Assessing Ghana’s Relationship with The World Trade Organization

Introduction

The Marrakesh Agreement birthed World Trade Organization (WTO) in 1994 as replacement of
the General Agreement on Tariff and Trade (GATT) and to enhance supervision and
liberalization of global trade among its initial 124 member countries. According to Article II of
the Marrakesh Agreement, the main objective of the WTO is to provide a common institutional
framework (a rules-based system) among its Members in order to facilitate trade liberalization
and to enhance transparency and predictability in trade relations at the multilateral level.

[CITATION Swe \l 1033 ] notes that international trade prior to WOT’s establishment was
characterized by Piracy, trade barriers and financial assistance due to different trading rules.
Currently, with 164 member states, WTO has since its inception has created growth and
prosperity by effectively freeing up world trade through tariff reduction and elimination of
nontariff barriers [ CITATION Bal10 \l 1033 ]. Despite criticism against WTO of bias and
favouritism towards wealthy nations and multinational organizations to the detriment of poor
and Developing Countries, [ CITATION San15 \l 1033 ] describes WTO’s impact on members’
trade relationship, through consumption promotion and living standard enhancement as
exceptional.

Cross-border trade is not only limited to the transfer of physical goods but services, technology,
labour and disputes. WTO’s dispute resolution mechanism is the most elaborate and effective
since the history of international trade [ CITATION Zim12 \l 1033 ]. Africa is considered
among the world’s wealthiest continent in terms of natural resource, however, plays a
negligible role in global trade. [ CITATION San15 \l 1033 ] stats that African countries
constituted 27% and 35% of total WTO and developing countries membership respectively yet
contributes the least to global trade. [CITATION AYA11 \l 1033 ] attributes Africa’s poor
international trade performance to supply rigidities of natural resources and commodity price
fluctuations.

To critics of WTO, African has gained nothing as members and WTO’s unwillingness to sanction
trade facilitation programs that inures to the benefit of Africa should be the basis for Africa’s
exit and focus on developing its regional trading block. Therefore, this essay aims at assessing
the impact of WTO on Ghana’s trade.

Ghana’s Membership with the World Trade Organization

Ghana is a West-African Country with an approximate population of 28 million and Accra is the
capital city. it gained independence on March 6, 1957, from the British and known to highly
uphold and practice the dictates and principles of Democracy. Ghana is highly endowed with
mineral wealth and vegetation which constituted its main trading commodities until 2011 when
it started drilling crude in commercial quantities. Thus, despite engaging in non-traditional
exports, Ghana’s major commodities as an export-driven economy are gold, unprocessed cocoa
and timber, and crude oil but also a highly finished and semi-finished goods importer. Ghana
was a GATT member since 17 th October 1957 and automatically became WTO member in 1995,
hence part of founding member states[ CITATION Wor19 \l 1033 ]. As a member, Ghana is a
signatory to WTO’s Agreement on Import Licensing (section 3.1.8), the TBT Agreement (section
3.3.1), and the Agreements on Antidumping and on Subsidies and Countervailing Measures
(section 3.1.9) [ CITATION Wor19 \l 1033 ].

Ghana’s International Trade Policy

Aside from being a member of WTO, Ghana is also a signatory to ACP-EU Partnership
agreement which is a trade agreement the EU and Europe’s colonies in Africa numbering 46.
Again, plays an integral role in the Economic Community of West African States (ECOWAS) and
a member of the United States African Growth and Opportunity Act (AGOA) quota and duty-
free status. Ghana’s trade policy factors these agreements and pacts to the realization of
intended objectives.

In the bid to create fair and transparent import-export regime, Ghana has ratified the ECOWAS
Common Extension Tariff Regime that makes all imports from Ecowas Member states duty-free
and also ensures a universal tariff regime to boost trade. Also, the introduction of the paperless
system, single window operations and automation of business process at Ghana’s ports aims to
reduce time spent on clearing goods and comply with WTO’s Valuation Agreement.
Furthermore, to cut delays from the port, Ghana has slashed its inspection agencies from 8 to 3.

Ghana’s International Trade Trends

Ghana’s dependence on primary commodity exports since independence remains the same
despite efforts by successive governments to industrialize the economy from primary to the
secondary exporter. According to [CITATION Ani17 \l 1033 ], it is accurate to investigate the
impact of the various policies implemented by successive governments to facilitate free trade
agreements since the implementation of Economic Recovery Program (ERP) in 1883. Therefore,
a trend analysis of Ghana’s imports and exports is important.

20000 8000 Trend

18000
6000
16000

14000 4000

12000
2000

Trade Balance
Million $

10000
0
8000

6000 -2000

4000
-4000
2000

0 -6000
2015 2014 2013 2012 2011 2010

Analysis of Ghana’s Export and imports (2010-2015)

Source: [CITATION Wor191 \l 1033 ]

The figure above presents a five year (2010-2015) analysis of Ghana’s total international trade.
Ghana’s exports increased from $4,032.93 Million to $5,070.53 million from 2010 to 2011.
Since then, exports consistently grew throughout the years under review. This signifies the
positive impact of international trade on Ghana’s economic performance. According to
[ CITATION Ani17 \l 1033 ] hikes in commodity prices, Ghana’s exploration of crude oil and
increased production of cocoa accounted for the increase in export revenues. Similarly, imports
reduced from $9,057.96 million in 2010 to $6,464.8 million in 2011 but afterwards, consistently
increased at an average annual rate of 17% till it dipped to $12,787.23 million in 2015. Ghana’s
trade balance, however, remained negative but for 2014 and 2013. The above narration reflects
Ghana’s dependency on imports and over-reliance on primary exports which is subject to
commodity price fluctuations. Ghana, however, rakes in excess of $ 20 billion tax revenue
annually from its ports, used to fund budget programs[ CITATION Ins17 \l 1033 ].
4500 4219
4078 4105 4079 4154 The composition of
3986
4000
Ghana’s Trade
3500
3000
2500 2282
1938 1844
2000
1474 1415 1523
1500
1000
500
145 171 141 167 152 171 115 153 127 161 144 165
0
2013 2012 2011 2010 2009 2008

No. Of Export partners No. Of Export products

No. Of Import partners No. Of Import products
Source: [CITATION Wor191 \l 1033 ]

The figure above gives a breakdown of the composition of Ghana’s international trade for the
period 2008 to 2013. The figure also reinforces the assertion of Ghana’s over-dependence on
imports. From the figure, Ghana’s import is averagely twice its exports for the period under
review. Ghana’s import catalogue covers over 4000 goods and services compared to its
maximum export catalogue of 2282 products which is largely primary commodities. Again,
comparing Ghana’s export and import partners showed Ghana had more import trading
partners than export partners. This is findings confirms [ CITATION Bal10 \l 1033 ] assertion
that the World Trade Organization and the Breton wood Institutions have failed to address the
underpinning structural challenges of developing nations that would guarantee sustainable
economic growth. This is because primary commodity-exporting economies and import-
dependent economies are always found at the mercy of the world superpowers. [ CITATION
Ani17 \l 1033 ] identified Europeans Union as Ghana’s largest exporting partner apart from
2011 where 75% of Ghana’s crude was exported to China, followed by the United States and
the Ecowas Market.

The benefit of Ghana’s WTO Membership

All WTO members enjoy the trade environment WTO has created which eliminates barriers and
promote the easy transfer of goods and services across the globe. However, countries also
enjoy specific benefits due to their geographic location as well as signatories to various trade
agreements and pacts. Ghana specifically being an import-dependent nation benefit
significantly as WTO member and the benefits enumerated below as;
 60 0.2 Fast
16%
0.15 economic
14%
50 47.81 47.02
10% 0.1 Growth
41.94 42.79
40 38.77 0.05
36.89

0% 0
30
-5% -0.05

20 -0.1

-0.15
10
-19%
-0.2

0 -0.25
2012 2013 2014 2015 2016 2017

GDP Growth % Change

Source: Bank of Ghana, 2019

Ghana’s economic growth has been on a positive trajectory since independence largely because
of international trade but sometimes suffers from global economic meltdowns. [CITATION Alf
\l 1033 ] discussing the benefits of WTO membership, identified economic growth as the
foremost by emphasising the importance of trade between nations. He notes that WTO’s
efficient creation of a transparent trading environment has significantly minimized
protectionism and upon the frontiers of cross-border trade to the advantage of all.
[ CITATION Dzi17 \l 1033 ] identified international trade under the auspices of WTO as the
panacea not just for global economic participation but the collective growth and development
of individual member states.

The figure above presents Ghana’s Gross Domestic Value for 2012 to 2017. According to Imani
Africa (2015), Ghana’s exportation of crude oil in commercial quantities which constituted 19%
of annual exports and hikes in commodity prices pushed Ghana’s Gross Domestic Growth rate
to 14.4% and became the springboard and catalyst to Ghana’s economic fortunes.
International trade accounted for Ghana’s growth from Least Income Economy to Lower
Middle-income economy in 2008 and subsequently becoming a fully fledge Middle Income
Economy (Ministry of Finance, 2018). As presented in the figure above, the nominal value of
Ghana’s economy increased by 14% in 2013 and subsequently decreased by 19% and 5% in
2014 and 2015 respectively. Assessing Ghana’s economic performance for two years,
[ CITATION Ins17 \l 1033 ] blamed the poor economic performance on increased budget
deficit resulting from spoils of elections in 2012. This forced Ghana into a 3-year extended
credit facility program with the International Monetary fund. Furthermore, additional oil and
gas discoveries expanded Ghana’s economy by 16% and 10% in 2016 and 2017 respectively.
The impact of economic growth on the living standard of citizens is positive and this serves as
empirical evidence of benefits accruing to Ghana as a member of the WTO.

Job Creation

WTO member states accord each member Most Favoured Nation (MFN) status which implies
extending the same treatments to each other without preference. This further connotes having
lower tariff regimes for member states and eliminating to the barest minimum trade barriers.
This trade facilitation is an opportunity for developing countries like Ghana to tap into the
larger global market with its goods and services. Ghana has been always being an attractive
destination for foreign direct investment and has witness growth in that regard. By the end year
2012, Ghana foreign direct investment was estimated at $1.3 billion. This implies more job
creation which [ CITATION AYA11 \l 1033 ] asserts is the link between international trade
and poverty eradication. Again, Foreign Direct Investment in Ghana increased by 54%
compared to 2016 and increased job opportunities by 8% (IBM Database, 2017). Again,
Ghana’s Local Content Law 2013 secures enshrines local participation by requiring foreign
investors to have mandatory Ghanaian partner as a condition precedent to qualify in the
Government of Ghana Bids.

Poverty Reduction
Ghana although the developing nation has made great strides in poverty alleviation and its
human capital development owed to Ghana’s WTO membership which has impacted positively
on its economic growth and business sector expansion. The government’s ability to provide
social goods depends heavily on its ability to generate revenue through international trade. In
the view of [ CITATION Bal10 \l 1033 ] international trade improves efficient allocation of
resources by allowing for specialization of goods and services production which ultimately
benefits consumers. According to the UNDP (2018), Ghana’s Human Development Index has
increased by 30% between 1990 to 2017.

Challenges of WTO Membership in Ghana

Associated to the significant benefits Ghana gains as a member of the World Trade
Organization are impediments with the potential of derailing any gains made. First, is the
government’s inability to local industries due to lower tariffs and trade barriers that make
imports from highly efficient economies such as China, the United States and the European
Union more competitive. This impedes Governments intention of undertaking massive
industrialization under the umbrella (One District, One Factory) aimed at value addition to raw
materials. The benefits of shifting trade focus exportation of primary commodities to semi or
finished goods outweigh its cost but external pressures from development partners and trading
partners have stifled this ambition.

Also, [ CITATION Ish18 \l 1033 ] argues that developed economies benefit the most from
World Trade organization compared to developing countries. WTO fair trading platform puts
developing countries like Ghana who need trade protection to effectively diversity at a
disadvantaged position. WTO’s commitment to serving the collective interest of member states
is undisputable, however, in reality, its free trade arrangement hinders developing economies
from growing.

Conclusion
Ghana has significantly benefited from Joining the World Trade Organization such as receiving
grants from international Institutions to develop and expand its economy whiles adequately
removing barriers for international trade. However, there are constraints faced by Ghana to
effectively eliminate all trade barriers at the detriment of its local business. This has led to low
employment levels, slow GDP growth, poor allocation of resources, decrease in general income
levels of people, slow socio-economic growth, and high inflation rates as well as stifle business
growth in Ghana. In the nutshell, globalization bars the possibility of Ghana being independent
until a total shift from the traditional commodity exports.

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