Implementation of economic agreements: Expert says trade deals to boost Cameroon’s economy.

Cameroon has ratified a trade agreement with the European Union, EU, called the Economic Partnership Agreement, EPA, coupled with the African Continental Free Trade Area, AfCFTA, signed in 2018. 

The expert, who is also the Founder and Chief Executive Officer, CEO, of Cameroon Economic Policy Institute, CEPI, posited that the AfCFTA represents a major economic development opportunity for African countries in general and Cameroon in particular. 

“The AfCFTA eliminates customs duties on 90% of goods produced on the continent, tackles non-tariff barriers to trade and guarantees the free movement of people. World Bank reports show that the AfCFTA could lift 50 million people out of extreme poverty by 2035 and increase incomes across Africa by $571 billion,” Kouam told this reporter.

He further noted that a large part of these gains would result from the liberalization of trade within the continent. 

Citing a flagship report published by CEPI, which quantifies the impact of the AfCFTA and the EPA, the economic analyst enumerated a number benefits of these trade agreements. 

Regarding economic growth, the expert averred that when both trade agreements are applied, Cameroon’s Gross Domestic Product, GDP, will increase from about US$918.93 million in 2020 to US$1,102.29 million by 2030, representing GDP growth rates from 2.40% to 2.45%.

He continued that exportation of agricultural products from Cameroon to the EU is anticipated to increase by US$6.55 million by the year 2030 with the industrial sector set to record the highest impact. 

“This is because, Cameroon exports industrial commodities more to the EU (32.7% for industry against 15.8% for agriculture). On the other hand, exports from private services decrease, albeit slightly by US$0.01 million,” he speculated. 

He, however, said Cameroon’s exports toward other African nations are not affected under the EPAs even though a 43.3% of its agricultural products against only 8.0% of its industrial products are sold in African. 

He further argued that domestic demand will increase under the EPAs with 0.01% for agricultural products, 0.59% for industrial products and 0.03% for services provided.

He indicated that the latter outcome is opposed to that of AfCFTA, which will negatively impact domestic demand.

“Cameroon will be subject to cheap products from other African countries. Even though EPAs were precisely criticized by the national and international community to fragilize industries (namely infant industries), they do not really negatively affect domestic demand,” he declared.

While mentioning that AfCFTA negatively affect domestic demand, Kouam pointed that the CEPI report shows that demand for services will increase by 49.84%. 

“This result brings to our attention the fact with AfCFTA, Cameroon being open to the rest of African countries, its inhabitants will shift their demand curve toward the other countries according to their preferences (agricultural or industrial commodities) but their behaviour towards local services will be enhanced,” he said. 

Impact on wages

According to the economic consultant, under the EPAs, wages in Cameroon will go up in the agricultural sector but drop in the industrial and services sectors.

He argued that both skilled and unskilled workers will see their wages fall from 0.12% in 2020 to 0.05% by 2030.

“With these prices falling, households would increase their consumption. Unfortunately, we note that only the consumption of industrial commodities increases under the EPAs scenario with an increase rate of 0.13%, and those of agricultural and services sectors being set to -0.04% and 0.08% respectively,” Kouam told The Guardian Post.

Due to the competitiveness of European firms, the economic consultant hinted that Cameroonian firms will see their profits suffer as greater competition will lower demand for their products. 

“The availability of European products in supermarkets equally make it easier for Cameroonians to access them versus Cameroon products,” he added. 

“It is usually asserted that free trade causes investment to rise. In the case of the AfCFTA and the EPA, investment rises by 1.60% in agriculture, 2.14% in industry and 1.30% in services respectively by 2030,” he pinpointed. 

Kouam also illustrated that profits in the agriculture sector will increase by US$31.63 million, US$183.07 million in industry and, US$617.82 million in services respectively. 

Recommendations 

The expert the recommended that all payments at Cameroon’s ports should be urgently digitized to put an end to corruption. 

He also called for greater efforts to be made in sensitizing, educating and informing business persons on trade procedures and for government to continue business friendly reforms in order to support the sector. 

He equally emphasised on the need for more investment in research and development as well as employee training to be tax deductible to boost the productive capacity of businesses and accelerate innovation. 

This article was first published in The Guardian Post Edition No:3247 of Wednesday October 02, 2024