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Any hopes for progress on the European Union’s Economic Partnership Agreements with Cameroon? Chofor Che, 24 April 2016

24 Apr

Opponents of free trade in Cameroon are of the view that the European Union’s Economic Partnership Agreements (EPAs) are against the national interest, and such agreements will only create unemployment. They add that the national economy is not ready for EPAs.

Most states in Asia like Indonesia that were not completely ready for free trade and that were not even at the current level of development of African economies have seen some progress in economic development because of free trade and economic partnerships. If we take India for example, they even opted for a unilateral opening to economic partnerships with states in the West without reciprocity from the other.
What matters in trade openness is not having the same economic advatage as partners, but to improve its gain relative to the initial situation. By design and default, other states especially European states are far more advanced than Cameroon in terms of resources and it makes sense, as long as they respect the rules of fair free trade.

According to an inteview accorded in late 2015 to Louis Paul Motaze the Minister of the Economy and Regional Planning, EPAS will permit Cameroon import at lower prices equipment which so far are too costly to import, the more competitive the country gets. According to Motaze, another advatage of Cameroon adhering to EPAs is that this will help open her markets. Cameroon has goods and services to sell to Europeans and the European Union is offering Cameroon a chance to open its market with no quota imposed. Considering this, the major problem Cameroon now faces is production which might be insufficient despite markets being opened to the country. Free trade will reduce the costs of local exporters and thus enhance their competitiveness. With free trade, Cameroon will have cheaper imports, thus export cheaper, so more market share in the global market.

The American firm Frontier Strategy Group published, during the month of February 2015, its ranking of the resilience of countries to external shocks. According to Frontier Strategy Group, Cameroon occupies the 21st position in Sub Saharan Africa. The country is above all number one in the CEMAC zone (a six member community comprising Cameroon, Congo, Gabon, Equatorial Guinea, Chad and Central Africa) in this ranking ahead of Gabon (24th). Some other strengths include vast agricultural land apart from oil production. The country is blessed with vast hectres of forests.

Critics often advance the argument that doing business with partners who have an added advantage over Cameroon will not be beneficial to the Cameroonian economy. This assertion can remain true if only Cameroonian public and private actors called upon to carry out transactions under the EPAs remain dormant rather than become more comeptitive with thier European partners.

Taking advantage of free trade, does not always necessary mean we must have an absolute comparative advantage over other states with whom we are doing business with. The country can make progress as these transactions are being carried out. South Korea had a comparative advantage in rice, but thanks to its openness to free trade has managed to build its comparative advantage in high value technology products. This is a scenario Cameroon has to copy. Cameroon produces cash crops like cocoa and rubber. At the same time Cameroon has raw materials like iron ore, uranium which can give the country added advantage if well exploited and utilised.

Cameroon is the 114th most competitive economy in the world, out of 140 countries assessed by the World Economic Forum (WEF). The country moves up two places compared to last year, but still comes behind Gabon (103rd), first Central African nation in this ranking 2015-2016. However, the WEF emphasizes, that Cameroon is 10 places ahead of Nigeria (124th), the leading economy on the continent. This equally makes Cameroon ready for EPAs with Europe.

There are several ways Cameroon can meet the challenge of competitiveness, not just by possessing a great natural resource base or a large workforce. By investing in human capital, industralisation and innovation, Cameroon can develop comparative economic advantage which will allow the country to sell on the international market at competitive prices. The country can also exploit the economies of scale related to regional integration, for example to bring out competitive companies.

The argument that EPAs will destroy jobs and local industries, is a façade to protect businesses and industries which have always enjoyed healthy profits thanks to state protectionism. And there is no morality to this especially as poor consumers continue to pay to maintain artificial industries in place. The state cannot continue to subsidize businesses and economic operations with taxpayers money whereas there is an opportunity to take advantage of the EPAs.

All the same issues like corruption needs to be addressed for Cameroon to adequately benefit from EPAs with Europe. The American think-tank Heritage Foundation and the Wall Street Journal recently published the 2016 ranking of the economic freedom index in the world, which measures economic freedom in countries since 1995, using criteria such as protection of property rights, the size of the state, budgetary and monetary policy and the fight against corruption. Out of a ranking of 178, Cameroon is positioned 29th in Africa and 130th in the world. When you have too many regulations (lack of economic freedom), companies face additional burdens and costs of transactions, undermining their competitiveness in the end. Corruption too, is a symptom of too much government intervention, so less freedom of choice for households and businesses. Therefore, with corruption, businesses pay bribes, additional expenses instead of investing them. The result is low competitiveness.

In conclusion, for Cameroon to benefit from the EPAs, the government should properly negotiate contracts with the EU. It is also germane for Europe to respect the principle of free trade by stopping subsidies to producers thus encouraging protectionism disguised as non-tariff barriers especially with respect to sanitary and phytosanitary standards, as well as environmental standards.

This article is originally published in the French language at Libreafrique.org

 

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