East Africa: Europe, EAC Economic Partnership Fallout Could Affect Trade

Arusha/Dar — The consequence of the possible refusal by Tanzania to sign the Economic Partnership Agreement (EPA) is so great that it might undermine trade within the East African Community (EAC) and beyond, experts have warned.

If Tanzania digs in to block the EPA deal with the European Union, some analysts worry, there is a high possibility that the Customs Union, which aims to ensure partner states trade freely among themselves, will suffer the biggest blow.

“The Customs Union will be greatly shaken in the event that some EAC countries accept EPA while others reject it. Unless a formula is designed to address this, EAC could end up operating two customs unions,” said an Arusha-based trade expert, who spoke on condition of anonymity.

He said there was a likelihood that Tanzania would maintain its “hardline” position during the next Heads of State Summit slated for January/February next year.

“The region should brace up for two trade regimes with the outside world, and this will disable the customs protocol, one of the pillars of economic integration.”

Kenya and Rwanda have already signed the EPA agreement with the EU while Uganda has not made its decision yet. Burundi has categorically stated that it doesn’t see the importance of the deal as it faces sanctions from EU.

Being a shared customs territory, however, all the six EAC members must sign the EPA for it to be implemented in the region.

The 17th EAC Heads of State Summi was held in Dar es Salaam on September 10 in the wake of Tanzania’s stiff opposition to the pact. It was during the meeting that the leaders decided to give technocrats more room for consultations on EPAs and to review their position in January.

Kenya has, however, since 2007 been pushing for the deal to be concluded with speed. Being the only developing state in EAC (the rest are classified as Least Developed Countries that enjoy duty-free trade with EU without reciprocating), Kenya has had to lobby its partners to endorse EPA because of the shared customs territory.

However, the analyst who acknowledged reasons so far advanced by Tanzania – being a sovereign state – to delay the ratification, wondered why the country backed out of the deal in the last minute after participating fully in the negotiations which date back to 2002.

“For over 10 years, Tanzania has been on the negotiating table with other EAC partner states. The government has not been against it,” he said, noting that the Tanzanians should be fed with more statistics on how the country was going to lose by embracing the EPA deal.

He said although regional partners were aware Tanzania has its sovereignty over the matter, the country has to come up with enough evidence to convince its partners to defuse the current standoff which does not augur well for integration.

Former President Benjamin Mkapa previously described EPA as a latter-day scramble for Africa. He maintained that signing the pact would kill the region’s industrialisation dream.

And now with President John Magufuli’s administration pushing for an industrialised economy by 2020, it will come as a no-surprise if Tanzania maintains its position come January next year.

Already, voices against the deal have increased of late.

During the recent National Assembly session in Dodoma, lawmakers joined the fray with a near unanimous vote to block the country from signing the EPA.

The MPs, who have the power to ratify such trade deals, want the deal to be renegotiated to align it with Tanzania’s economic interests. Under the EPA, the EU will immediately keep its market open for the region in exchange for gradual liberalisation of 82.6 per cent of the signatories’ market over a period of 25 years.

Mr Zitto Kabwe, the outspoken MP for Kigoma Urban (ACT-Wazalendo), warned that should Tanzania sign the EPAs it stands to lose $853 million (approx. Sh1.9 trillion) in revenue in the next 25 years while the EAC as a bloc would lose Sh8 trillion.

And speaking to The Citizen recently, an assistant lecturer at the Archbishop James University College in Songea, Mr Denis Mpagaze, said the differences on EPA could usher in a new era of uncertainty for the region.

“The growing disparities might shake the stability of the Community if every member sticks to their guns against the other,” he said.

A diplomacy lecturer at the Open University of Tanzania (OUT), Mr Salim Hamad, warned that without a common stance on EPA the bloc faces a major threat to regional economic development. “This has to be considered a challenge to the building of a sustainable economic regional bloc,” he said. Dr Aidan Msafiri, a senior lecturer with the Mtwara-based Stella Maris University, commended Tanzanian lawmakers for putting aside their political differences to agree on not signing the EPA deal.

“The advantages of not signing the EPAs are greater than the consequences of signing,” he said.

A business consultant based in Arusha, Mr Simon Mapolu, also defended Tanzania’s position, saying it has the right to align regional trade agreements with its national interests. “Every partner state is responsible for its citizens and its priority is to develop its economy before taking into account the interests of the bloc,” he told The Citizen over phone, playing down fears that the country would lose by not signing EPA.

But the Arusha-based trade expert maintained that instead of convincing the government to reject the deal through Parliament, the public should be fed with a breakdown of statistics of how Tanzania is going to lose.

“This is not an EU demand but a requirement of the World Trade Organisation,” he explained, noting that Africa Caribbean Pacific (ACP) and European blocs are members and have international obligations to subscribe to global trade rules. He added that Tanzania was not likely to benefit in the short term by rejecting EPA, and that banking on the Everything But Arms (EBA) preference scheme for Least Developed Countries has its limitations because the country may soon graduate from LDCs.

The situation, according to him, could have been complicated by Britain’s exit from EU and Kenya’s full-throttle trade with the European bloc compared to Tanzania which is increasingly buying more from the Asian countries and South Africa. Fears are there might be cases where Kenya imports duty zero-rated goods while the same imports are charged duty in Tanzania, weakening the Customs Union, seen as a bedrock of the EA Common Market and rendering Common Exernal Tariffs (CET) ineffective. The mood created by the stand-off over EPA is evident at the EAC headquarters in Arusha, with most officials declining to comment on the matter.

Journalists are often told to seek comments from senior executives of the regional organisation, who are most of the times not available.

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