EU trade deal places East Africa in a fix
The East African | 18.02.2012
EU trade deal places East Africa in a fix
The East African community is facing a tough time as the deadline for signing a new trade regime with the European Union approaches.
Former Tanzanian president Benjamin Mkapa said, there are three options on the table for EAC to choose from as the negotiations on the Economic Partnership Agreement (EPA) enter the final round next month. Option one Mr Mkapa said, is for Kenya — the region’s biggest economy — to go it alone in signing the EPA so that it can retain its preferences in flowers and fish.
“But if Kenya follows this direction, it would devastate the EAC Customs Union” he said in an interview. This is because Tanzania, Uganda, Burundi and Rwanda could refuse to open up their markets to Kenya in order to avoid EU goods flooding their markets.
Kenya relies heavily on the EU for trade, and it represents 31 per cent of its export market, especially, for cut flowers, tea, vegetables and coffee.
The second option, according to Mr Mkapa, is for the entire EAC to sign the EPA. In this case developing countries in the World Trade Organisation — which do not have to take tariff cuts in WTO trade liberalisation rounds — would have to cut their tariffs to zero for at least 80 per cent of trade with the EU. This would have far-reaching ramifications for the ability of the region to industrialise, he said.
“Given that the EU remains a major food exporter and still subsidises its agricultural sector to the tune of 60 billion Euros a year, this could shrink the size of the local markets, which small farmers in the region sell to,” Mr Mkapa explained.
The third option is for the entire region not to sign the EPA. In this case, the former head of state noted that Kenya would lose its preferences on flowers. He wondered how important this sector was, in comparison with opening up the EAC market to EU and the real threat of not being able to industrialise in the future.
If EAC decides not to sign the EPA, then Kenya stands to lose $1.2 billion annually in earnings from horticulture alone. The EU represents an important trade partner for the EAC region, with around $4.8 billion of imports from the EU — mainly oil products, medicines, machinery and mechanical equipment, cars, aircraft and electrical appliances — and around $3.18 billion of exports to the EU — mainly coffee, tea, fresh cut flowers — as per 2010 trade data.
“We in East Africa need to preserve, protect, and grow the European Union market and ensure that it works for us” said EAC Secretary General Dr Richard Sezibera.
The EPA is expected to be a WTO compatible agreement that will govern trade relations between the EAC partner states and EU member states.
The EAC Partner States are also engaged in the WTO negotiations, but unlike the EPAs, these negotiations are not co-ordinated at the regional level.
The EAC chief noted that while building on the current momentum to enhance the trade potential of the region, addressing the supply side constraints should and must take a center stage to make the EPA process more meaningful and beneficial.
“This has and will continue to be an important aspect in our negotiations” affirmed the Secretary General.
The East African Community and European Union head back to the negotiation table in March, 2012 to resolve the controversial articles, before the two trading blocs sign an EPA regime.
EAC officials say the EPA and WTO negotiations have been extremely challenging, in terms of both process and substance. prompting the need for the region to look for best approaches in the final round.
“Both EPA and WTO negotiations have become so complex that EAC partner states are expected to be analytical and make adequate preparations to participate effectively” EAC Director General of the Customs and Trade Directorate Mr. Peter Kiguta told The East African.
Mr Kiguta says that as a Customs Union, the EAC was negotiating trading arrangements as a bloc with other parties, notably the EPA, with the EU, and also the Tripartite Free Trade Area with member countries of COMESA and SADC. The EAC basically needs to ensure that the engagement of EAC Member States in trade negotiations both at the EPA and WTO level is coordinated in order to make sure that the region maximizes and benefits from these negotiations.
The EPA is expected to be a WTO compatible agreement that will govern trade relations between the EAC partner states and the EU member states.
The EAC Partner States are also engaged in the WTO negotiations, but unlike the EPAs, these negotiations are not coordinated at the regional level.
