Antoine; von Uexkull, Erik. 2015. Benefits of the ECOWAS CET and EPA Will Outweigh Costs in Nigeria, but Competitiveness is the Real Issue. Africa trade policy notes;no. 43. © http://hdl.handle.net/10986/21312 License: CC BY 3.0 IGO.”
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Publication Implementing the ECOWAS Common External Tariff : Challenges and Opportunities for Nigeria(World Bank, Washington, DC, 2014-06)The common external tariff (CET) for Economic Community of West African States (ECOWAS) was adopted at a Heads of State Summit in October 2013 in Dakar. This paper assesses the potential impact on Nigeria of implementing the new ECOWAS CET. It uses the World Bank's tariff reform impact simulation tool (TRIST) to simulate three scenarios: (i) keeping in place current import bans and levies which are charged in addition to tariffs, while implementing the CET tariff rate on non-banned products, (ii) removing the import bans and implementing the CET rate on all products, but keeping the additional import levies in place, and (iii) fully implementing the CET on all products and completely removing import bans and levies. The paper suggests that implementing the CET will have significant and largely positive effects on Nigerian consumers and producers. This note is intended to enrich the debate by presenting projections on the likely effects of CET implementation. To the extent possible with the limited available data, it gives a comprehensive overview of the effects to be expected on government revenue, the welfare of consumers, and the performance of Nigerian firms. It also discusses new opportunities for Nigerian firms to benefit from the regional market that are likely to arise if the CET is implemented. The note is organized as follows: section one gives introduction. Section two describes Nigeria's current trade profile with a particular focus on trade with the ECOWAS region. Section three makes use of the World Bank's TRIST to analyze the impact of implementing the CET in Nigeria in terms of changes in the level of protection by industry, government revenue from taxes levied at the border, consumer welfare, and the competitiveness of Nigerian firms. 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The intention is to add value to the policy debate around the EPA by generating results that are intuitive and transparent to a non-technical audience, and that rely on a limited number of simple assumptions, while adding precision and detail to the expected impact on the domestic economy.Publication Assessing the Adjustment Implications of Trade Policy Changes Using TRIST : Tariff Reform Impact Simulation Tool(2009-09-01)TRIST is a simple, easy to use tool to assess the adjustment implications of trade reform. It improves on existing tools. First, it is an improvement in terms of accuracy because projections are based on revenues actually collected at the tariff line level rather than simply applying statutory rates. Second, it is transparent and open; runs in Excel, with formulas and calculation steps visible to the user; and is open-source and users are free to change, extend, or improve according to their needs. Third, TRIST has greater policy relevance because it projects the impact of tariff reform on total fiscal revenue (including VAT and excise) and results are broken down to the product level so that sensitive products or sectors can be identified. And fourth, the tool is flexible and can incorporate tariff liberalization scenarios involving any group of trading partners and any schedules of products. This paper describes the TRIST tool and provides a range of examples that demonstrate the insights that the tool can provide to policy makers on the adjustment impacts of reducing tariffs.Publication Assessing the Direct Economic Effects of Reallocating Irrigation Water to Alternative Uses Concepts and an Application(2009-04-01)This study discusses potential economic implications for Nigeria of an Economic Partnership Agreement with the European Union. 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Their removal would undermine a major reason for cross border smuggling and pave the way for a return to normal regional trade flows. The paper shows how an Economic Partnership Agreement presents an opportunity for accelerating the reforms that are needed to support a strategy to increase regional and global trade integration. Such an agreement is more likely to have positive and significant impacts when integrated into a comprehensive strategy toward competitiveness and alleviation of the supply constraints that have stifled the impact of previous trade agreements. Key issues that should be addressed include liberalization and regulatory strengthening of services sectors to ensure that all firms in Nigeria have access to efficiently produced backbone services and initiatives to address the country s poor trade logistics performance.Publication Assessing the Economic Impact of the ECOWAS CET and Economic Partnership Agreement on Ghana(World Bank, Washington, DC, 2015)Ghana is currently facing two major trade policy adjustments - the economic community of West African states (ECOWAS) common external tariff (CET) is a significant milestone within the long history of regional integration in West Africa. In addition to the CET, Ghana faces the economic partnership agreement (EPA) with the European Union, which has been designed to build on the CET in West Africa. This study aims to enhance the debate by presenting an intuitive and data-driven technical perspective on the likely effects of the CET and the EPA. The study seeks to improve the information available to policy makers in Ghana. This is highly relevant, as the CET currently awaits parliamentary approval and the EPA will soon also require ratification. The study also aims to expand the information with which policy makers can develop accompanying policies to support and derive maximum benefit from the CET and EPA trade reforms. The first stage of the study employs the trade reform impact simulation tool (TRIST), which was developed by the World Bank. The study uses the finalized CET and EPA tariff schedules at the most detailed (10-digit) tariff line level, and 2013 customs excise and preventive service (CEPS) data on imports, exemption rates, tariff revenue, value-added tax (VAT), and national health insurance levy (NHIL) revenue, excise duty, and the over-age penalty for vehicles. The report presents the results for six scenarios: (1) the effect of the CET only, which is to be implemented before the end of 2015; the effect of each stage of the EPA implemented on top of the CET, (2) CET + EPA2020, (3) CET + EPA2025, (4) CET + EPA2030, (5) CET + EPA2035, and (6) the net effect of the EPA, where the EPA is implemented from a baseline where the CET is already in place (EPA2035 from CET). The study is structured as follows: section one gives introduction. Section two summarizes the market access content of the CET and EPA. Section three analyzes the effects of each reform on revenues and imports, section four looks at the effects on consumers, and section five examines the effects on firms’ competitiveness and jobs. Section six looks at potential accompanying measures and section seven concludes.
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