… The relationship between prosperity and the imperfect contemporary implementation of a Free Trade Agreement
By Eugene Nweke
In my global trade review last quarter release of October, 2018, I did release issues and concerns having gone through the proposed Africa Continental Free Trade Agreement (AfCTA). With this imbalance between enforceable standards related to trade and none for labor, investment will conveniently move in the direction of countries where workers operate their local Industries before the introduction of Trade Liberalization Scheme.
Lessons, concerns from the past implementation of Trade Liberalization Agreements:
During the ECOWAS Trade Liberalization Scheme (ETLS) renegotiation in 2011, I posited the following to guide the representatives to the negotiation:
- If free trade agreements are not adequately structured and monitored to meet local peculiarities, it opens a window for the further flooding of the markets overt with substandard, counterfeit and fake products produced offshores that compromised quality standards, production process and labor best practices – resultantly, it leads to disastrous prices falling, making the locals unfits and unable to compete with such offshore products.
- Government has the constitutional obligation to protect, support and encourage the commoners in their respective small or medium scale business interests.
- Farming and farmers constitute and are critical sectors that require serious protection against any threatening foreign trusts such as entering into a trade agreements. Naturally, where the benefits of a trade agreement are not adequately communicated, fears and doubts are being entertained.
- Eventually such alluded fears mushrooms into widespread public agitation against artificially raised prices thereby limiting the opportunities and interests of the struggling farmers/small scale companies.
- To this end, Government must streamline regulatory agencies’ obligations to guard against duplication and wasteful competitions so that each industry maintains a supply value chain that could keep prices down and prevail against offshore rival which the agreement implementation will throw up.
- In view of the above, thousands of small, medium and large companies that could not withstand the unregulated substandard foreign products price environment nor foresee hope to survive will steadily close up voluntarily, except in rare cases rescued or reacquired by the commercial banks or taken over by other firms.
- There is therefore the need to redefine the Nigeria industrial fabric. Government should shield small business and major businesses from the monopolies and excess of “international robber baron and their national allies aka malefactors of great wealth (indigenous cum foreign conglomerates) who exploits the political fabric, ply and by proxy penetrates international bodies to do their business biddings through the trade or treaties agreements.
- At present, Nigeria trading environment is already caught up with fragile, over leveraged structures created by the robber barons as a result tumbling down, erasing the life savings (no thanks to capital flights and inflation) of thousands of small investors; as most of the robber barons or malefactors operates and parades themselves as above laws in a weak regulatory environment.
- Deliberate efforts must be deployed to weigh the impacts of overzealous production by factories/firms owners who desire to gain entry into the local market with ulterior motives, to avoid massive economic reversal that will results to financial depression.
- Caution must be taken, mostly in the face of increasing unemployment and poverty rate and societal ills, business owners are no longer the high priest of prosperity, rather they are pariahs whose evil speculation is transferring the Nigeria dreams into nightmares on account of greed, compromise and corruption.
- As referenced in 1 above, the cutthroat competition styles and intent of participants to the free trade regime is often driven by deliberate connivance and plotting to enslave the commoners and belabouring the local traders. They initially sale their substandard products at prices far below any competitive pricing range in order to dwarf and drive the locals uncompetitive and over the brink, once they succeeds, gradually, they recoup their perceived losses by raising production prices having monopolize the market and garnered customers on their side.
- Going forward, Government should uphold and exhibit a high degree of centralized economic planning and commitment to business intervention as prompt as possible. Often, the driving force behind free trade is to weaken the customs imports and exports tariff/valuation of developing countries, an indirect way of seeking for a lenient tax regime in the international trade supply chain.
- It is on record that, the free trade agreements propagandist pushes more on what they believe should be the right to produce (a subtle songs of intent while singing aloud the songs of Free Trade).
- An implementing agency must consider such variables as critical component that cushions the population factor, the faster the population increases more than the supply of goods available for their needs, which subdues living standards to sustainable level.
- Market forces are expected to be driving factor to product price and demand, but free trade put pressure on local trading interest, as such implementing agencies should evolve the basis for what constitutes “competitive cost and selling price” without undue pressure from the foreign interests whose sole aim is to weaken or suppress its interests.
- In order to harness the national commercial/economic potentials from a given trade agreement, implementing agencies should collaborate with a specialized and experienced agency with the capacity to moderating and protecting the interests of the Nigerian Shippers.
- On a note of national reflection, let me share the ancient reasoning on trade inequality and unlevelled playing field:
The power of old world was human power; everything depended ultimately upon the driving power of human muscles, the muscle of ignorant subjugated men. This was a joyless situation, other than emancipation expected by the machine age and the expected increase trading competition.
The mills had no need of skilled workers who became destitute or accepted the degradation of a factory job where they were broken in status from respected craftsman to anonymous industrial peasants. The mills paid a good wage by the standards of unskilled labour but one still too low to allow a man to support his family.
Finally, is to pose this important question to the government:
a). How competitively ready and prepared is the Nigeria manufacturing, farming, trade and services industry?
b). Has the government created an enabling environment for effective industry competition?.
c). How effective is our product quality assessment and conformity standards and trade practices and pricing regulatory agencies?
d). Are the new factors of production readily available? Do our various industries enjoy adequate and prompt public energy supplies to power productions?
e). Can our labour policy withstand a competitive industry practices?
f). Has the government taking adequate consideration and measures with regards to unemployment and security concerns?
Trade Agreement is not aimed to satisfy the business interests of foreign nations and their nationals but to carter for the well beings of the nations and citizens. Don’t compromise local economic development and potentials. Let us look at the ECOWAS Trade Liberalization Scheme with a deeper concern.
NOTE: Unfortunately, almost all that was enumerated above played out in the ETLS implementation. ETLS implementation in almost past ten years opened our economy to smuggling, capital flights, inflation, influx of substandard and counterfeit products, insecurities threats, etc.
Beyond AFCFTA implementation – Clarification, Focus and Concerns:
From the perspective of a professional freight forwarding practitioners, having revisited the AFCTA, enough time was taken to study the following trade agreements, the implementation and reported thereof;
a). North American Free Trade Agreements – NAFTA.
b). Nanking Treaty.
c). Trade Related Intellectual Property Rights Agreements – TRIPS.
d). Trade Related Investment Measures Agreements – TRIMS.
e). General Agreements On Trade In Services – GATS.
f). General Agreements On Tariff and Trades – GATTs.
g). Transnational Corporations Agreements – TNC.
h). Multilateral Investment Agreements – MIA, etc.
I will for the sake of national interests plead with the steering implementation committee not to lose sight in the following trade economic concerns; time may not permit for details explanations.
However, the emphasis is that Nigeria participation in AFCFTA, the steering implementation committee should for the benefits of the listed concerns and for the sake of national growth may recall that in an ideal trading environment, trade agreements considers the importance of negotiating tools such as: Local Content Requirements( where TNCs are required to buy more than a certain share of inputs from local producers), Export Requirements (where they are forced to export more than a certain proportion of their output) and Foreign Exchange Balancing Requirements(where they are required to export at least as much as they import):
a). The pros and cons of protecting infant industry in agriculture.
b). The pros and cons of Import Substitution Industrialization – ISI.
c). The pros and cons of Intellectual Property Rights – IPR, counterfeit goods, patent rights.
d). The laws and convention with respect to foreign exchange control.
e). Comparative free market policies, bureaucratic competence and development.
f). Develop measuring indicators for growth rates and expense protecting foreign interests in a free trade agreements regime.
g). Reassess our Heavy and Chemical Industrialization – HCI program.
h). Review the controlling stakes, especially aggressive protection on the following industries: dairy, garment, cotton and other farming, electronics, electrical, pharmaceutical, mining, plastics etc.
I). Revisit the effects of trade liberalization on government revenue and export production quality standards.
j). Raise a mechanism to identify Government Linked Company – GLC in relation to Capital flights and inflation practices.
k). Evaluate the technological development and technologies protection flow in relation to essential services and value chain system inherent.
l). Pencil down possible brown field and green field investment consideration.
m). Highlight Time Scale, evolve collective investment funds and balancing interests.
n). Weigh the effects of prevailing deregulation and corruption inherent.
O) Collaborate with the Natural Resources and Standards of Living Agency or Commission to measure the yearly Consumer Protection Index – CPU.
p). Measuring Manufacturing Output, listing ways of regulatory
q). Stating conditions for accepting policy summersault, nullification crisis, etc.
r). Stating conditions governing national monopolies, unhealthy competition and transfer pricing structures.
s). Set up mechanism for improving monitoring performances between service and manufacturing economy, etc.
t) Develop tool for constant monitoring of microeconomics policies, etc.
u). Set conditions for Special and Deferential Treatment – SDT application where necessary.
Notes: 1). Premature opening or exposing of the economy to free trading activities without having in place a well-developed and well supervised financial sectors, good regulatory institutions and sound macroeconomic policies can hurt a country by making the structure of the inflows unfavorable and by making the country vulnerable to sudden stops or reversal of flow.
2). Allowing easier parallel imports may result in some reverse inflow of cheap products from other developing countries before the end of Intellectual Property Right IPR (incubation) life.
- Price stability is of course an important part of overall economic stability but the stabilities in output and employment are also important.
Finally, the implementation committee should embrace this task from a larger perspective of national economic development and protection. Most of the concerns express and noted above may not apply if the committee chooses to limit its assignments within the windows of the agreements, such resolution may not inject the needed tunics to drive the process for national well beings.
I wish the Implementation committee members well in this herculean tasks ahead. Always remember the lives of millions of Nigerians have been entrusted into your hands. It is my desire that you find this modest a complementary working tool.
May God bless the Federal Republic of Nigeria.
Dr. Eugene Nweke.
Sea Empowerment and Research Center – RGT,
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