East Africa: Regional Business Council Pushes for Economic Partnership Agreement
By James Karuhanga
Further delay in signing the Economic Partnership Agreement (EPA) will hamper East African Community partner states’ export to the European Union market, the East African Business Council (EABC) chief executive, Lilian Awinja, has said.
EAC partner states earlier proposed that EPA signing ceremony be held in the first week of August, but the apex body of business associations of the private sector and corporates from EAC countries now recommends July 18, as an apt moment to take advantage of the EU Commissioner for Trade, who will be in Nairobi attending an upcoming United Nations Conference on Trade and Development conference.
The EABC expectations are that all EAC partner states’ Ministers of Trade will also attend the conference in Nairobi in July and, therefore, be able to sign the EAC-EU-EPA on the same date to project the region as a functional Customs Union.
According to Awinja, the suggested July 18 signing will give partner states ample time to ratify the agreement before October 1, the deadline earlier set by the EU.
Awinja said: “Failure to meet EU deadline on ratification will see EAC exports to EU attract import duty, especially for Kenya which is considered as a developing country, while other four countries (Tanzania, Uganda, Rwanda and Burundi), that are considered Least Developed Countries (LDCs), may be forced to opt for everything but army trade arrangement that has more complicated rules of origin.
The EABC has indicated it intends to petition EAC partner states to sign the deal.
Meanwhile, come January 1, 2017, according to EABC, Kenya is expected to be removed from the EU’s generalised scheme of preferences trade regime for live plants and floriculture products, hence attracting even more duties under the ‘most-favoured nation’ rates.
EABC says this scenario – which Kenya wishes to avoid – implies that Kenyan exporters would be subjected to import duties of between 5 per cent and 8.5 per cent.
According to Awinja, the economic and social loss to Kenya will be catastrophic, worsening the consequences of missing the deadline for EAC- EU EPA ratification.
Interacting with an EABC delegation in Brussels, this week, the Director-General of Business Europe, Markus Beyrer, said, on June 20, the Council authorised, on behalf of the EU, the signature and provisional application of the EPA between the EU and the EAC.
Business Europe is a business lobby agency.
The EPA, an agreement based on the principle of asymmetrical market opening, meaning that it provides a better access to the EU market for ACP partners, intends to enhance regional integration and economic development in African, Caribbean and Pacific (ACP) countries.
The deal, which is expected to replace the previous market access regime of unilateral preferences for ACP countries, offers unprecedented market opportunities for agricultural and fisheries products.
Tough times for Kenya
EABC says Kenya faces a tough choice as the clock ticks towards the October 1 deadline for the ratifying of the EPA with EU.
It is not clear whether it is possible for Kenya to ratify the agreement on its own so that its exporters can benefit from duty-free exports to the EU market or whether it must be ratified collectively with other partner states.
Burundi, Rwanda, Uganda and Tanzania have an option to rely on the ‘everything but army trade’ regime, where they have duty-free market access to the EU.
But Kenya, the biggest economy and the only non-Least Developed Country in the EA region, heavily relies on the EU- which represents 30 per cent of its export market – for selling its cut flowers, tea, vegetables and fish.
This was among the key trade issues that featured prominently during the EABC engagement with the Kenya’s deputy President William Ruto in Nairobi last week.
It was decided that EABC should engage all EAC partner states to enlighten them on the importance of ratifying the comprehensive EPA.
“The EABC will write to EAC partner states respective trade and industry ministers’ to underline the urgency of signing the deal, well before July 18,” Awinja said.
Emmanuel Hategeka, the permanent secretary at the Ministry of Trade and Industry, said Rwanda is still going by the previous decision of the Sectoral Council.
Hategeka said: “We haven’t been petitioned yet. We haven’t received any particular request to fasttrack the signing. But the good thing is that all of us are ready to sign as per the earlier agreed on dates of signature. I think the EU is also still struggling with Brexit and we are monitoring events as they unfold.”
Negotiation for EPA between EAC and EU started in 2007 initialing the framework on November 27 that year. But the two blocs failed to agree, resulting in postponement of the deadline several times.
In October 2014, after nearly one decade of grueling negotiations, the EAC finalised negotiations for a region-to-region comprehensive EPA, covering trade in goods and development cooperation, with European Union.
The deal, which is in line with the EAC Common External Tariff, supports the EAC’s ambitious regional integration project and is expected to be signed and ratified by October 2016.
In signing it, the EAC committed to liberalise up to 82.6 per cent of all its imports from the EU by 2033.
According to the EABC, extensive liberalisation is based on the argument that the region needs cheap intermediate goods to be used as inputs in production processes, and finished products whose availability at lower costs is deemed to have consumer welfare-enhancing effects.
Beyond the elimination of customs duties, the agreement covers such issues as free movement of goods, cooperation on customs and taxation, and trade defence instruments, which mirror EAC efforts to strengthen its customs union and set up an effective internal market.
Those who oppose the deal, including East African Legislative Assembly (EALA) MP Dr James Ndahiro, a Rwandan economist, are of the view that the agreement is “lopsided” as EAC countries do not have the requisite competitive edge given their small industrial base, among others.
According to Ndahiro, for example, EU countries spend more than Euro 90 billion on agricultural subsidies and, as such, EAC agricultural products, that are not equally heavily subsidised, cannot compete fairly.
But PS Hategeka insists “we all benefit” since it is all about removing the unilateral Cotonou Agreement, a treaty between the EU and the African, Caribbean and Pacific Group of States signed in June 2000 in Cotonou, Benin, by 78 ACP countries (Cuba did not sign) and the then 15 EU Member States.
The Cotonou Agreement, Hategeka said, is not compatible with the reciprocity that is required by World Trade Organisation.
“The EPA is going to be a reciprocal agreement that clearly takes into account the stage of development at which EAC countries are at present. That’s why there is a big development chapter in it. We aren’t opening up our markets immediately,” Hategeka said.