Kenya’s dilemma at EU trade talks
The Standard, Kenya
Kenya’s dilemma at EU trade talks
26 March 2012
By Luke Anami in Brussels
Revelations that Kenyan flowers will be subjected to 16 per cent duty should Kenya fail to ratify Economic Partnership Agreements (EPAs) by June raises concern about their role in boosting trade on the continent.
Kenya is among the 79 African, Caribbean and Pacific (ACP) countries engaged in negotiations with the European Union (EU) that will allow exports preferential access to European markets. Kenya is negotiating for a new deal under the East African Community (EAC) banner.
The EU-EAC negotiations, which stalled in 2007 have dragged since then, with EU preferring to negotiate with individual EAC member countries, a move Kenya is resisting.
Kenya stands to lose heavily if a new EPA deal is sealed because the rest of the EAC partner - Tanzania, Uganda, Rwanda and Burundi - enjoy the Least Developed Country status, earning their goods free access to Europe. Kenya is not listed as an LDC.
"EPAs are key components of the Cotonou Agreement whose purpose is to increase exports of ACP countries to the EU. The agreements are expected to support the agriculture sector and trade, but so far they have not achieved much," said Musikari Kombo, who was last year elected President of the ACP Joint Parliamentary Group for two years.
Noble idea
Kombo said EPAs seem to have renegaded on this noble idea by introducing new conditions that make it difficult for African countries - including Kenya - to benefit as envisaged under the Lome and Cotonou Agreements.
"EU insists that Kenya is not a member of the Least Developed Countries (LDCs) like Tanzania, Uganda, Rwanda and Burundi, hence she should negotiate the trade deal alone. If you force Kenya to sign because it is not an LDC, the move is going to thwart regional integration."
European countries championed the need for trade relationships when they let free their former colonies. Hence, negotiations that culminated into EPAs begun 40 years ago when the two groups (EU and ACP) came into existence.
EPAs are important as they lay the rules of trade between Europe and mostly former British and French colonies over a long period of time and affect the livelihood of millions of people.
EPAs are intended to reformulate the trade preferences accorded to the ACP countries under the Lome-Cotonou agreements to make them compatible with World Trade Organisation rules as well as more effective in promoting ACP-EU trade and more supportive of African regional integration and broader development goals.
Regional integration initiatives enable ACP countries to benefit from economies of scale, attract investment, make feasible joint infrastructure and industrial development projects, among other benefits that would be foregone under the EPAs deals.
Kombo, who presided over a coordination meeting between the African members of the ACP Parliamentary Assembly and the African Group of ambassadors last week in Brussels, Belgium, called on the EU to continue negotiating the EPAs deal under the EAC banner.
Of the 79 ACP states, 18 have ratified full EPAs, while 18 have signed partial agreements.
While there is urgency to negotiate EPAs, Kombo sees the deal benefitting Europe more than it does to Kenya.
Under EPAs arrangement, ACP countries will need to open their markets to EU imports to a significant degree. A likely scenario is that ACP countries will eliminate tariffs for about 80 per cent of imports.
"Negotiations must be held on equal partner basis," Kombo told Financial Journal.
Questions are being raised as to why Kenya should rush into signing EPAs when they are skewed in favour of European countries.
A review Kenya’s exports to Europe reveals the country exports mostly agricultural products - horticulture (flowers, vegetables and fruits), tea, coffee and fish - with little value addition.
In contrast Kenya’s main imports from the EU are value added products such as machinery, electronic, equipment, chemicals, vehicles pulp and paper.
Under the current trade regime, EPAs would forever condemn Kenya to export raw materials instead of finished goods.
Implementation of EPAs is associated with certain losses and gains. The potential gains are low pricing for consumers of imported goods, capital and intermediate goods sourced from the EU.
Kenya is both a member of the Common Market for Eastern and Southern Africa (Comesa) and EAC which both account for about 30 per cent and 35 per cent of Kenyan exports, respectively.
Hence, Kenya stands to lose out within the EAC and Comesa blocs if it signs the EU trade deal.
"Within the EAC bloc we benefit more from intra-trade with our neighbours than with EPAs deals," Dr Joyce Laboso, Sotik MP who led the Kenyan delegation to Brussels said.
Free access
EU has announced it will give all ACP exporters tariff and quota free access to European markets.
For 36 of the 79 ACP countries negotiating EPAs, this access is already available to them under the EU’s "Everything but Arms" initiative for least developed countries.
For the remaining non-LDCs (such as Kenya) currently exporting under Cotonou preferences, a new EPA deal that continues to exclude bananas and sugar would improve access for only 0.46 per cent of current exports.
What does it imply?
An expert on multilateral trade issues based at the ACP secretariat in Brussels argues that Kenya should consider all trade regimes before signing the EPAs.
"According to an LDC conference held in Istanbul last year, there are plans to graduate more than 50 per cent of the LDCs from that status, which means the countries like Tanzania or Uganda could be upgraded. So why ask to negotiate with Kenya alone when it’s clear that EU has plans to upgrade some countries? Kenya should continue negotiating EPAs under the EAC," said Karinge Githinji, an expert in multilateral trade issues based in Brussels.
