East Africa: European MPs back deadline extension of EPA trade deal with EAC
All Africa | 22 July 2016
East Africa: European MPs back deadline extension of EPA trade deal with EAC
By Edwin Okoth
Members of the European Parliament are rooting for the extension the October deadline to sign the comprehensive Economic Partnership Agreement (EPA) between East African Community (EAC) and the EU.
The MPs said the move is meant to salvage Kenya after Tanzania and Burundi stood in the way to the realisation of the deal set to give relief from heavy taxes for the country’s exports to the EU.Tanzania has refused to sign the agreement while Burundi is at the verge of being sanctioned by the European Union following political instability in the country.EU chair of a joint delegation of Trade and Development Committee Bernd Lange attending the 14th United Nations Conference on Trade and Development in Nairobi said Kenya would be the biggest casualty should the two scenarios persist and the EPA is not signed hence the need to save the situation"Our first proposal is to have the October 1st deadline extended to allow for more time and see whether Tanzania will agree to sign or if Burundi will improve her democratic situation and evade sanction from the European Union. "If none of these happen then I expect that Kenya will apply for the GSP plus and when it is received then we can begin the market access regulations and save Kenya," Mr Lange said.The Generalised System of Preferences (GSP) Plus status will allow Kenya to continue exporting at the current preference terms even if the two countries fail to sort out their issues standing in between the region and a lucrative agreement to one of the world’s largest market.
The scenario now leaves Kenya with a huge headache of dealing with political squabbles of one neigbour as well as convincing another to sign an agreement which they do not have interest in as at now.LDC STATUSKenya is the only country among the East African partners not considered a Least Developed Country (LDC) hence has to depend on the agreement or risk preferential treatment in the lucrative EU market.European parliament member Marie Arena said the EAC countries needed to agree on having a structured agreement without leave any of them out."The question now is now is not even the details of the agreement but the timeliness and the countries really need to do that this August because as EU parliament, we have no control on sanctions to Burundi or convincing Tanzania to sign the agreement. "Kenya and other members can do that better so that we have a smooth signing sail in this agreement," Ms Arena said.Under the trade deal, EU would be granted unlimited market access to Kenya for the next two and half decades. Kenya will also enjoy the exemption from the 8 -12 per cent taxes while selling goods to the EU market.UNCOMPETITIVE PRODUCTSShould the deal flop, these taxes will hurt Kenyan exports by making them uncompetitive, forcing exporters to offer up to Sh600 million every month in cumulative discounts to buyers to be at par with the other sellers.A failure will also hurt one of Kenya’s engines of economic growth - agriculture. Close to 90 per cent of the country’s exports to EU are agricultural, agro-processed and manufactured products. The scenario might also spell doom for more than 600,000 workers mainly in the flower farms and fresh food producers.
It is not the first time Tanzania has been a hurdle in the signing of the EPA. In 2014, Kenya suffered a setback after Tanzania refused to sign the pact that East African delegates negotiated in Brussels. Tanzania now says it is resisting the pact due to strict EU market access conditions.Such non-tariff measures have been cited by a report released by UNCTAD to cost developing countries up to Sh230 billion per year. The amounts equal 10 per cent of their exports to the G20 countries.The South Africa Development Community signed a similar pact but included in the negotiations that the signing can be done even if one member opts out. The European Union in 2013 granted the GSP Plus status to Pakistan, giving the country a duty-free access to the European market.The GSP Plus status only allowed 20 per cent of Pakistani exports to enter the EU market at zero tariffs and 70 per cent at preferential rates meaning Kenya may not enjoy full zero taxes in the GSP deal if it chooses to go it alone.Trade and Industrialisation Cabinet Secretary Adan Mohamed said Tanzania risks falling in the same trap Kenya is in when it attains the middle-income status in the next two years.
