Trade

The promotion of Ghana's foreign trade has been central to all government plans to revive the economy since 1983. Under the ERP, export-producing industries received the most direct support; they also received the most indirect support through the improvement of their proximate infrastructure. By promoting exports, the government sought to obtain foreign exchange essential to repay debts and to ease the country's restrictions on imports. Imports, of course, are also necessary to upgrade many of the export industries hamstrung for lack of equipment. Prior to 1983, economic conditions conspired to erode the terms of trade to such an extent that Ghanaians had reverted to smuggling goods across the borders as well as to trading on the black market on a significant scale. Ghanaians who had anything to sell could multiply their earnings by selling their goods in French-speaking countries, especially neighboring Côte d'Ivoire, and then changing the resultant francs into cedis at black market rates. Smuggling cut down the amount of foreign exchange available for official transactions, leading to a reduction in imports, which hit manufacturing enterprises dependent upon imported equipment and raw materials especially hard. As a result, many consumer goods were no longer available in Ghana, which further boosted smuggling across borders of those countries where such goods could be obtained. By 1982 the World Bank estimated that transactions on the parallel, or black, market constituted 32.4 percent of all domestic trade. Since the start of the ERP in 1983, the government has introduced several policies to adjust the pattern of Ghana's trade structure. These include devaluing the currency as well as raising producer prices for crucial exports such as cocoa to offset the advantages of smuggling such goods across borders. In addition, the government introduced an interbank foreign exchange market to facilitate currency exchange. To ease the importation of essential capital goods, but not necessarily consumer goods, the government revised and reduced numerous import duties and trade taxes. By the early 1990s, government efforts had resulted in the restoration of many of Ghana's historical trade relationships. Exports were again dominated by cocoa, which earned US$280 million in 1993. Other significant export commodities in 1993 were gold (US$416 million) and timber (US$140 million), followed by electricity, diamonds, and bauxite. Ghana's nontraditional exports, such as furniture, cola nuts, and pineapples, have also increased significantly. On the import side, fuel and energy, mainly oil, accounted for 16 percent of 1990 imports; followed by capital goods, 43 percent; intermediate goods, 28 percent; and consumer goods, 10 percent, according to the World Bank. In addition to supporting traditional export industries such as cocoa and gold, the government also attempted to diversify the content of Ghana's exports. To encourage nontraditional exports in the fishing and agriculture sectors, the government offered to refund 95 percent of import duties on goods destined for reexport and even to cancel sales taxes on manufactured goods sold abroad. In addition, the government devised a scale of tax rebates ranging from 20 percent to 50 percent determined by the volume of total production that was exported. These incentives generated considerable response. By 1988 more than 700 exporters were dealing in 123 export products, the major items being pineapples, marine and fish products (especially tuna), wood products, aluminum products, and salt. By 1990, the last year for which figures were available, the value of nontraditional exports had risen to US$62 million. In 1992 the government's Ghana Export Promotion Council announced a plan to raise nontraditional exports to US$335 million by 1997 through increased market research, trade missions, trade fairs and exhibitions, and training. Among its most ambitious specific targets were increases in tuna and shrimp sales to US$45 million and US$32 million, respectively, by 1995, and increases in pineapple sales to US$12.5 million. In the manufacturing sector, wood products, aluminum goods, and processed rubber were targeted to yield US$44 million, US$42 million, and US$23 million, respectively. Earnings from salt were projected to rise to US$20 million. In the early 1990s, Ghana continued to trade primarily with the European Community, particularly Britain and Germany. Britain continued to be the principal market for Ghanaian cocoa beans, absorbing approximately 50 percent of all cocoa beans exported. In 1992, Germany was the single most important destination of Ghana's exports, accounting for some 19 percent of all exports. Britain was next, accounting for about 12 percent; followed by the United States, 9 percent; and Japan, 5 percent. The same year, Britain supplied approximately 20 percent of Ghana's imports, followed by Nigeria, which provided 11 percent. The United States and Germany were third and fourth, respectively. Ghana also belongs to the sixteen-member Economic Community of West African States (ECOWAS), founded in 1975 with headquarters in Abuja, Nigeria. ECOWAS is designed to promote the cultural, economic, and social development of its component states. To achieve these ends, ECOWAS seeks to foster regional cooperation in several areas, including removal of barriers to the movement of peoples and trade, harmonization of agricultural policies, improvements in infrastructure, and, as of 1991, renewed commitment to democratic political processes and non-aggression against member states. Ghana also has a number of barter trade agreements with several East European countries, China, and Cuba. Under the agreements, imports of goods and services are paid for mainly by cocoa from Ghana. A major change occurred in 1991 when the German Democratic Republic (GDR, or East Germany) abrogated its barter trade agreement with Ghana following the union of the two Germanies. In spite of this, agreement was reached between the two countries to honor existing commitments. In late 1991, the Ghanaian government showed renewed interest in trade with the countries of Eastern Europe following the adoption of free-market systems in the wake of political upheavals in those countries. Ghanaian trade officials expect that the barter trade system will give way to open market operations.