VZCZCXRO1006
RR RUEHMA RUEHPA
DE RUEHOS #0212/01 1690650
ZNR UUUUU ZZH
R 170650Z JUN 08
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 9948
INFO RUEHUJA/AMEMBASSY ABUJA 9653
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC

UNCLAS SECTION 01 OF 03 LAGOS 000212 
 
SIPDIS 
 
COMMERCE FOR KBURRESS 
TREASURY FOR DPETERS, RHALL, RABDULRAZAK 
STATE PASS USTR FOR LISER, AGAMA 
STATE PASS OPIC FOR ZHAN, MSTUCKART, JEDWARDS 
STATE PASS TDA FOR EEBONG, DSHUSTER 
STATE PASS EXIM FOR JRICHTER 
STATE PASS USAID FOR NFREEMAN, GBERTOLIN 
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS 
USDOC FOR USPTO - PAUL SALMON 
USDOJ FOR MARIE-FLORE KOUAME 
 
E.O. 12958: N/A 
TAGS: ETRD EFIN EINV PGOV NI
 
SUBJECT: NIGERIA: EU ECONOMIC PARTNERSHIP AGREEMENT RAISES CONCERNS 
 
¶1. (U) Summary: The Manufacturers Association of Nigeria (MAN) and 
the Nigerian Economic Summit Group (NESG) held a seminar May 15-16 
to determine under what conditions Nigeria might sign the European 
Union's (EU) Economic Partnership Agreement (EPA). Manufacturers 
contend that high overhead costs, resulting from failing power and 
transportation infrastructures, make them uncompetitive globally. 
They complain the EPA, which would lower tariffs on EU imports to 
Nigeria, would only exacerbate their problems. Stakeholders 
suggested the institution of a regional EPA fund might make the EPA 
more acceptable to Nigeria.  End Summary. 
 
Manufacturers, NESG Scrutinize EPA 
---------------------------------- 
 
¶2. (U) On May 15-16, the Manufacturers Association of Nigeria (MAN), 
the Nigerian Economic Summit Group (NESG), and the UK Department for 
International Development (DFID) organized a stakeholders' forum to 
deepen the private sector's knowledge of the Economic Partnership 
Agreement (EPA) proposed by the European Union (EU).  MAN President 
Bashir Borodo said the forum was intended to give the private sector 
the opportunity to better articulate its position and to contribute 
to the formulation of a development-oriented EPA. 
 
EPA Stalemate Hurts Exporters 
----------------------------- 
 
¶3. (U) In June 2000, the EU and 77 African, Caribbean and Pacific 
(ACP) countries signed a Partnership Agreement in Cotonou to promote 
trade cooperation. To effectuate the agreement, the EU proposed an 
Economic Partnership Agreement (EPA). Despite the EU's hope for a 
conclusion of the negotiations by December 2007, talks dragged on 
largely because of West African reservations about the EPA's impact 
on regional development. The stalemate resulted in a return to the 
Generalized System of Preferences (GSP) on January 1, 2008, and the 
imposition of tariffs on some export items from Nigeria, Ivory Coast 
and Ghana. (Note: Under the Cotonou Agreement, the GSP was suspended 
during the EPA's negotiation process, and the EU and ACP countries 
agreed to maintain the Lom preferential system, which granted the 
latter unilateral preferential access to the EU market without 
reciprocation requirements, until the end of 2007.  Under the Lom 
system, ACP exporters had substantial access to EU markets, and ACP 
countries retained the ability to protect their producers from 
highly competitive EU exporters.  When the Lom IV Convention 
expired in 2001, the EU requested for a World Trade Organization 
waiver under the Cotonou Agreement for the extension of unilateral 
preferences for ACP countries to continue until the originally 
intended deadline of December 2007. End Note) Subsequently, Ivory 
Coast and Ghana opted to conclude single country interim agreements 
with the EU in December 2007. Nigeria, emboldened by revenues from 
high oil prices, preferred to wait until a regional EPA could be 
agreed upon; this caused an outcry from Nigerian export-oriented 
companies. 
 
¶4. (U) With already high overhead costs resulting from failing 
transport and power infrastructure, the higher tariffs pursuant to 
the EPA stalemate have added to the Nigerian manufacturers' costs, 
making their efforts even less competitive than those of their West 
African counterparts. The Cocoa Processors Association of Nigeria 
(COPAN) decried the EPA stalemate and claimed that higher tariffs 
have led to as much as a 20 percent production cut. COPAN said its 
members have lost 30,000 naira (USD 250) on every ton of cocoa 
exported to the EU from Nigeria since January 2008, which amounted 
to an industry-wide loss of about 585 million naira (USD 4.9 
million) in the first quarter of 2008 alone. 
 
Zero Tariffs: Hurt Manufacturers and Macroeconomy 
--------------------------------------------- ---- 
 
¶5. (U) Nigerian manufacturers claim the elimination of duties and 
trade restrictive measures on at least 80 percent of goods from the 
EU, as proposed in the EPA, would kill Nigerian industries.  Ken 
Ukaoha, President of the National Association of Nigerian Traders 
and member of the ECOWAS EPA negotiating team, also contended that 
placing zero tariffs on goods entering Nigeria from the EU will 
 
LAGOS 00000212  002 OF 003 
 
 
result in a huge loss of tariff income for the Government of Nigeria 
(GON) and an unrestricted influx of goods into an already flooded 
market.  Ukaoha believes this will have macroeconomic consequences 
ranging from a hike in interest, exchange and inflation rates to a 
surge in unemployment. 
 
Few Exports, Little Benefit to Nigeria from EPA 
--------------------------------------------- -- 
 
¶6. (U) Nigeria and other West African countries manufacture too few 
goods to take advantage of the zero tariffs on their exports to the 
EU under the EPA, shareholders claimed. The EPA proposes that 100 of 
ECOWAS goods could enter the EU duty free while only 80 percent of 
EU goods could enter ECOWAS duty free.  Even with this asymmetric 
market access arrangement, Ukaoha believes the EU would derive more 
benefit from the partnership than the ECOWAS countries. Unrestricted 
market access is more beneficial for the EU because it has more 
finished goods to export to ECOWAS countries where demand for such 
goods is already high, he said. 
 
EPA Could Cause MNC Factories to Close 
-------------------------------------- 
 
¶7. (U) Dr. Aremu, CEO of Market Link Consults, stressed that most 
multinational corporations (MNCs) established a physical presence in 
Nigeria to avoid paying the Government of Nigeria (GON) high tariffs 
on their goods.  The zero tariff provision in the EPA, if 
implemented, would obviate the need for European MNCs to locate in 
Nigeria.  Aremu predicted some MNCs may even be compelled to close 
down their existing West African factories, a move that would result 
in massive job losses. 
 
EPA Could Increase Smuggling into Nigeria 
----------------------------------------- 
 
¶8. (U) A representative of the Nigerian Customs Service said the 
single country interim agreements between the EU and Ghana and Ivory 
Coast, which are expected to be signed in June 2008, could lead to 
an increase in the smuggling of zero tariff EU goods into Nigeria 
from these countries.  Should other West African countries sign the 
EPA without Nigeria, smuggling activities and the dumping of goods 
might increase even more, he forewarned. 
 
Regional EPA Fund Could Promote EPA 
------------------------------------------ 
 
¶9. (U) Chibuzon Nwoke of the Nigerian Institute of International 
Affairs (NIIA) said the onus is on the EU to improve benefits for 
ECOWAS countries under the EPA since they are the junior partner in 
the arrangement.  He stressed the need to shift the EPA's focus from 
trade-for-trade to trade-for-development.  He advocated the 
inclusion of initiatives that would help reduce poverty, promote the 
sustainable development of West African countries, and facilitate 
their gradual integration into world trade.  The implementation of a 
fund to support export development and compensate West African 
countries' for the loss of tariff revenue, employment, and 
production arising from adoption of the EPA would improve the EPA's 
chance at success, Nwoke said. 
 
West Africa Should Use EPA to Guide Development 
--------------------------------------------- -- 
 
¶10. (U) Professor Mike Kwanashie of the University of Zaria implored 
Nigeria and ECOWAS to use the EPA as a roadmap to develop and become 
more competitive in global trade.  Governments should study the 
EPA's impact on each sector of their economies and assess the 
available local capacity in those sectors before deciding on the 
extent of openness to offer the EU, he urged. 
 
¶11. (U) Comment: Because Nigerian companies are not internationally 
competitive, Nigerian manufacturers are concerned that dropping 
tariffs would hurt them, a familiar refrain as well in US-Nigeria 
negotiations on tariff reductions and import bans. End comment. 
 
 
LAGOS 00000212  003 OF 003 
 
 
¶12. (U) This cable has been cleared by Embassy Abuja. 
 
Hudson