Several prominent trade associations in Ghana, representing businesses in the manufacturing and import sectors, have submitted comments regarding the proposed LI “Export and Import (Restrictions on Importation of Selected Strategic Products) Regulations, 2023.
These associations have commended the Ministry of Trade and Industry for initiating a public consultation on the draft regulation but have expressed significant concerns that warrant government’s attention.
One major concern highlighted by the trade associations is the scope of the proposed measure. While the list includes 24 goods, it is noted that numerous categories, such as clothing, iron and steel, motor vehicles, plastics, etc., could be potentially affected.
This broad scope could encompass hundreds, if not thousands, of specific goods and tariff lines, posing significant challenges for both administration and forecasting domestic supply and demand.
Moreover, the trade associations are apprehensive about the workability of administering a permitting process for such a wide range of goods. They argue that this could lead to distortions in competition, as the government would effectively be choosing who gets to import into the country, deviating from international trade norms. Additionally, the measure overlooks practical aspects of international trade, disrupting the natural and competitive selection process of suppliers and authorized distributors.
Furthermore, as manufacturers and processors heavily reliant on imported intermediary inputs, the trade associations emphasize the importance of supply chains for business competitiveness and resilience.
They express concerns that the proposed measure could disrupt supply chains, leading to inconsistencies in the availability and quality of inputs for production within Ghana. This uncertainty hampers business planning and investment in an already challenging macroeconomic environment.
Another critical issue raised pertains to franchise companies, which have contractual obligations regarding the quality standards of inputs. Restricting supply based on permits issued by a committee could force local franchisees to accept unsuitable supplies, jeopardizing their operations and ability to meet quality standards.
The trade associations drew attention to the potential unintended consequences of such regulations, citing experiences from other countries where similar policies have had far-reaching impacts.
Repercussions Stemming from Nigeria’s Initiatives to Restrict Imports
Meanwhile, the associations cited the World Bank which highlighted several repercussions stemming from Nigeria’s initiatives to restrict imports and regulate foreign exchange. These consequences include the emergence of parallel currency markets, heightened inflation for affected products, increased production costs extending to industries not initially targeted, and a surge in trade evasion or smuggling, estimated at 18% as a direct result of the measures.
Moreover, there were revenue losses due to reduced trade, as outlined in the World Bank document “Turning the corner: From reforms & renewed hope to results, Nigeria Development Update, December 2023.”
Drawing from the specific case of sugar regulations in Côte d’Ivoire, Ghana observes how such measures can distort market competition. Licensees often monopolize or semi-monopolize the market, leading to price hikes or supply reductions, particularly for competitors selling sugar-related products or using sugar as an input in manufacturing.
It’s important to acknowledge that Ghana possesses alternative tools to address legitimate trade concerns, with existing measures, policies, and taxes already in place for some of the products listed. For instance, significant tariff increases have been imposed on used clothing, while used autos are subject to various policies, including special valuation and proposed inspection regimes.
Collaboration with the Government has addressed numerous sugar-related policies and taxes, while poultry imports already require permits. Additionally, certain plastics are subject to special taxes.
As companies dedicated to advancing Ghana’s regional trade ambitions within Africa, especially with its pivotal role as the host of the AfCFTA Secretariat, we are wary of the potential influence such measures may have on neighboring or other African countries.
Emulating such policies could curtail Ghana’s international trade opportunities and impede efforts to develop regional value-added chains in priority sectors like agro-processing and automotive.
Moreover, the proposed restrictions risk straining trade relations and provoking tensions with key trading partners such as the US, UK, and the European Union. Measures that impede the flow of goods may undermine the spirit of trade partnership agreements and disrupt the smooth functioning of trade between Ghana and its international counterparts.
In essence, “as local employers committed to manufacturing in Ghana and sourcing locally whenever possible, we oppose the establishment of a permitting committee to dictate importation terms and quantities. Such measures could potentially inflate production costs and distort competition, creating a more challenging business environment instead of enhancing competitiveness”.
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