72596 v1 World Trade Indicators 2009/10 Ghana Trade Brief Trade Policy External Environment As a member of the Economic Community of West As judged by its Market Access TTRI2 including African States (ECOWAS), Ghana adopted the preferences of 3.1 percent, Ghana’s exports face a group’s Common External Tariff (CET) in 2008. The relatively favorable trading environment, compared to country’s current MFN Tariff Trade Restrictiveness the averages of 3.9 percent for SSA and 5.6 percent Index (TTRI)1 of 9.0 percent is below both the Sub- for low-income countries. Also reflecting its favorable Saharan Africa (SSA) and low-income country group market access, the weighted average rest of the world averages of 11.3 percent and 11.6 percent, respectively, tariff, including preferences, faced by the country’s reflecting a relatively more open trade regime. It ranks exports is low at 0.5 percent, with agricultural and 89th of 125 countries (where 1st is least restrictive). The non-agricultural exports facing similar tariff barriers agricultural sector, in particular the cocoa sector, is the (0.6 percent and 0.4 percent, respectively). A large driving sector of Ghana’s economy, and as such, current-account deficit due to high prices of fuel agricultural products are given a high level of tariff imports and demand for capital imports caused the protection at 14.8 percent compared to the tariff Ghanaian cedi, which was redenominated in 2007 (one protection of 8.1 percent for the non-agricultural new Ghanaian cedi is equivalent to 10,000 old sector, with cocoa and cocoa products being subject to Ghanaian cedis) to lose value in 2008. The the country’s maximum MFN tariff. With the depreciation of the cedi also resulted from a large adoption of the ECOWAS CET, this maximum MFN contraction of the financial account surplus which applied tariff (excluding alcohol and tobacco) was 20 suffered from the sudden closure of access to financial percent, whereas in the mid-2000s it was well over 200 markets and some liquidation of foreign investors’ percent. However, the ECOWAS CET was revised in assets. The cedi depreciated by 2.5 percent in real, June 2009 to include a fifth band of 35 percent, trade-weighted terms in 2008, making the country’s primarily at the behest of Nigeria. Ghana’s average exports more competitive. MFN applied tariff has also remained stable over the past couple of years at 13 percent. The country’s trade Ghana initialed an interim Economic Partnership policy space, as measured by the wedge between Agreement (EPA) with the EU at the end of 2007 bound and applied tariffs (the overhang), is 76.3 which extended its preferences to the EU market percent. Regarding its commitment to services trade under the Cotonou Agreement, which were due to liberalization, Ghana ranks 84th out of 148 countries expire in December 2007, but has not yet signed the on the GATS Commitments Index. agreement. Together with the other members of the ECOWAS, the country is currently in negotiations to Import duties on rice, wheat, yellow corn, and sign a comprehensive EPA with the EU. vegetable oil were suspended in 2008 when global food prices were rising but these duties have now been reinstated. Behind the Border Constraints Ghana’s position on the Ease of Doing Business Index, which ranks the business environment of 183 Unless otherwise indicated, all data are as of August 2009 countries, dropped slightly to 92nd in 2009 from 87th in and are drawn from the World Trade Indicators 2009/10 2008. Reflecting significant improvements in its Database. The database, Country Trade Briefs and business environment, Ghana earned a position on the Trade-at-a-Glance Tables, are available at top 10 reformers list for the 2007 Ease of Doing http://www.worldbank.org/wti. Business Index when it improved its ranking from 109th out of 178 countries in 2006 to 82nd out of 181 If using information from this brief, please provide the countries in 2007. With respect to the extent of trade following source citation: World Bank. 2010. ―Ghana facilitation in the country, Ghana does not fare well, Trade Brief.‖ World Trade Indicators 2009/10: Country Trade with a score of 2.16 out of 5 on the Logistics Briefs. Washington, DC: World Bank. Available at Performance Index (LPI), lagging behind the SSA http://www.worldbank.org/wti. World Trade Indicators 2009/10 Ghana Trade Brief (2.35) and low-income country (2.29) averages. Among cocoa production was driven up by an increase in the the LPI subcategories, the country is doing well in domestic producer price paid by the government.3 ensuring the timeliness of shipments in reaching their Goods exports growth is however expected to decline destination but it needs to significantly improve the sharply to 2.1 percent in 2009, and in the first half of competence of the local logistics industry. 2009 recorded a growth of 5.6 percent. Although tourism was boosted by several major sporting and Trade finance would be boosted by recently cultural events in the country, including the African established requirements that commercial banks raise Cup of Nations football tournament, services exports their capital reserves from 7 million cedis to 60 million growth is estimated to have slowed down from 31.2 cedis (by 2010 for foreign banks and by 2012 for local percent in 2007 to 6.5 percent in 2008, and this banks) to reduce banking sector risks and encourage downward trend is expected to continue in 2009 with mergers. Trade finance would also be helped by the a projected growth rate of 3.7 percent. However, successful completion of the (ongoing since 2005) imports of goods recorded a steep decline in the first merger of Eximguaranty Company Ghana Limited half of 2009 contracting by 19.4 percent. (which provides guarantees and insurance) and Export Finance Company Limited (which provides trade An emerging market, FDI flows into Ghana have been credits) to create a one-stop shop for trade finance, increasing over the past few years, rising from an with a special focus on small and medium enterprises average of 1.8 percent of exports during 2000–05 to (SMEs). 6.5 percent of GDP in 2007, although these flows are expected to decrease due to the tightening of global credit. Following the recent discovery of oil reserves, Trade Outcomes the country is also expected to start exporting oil in late 2010 or 2011. Despite the global recession, Ghana managed to register robust real (in constant 2000 U.S. dollars) trade growth of 7.4 percent in 2008, only marginally Notes lower than the average real growth rate of 7.9 percent over the 2005–07 period, although growth is expected 1. TTRI calculates the equivalent uniform tariff that to slow down to 0.3 percent in 2009 as the country would keep domestic welfare constant. It is weighted by begins to feel the effects of the recession. The growth import shares and import demand elasticity. in trade in 2008 was primarily driven by imports which 2. MA-TTRI calculates the equivalent uniform tariff of maintained their 8.9 percent growth rate, while export trading partners that would keep their level of imports growth decelerated from 7.4 percent during 2005–07 constant. It is weighted by import values and import to 4.7 percent in 2008. Export growth is projected to demand elasticities of trading partners. continue to decelerate in 2009 to 3.2 percent, while 3. African Economic Outlook, 2009. imports are expected to fall by 1.3 percent, hurt by the global economic downturn which is likely to reduce foreign investment and hence demand for capital References imports. African Economic Outlook. 2009. ―Ghana.‖ African Economic Outlook. May 27, 2009. In nominal terms, trade growth of goods and services Europa. 2009. ―EU and West Africa Move Forward on remained stable at an estimated rate of 23.2 percent in Regional Economic Partnership Agreement.‖ 2008, driven by strong performance in both exports and imports which both maintained stable growth Europa. June 17, 2009. rates of 23.8 percent and 22.9 percent, respectively. Food and Agriculture Organization of the United The country’s trade value, which has consistently been Nations (FAO). 2008. ―Policy Measures Taken by over 100 percent of GDP in the past few years, was Governments to Reduce the Impact of Soaring 142 percent of GDP in 2008. Goods exports increased Prices—Africa—Ghana. FAO, New York. by an estimated 29.8 percent in 2008, compared to 12 The Economist Intelligence Unit (EIU). 2009. Country percent in 2007, primarily as a result of the increase in Report—Ghana. EIU. June 2009. the production of gold and cocoa, the country’s Office of the United States Trade Representative. 2009. dominant exports. Gold production was boosted by ―Ghana.‖ . Ghana Trade Brief World Trade Indicators 2009/10 Reuters. 2007. ―West Africa Bloc Aims for EU Trade Deal by June '09.‖ Reuters. December 17, 2007. World Trade Organization (WTO). 2008. Trade Policy Review—Ghana. WTO. May 7, 2008. .