Ghanaian Trade Associations critique proposed Export & Import Restrictions Bill 2023 in formal submission to Government
In a meticulous and comprehensive formal submission to the Government, prominent trade associations representing the interests of businesses in Ghana’s manufacturing and import sectors have expressed their reservations regarding the proposed LI “Export and Import (Restrictions on Importation of Selected Strategic Products) Regulations, 2023.”
The meticulously crafted document, undersigned by the trade associations, applauds the Ministry of Trade and Industry for fostering transparency through a public consultation on the draft regulation. Yet, it delineates several compelling concerns that merit the attention of the government.
Scope and Administration Challenges
At the forefront of the trade associations’ apprehensions is the scope of the proposed measure, encapsulated in a list of 24 goods that the associations argue significantly understates the potential breadth of coverage. The harmonized tariff code, ranging from clothing and apparel to motor vehicles, presents an extensive landscape of goods that could fall within the ambit of the proposed regulation.
Critiquing the practicality of administering a permitting process for such a diverse array of goods, the associations express skepticism about the private sector’s ability to forecast domestic supply and demand effectively. The complexity inherent in this process, they argue, could pose substantial challenges.
Distorted Competition and Supply Chain Disruptions
The trade associations further argue the potential distortion of competition that may arise from government-selected importers, a departure from established international trade norms. Moreover, the associations highlight the crucial role these goods play as intermediary inputs in the manufacturing process within Ghana, warning that the proposed measures could disrupt vital supply chains.
Concerns are also raised about the impact on franchisees who, bound by contractual obligations, may be forced to accept supplies that do not meet their established quality standards. This, in turn, could jeopardize operations and result in closures.
Lessons from Global Precedents and Trade Relations
Drawing on global examples, the associations reference consequences observed in other countries, including the creation of parallel currency markets, increased inflation, and trade evasion. They caution against the potential replication of such unintended consequences, emphasizing that Ghana possesses existing tools to address legitimate trade concerns.
Furthermore, the trade associations stress the broader implications of the proposed restrictions, expressing worry about the demonstration effect on neighboring African countries and potential strain on trade relations with key partners such as the US, UK, and the European Union.
A Plea for Reconsideration
The trade associations with an eye on Ghana’s international trade ambitions, have raised a plea for the reconsideration of the Export and Import Bill. As staunch supporters of local production, the associations underscore the need for a collaborative approach that fosters competitiveness rather than introducing potential impediments to Ghana’s economic landscape.
Read details of the statement below:
INPUT BY TRADE ASSOCIATIONS
EXPORT & IMPORT RESTRICTIONS BILL 2023
We, the undersigned trade associations in Ghana representing the interest of businesses in the manufacturing in import sectors, appreciate the opportunity to submit comments on the proposed LI “Export and Import (Restrictions on Importation of Selected Strategic Products) Regulations, 2023. We commend the Ministry of Trade and Industry for undertaking a public consultation on this proposed draft regulation, and would like to present the following comments for the Government’s consideration:
- Scope of the proposed measure. The list of 24 proposed goods minimizes the actual scope of what could be covered by the measure. Entire chapters of the Harmonized Tariff Code could be covered by categories such as clothing and apparel, iron and steel, motor vehicles (which may even extend to parts), plastics, etc. The measure could easily cover hundreds if not thousands of specific goods and tariff lines.
- The workability of administering a permitting process, including forecasting domestic supply and demand for such a wide list of goods seems very challenging for the private sector.
- We are concerned that at a fundamental level, the government would be choosing who gets to be importers into the country and that there are distortions to competition that flow from that break from international trade norms. Further, the measure does not take into account some practical aspects of international trade and how businesses plan their operations. Suppliers assess and choose who they think is qualified to serve as an authorized distributor or representative in a foreign market. A committee in Ghana selecting and limiting the importers through a permitting process would distort this natural and competitive aspect of international business.
- As manufacturers and processors, we use many of the products on the list as intermediary inputs into our production within Ghana. We have all come to appreciate the importance of supply chains during the pandemic and how critical they are to our business competitiveness and resilience. We are concerned that this measure would disrupt individual companies and industries’ supply chains for inputs. There is simply not enough domestic supply or supply at a consistent quality level to satisfy the level of needed inputs for the production of some goods and services in Ghana.
Without a clear sense of whether we will have a consistent supply of specialized plastic, oil, poultry, metal, sugar, or other input into production or packaging, we will not be able to plan and invest on time. Trying to anticipate possible quota levels, whether we would obtain a permit or not, and whether a permit would be renewed or not creates additional static for business planning in an already challenging macroeconomic environment.
- Companies that are franchisees have contractual obligations with franchisors about the use of inputs that meet certain quality standards. By restricting supply to those individuals/companies that the committee chooses to provide a permit for, local franchisees who employ thousands of Ghanaians could be forced to take supplies that they cannot even use, which can result in not meeting quality standards and closure of aspects of their operations.
- Our companies operate in multiple international markets and have had an opportunity to observe some specific unintended and far-ranging consequences from policies that have been attempted in other countries.
The World Bank outlined several consequences that flowed from measures that Nigeria took to limit imports and to regulate FOREX there. Specifically, it cited:
- a) the creation of parallel markets for currency;
- b) increased inflation for the products covered themselves and increased production costs that cascaded down to industries that were not even ones targeted for protection in the measure;
- c) trade evasion or smuggling – the World Bank estimates that there was an 18% increase in smuggling as a result of the measures. And finally,
- d) revenue losses from reduced trade. See: World Bank Document(Turning the corner: From reforms & renewed hope to results, Nigeria Development Update, December 2023).
We observe the specific example of measures imposed on sugar in Côte d’Ivoire that have resulted in distortions to the competition on the market. Licensees often took on a monopoly or semi-monopoly role and raised prices or reduced supply, especially to competitors for sale of the products as well as competitors who manufactured goods using sugar as an input.
- We would like to note, that Ghana has other tools to deal with legitimate trade concerns and there already exist multiple measures, policies, and taxes on some of the products on the list. Used clothing has been subject to a major tariff increase. Used autos are subject to various policies, including a special valuation regime and proposed inspection regime. The industry has worked with the Government regarding a range of sugar policies and taxes. Poultry is already subject to import permits. Some plastics already attract special taxes.
- As companies that seek to help realize Ghana’s goal of expanding its regional trade within Africa — especially in the context of its leadership role as host of the AfCFTA Secretariat — we are concerned about the demonstration effect of such a measure on neighboring or other African countries who may try to copy such a measure. That, in turn, would limit Ghana’s international trade opportunities and the goals of developing regional value-added chains in agro-processing, automotive, and other sectors of priority to Ghana.
- The proposed restrictions have the potential to strain trade relations and create tensions with Ghana’s key trading partners, such as the US, UK, and the European Union. Measures that restrict the flow of goods could undermine the spirit of trade partnership agreements and hinder the smooth operation of trade between Ghana and its international partners.
In short, we are local employers with a demonstrated commitment to producing in Ghana and sourcing locally for our production within Ghana where we can. A permitting committee that directs who can import and to what extent, is not a measure that we would seek as a means to increase our competitiveness. On the contrary, we can see scenarios where the resulting higher prices of production and distortions to competition could create a more challenging environment as a result.
