Tanzania's u-turn sparks calls to rethink EU trade deal

It is imperative for East African Community (EAC) to listen carefully to the issues Tanzania is raising related to the Economic Partnership Agreement (EPA) the bloc concluded with the European Union, a regional lawmaker has said.

MP Abubakar Zein Abubakar, a Kenyan representative in the East African Legislative Assembly (EALA), stressed this during an interview with The New Times on Monday.

“It is important for us to listen to the issues Tanzania is raising and also look at the implications of Brexit. We, as Africans, cannot afford not to act together as a bloc,” Zein said.

“We must always consider working together as a unit and take into consideration whatever unfolding situations.”

Tanzania’s foreign affairs permanent secretary Aziz Mlima said his country will not sign the EPA between EAC and EU.

Dr Mlima told reporters in Dar-es-Salaam, last week, that Tanzania decided to halt signing because of the “turmoil” that the EU is experiencing following Britain’s exit.

“Our experts have established that the way it has been crafted, the EPA will not benefit lead industries in East Africa, but instead to their destruction as developed countries are likely to dominate the market,” said Dr Mlima.

Like Mlima, Rwandan economist and EALA member, James Ndahiro, opposes the EPAs on grounds that “it is one-sided” and that EAC economies do not have a competitive edge given their small industrial base.

Ndahiro said that, for example, EU countries spend more than Euro 90 billion on direct farm payments (subsidies) and, as such, agricultural products from the EAC which are “not equally subsidised” cannot compete fairly.

Nonetheless, the East African Business Council (EABC) is advising Partner States to sign the deal earlier than previously agreed as further delay will hamper EAC export to the EU.

Partner states previously proposed the signing ceremony be held in the first week of August. But, last month, the EABC recommended July 18, as the date of signing to coincide with the visit of the EU Commissioner for Trade, who will be in Nairobi attending the United Nations Conference on Trade and Development conference.

Failure to meet EU deadline on ratification could see EAC exports to EU attract import duty, especially for Kenya that is considered as a developing country.

Tanzania, Uganda, Rwanda and Burundi, are considered Least Developed Countries (LDCs), and may be forced to opt for an ‘everything but arms’ (EBA) trade arrangement with its more complicated rules of origin, the EABC warns.

On January 1, 2017, 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. This implies Kenyan exporters would be subjected to import duties of between 5 per cent and 8.5 per cent, says EABC.

On Monday, EABC chief executive Lilian Awinja told The New Times that Tanzania, as current chair of EAC, should take a “leadership role” in signing the agreement as it has been committed to the negotiations since the formation of EAC-EU EPA configuration in 2007.

Awinja said the UK exit from EU should not be a reason to back out as signing with the remaining 27 EU countries presents the EAC bloc with clear opportunities for export development.

“The agreement gives the EAC an opportunity to grow its industries to better compete globally due to the progressive nature of the EU access to EAC market. I urge Tanzania to observe the deadline set by the EU (October 1) for ratification,” Awinja said.

By October 1, if Tanzania will not have finalised ratification of EPA, Awinja said, it will, among others, lose Duty-Free Quota-Free Access to EU market, leaving it with the option of ‘everything but arms’ which is not a better option as it has more stringent rules of origin requirements.

The knowledge hitch

Zein also stressed that people in the region know little about what is contained in the EPAs deal and this is a critical setback.

“There isn’t enough knowledge and information available even to some senior people in the Community,” Zein said, adding: “My concern also touches on our ability to grow our manufacturing sector. Then, there are issues of policy space. The agreement reduces space for policy making in EAC.”

The existing draft of the EPAs is such that EAC countries cannot offer “any other party” preferential treatment without offering the same terms, automatically, to the EU, Zein observed.

In a situation where, for example, EAC is negotiating with the Common Market for Eastern and Southern Africa (COMESA) and the Southern Africa Development Cooperation (SADC), the EPA in its current format, “will limit” the type of preferential treatment with other blocs.

In 2015, the third COMESA-EAC-SADC Summit signed a new trade pact creating a common market spanning half of the continent as a critical step in opening up opportunities for business and investment within the 26-member bloc.

Zein also underscored the danger that even then, “the paper [EPA] must be first be approved by the European parliament yet here, there is no such requirement for the EPAs to come to EALA.”

In June 2010, EALA passed a resolution urging partner states to delay signing with view to urging the EU to cooperate with the EAC to revise the agreement and include “interests of both parties.”

The Assembly also wanted the draft framework of the agreement subjected to parliamentary approval processes at both partner state level and at regional level.

The EABC says the main reason for initialing the EPA was to avoid trade disruption between EU and EAC partner states.

According to Awinja, if all partner states sign the agreement on the same date, it will project the EAC region as a functional Customs Union.

Emmanuel Hategeka, the permanent secretary at thes Ministry of Trade and Industry, recently said “we all benefit” since EPAs will do away with the unilateral Cotonou Agreement, a treaty between the EU and the African, Caribbean and Pacific Group of States signed in June 2000.

The Cotonou Agreement, Hategeka said, is not compatible with the reciprocity required by the World Trade Organisation.

A chapter on agriculture guarantees that the EU will not apply exports subsidies, even in times of market crisis.

Article 83 stipulates that the Parties acknowledge the importance of the agricultural sector to the economies of the EAC partner states and agree to cooperate in promoting its transformation and facilitate the adjustment of agriculture and rural economy to accommodate the effects of implementation of the Agreement “with special attention to small scale farmers.”

The EABC maintains that, under EPA, EU market access offer of 100 per cent duty-free and quota-free access to EAC exports, while the European Union access to EAC market provides for a “gradual liberalisation of tariffs” over three phases spanning 25 years, eventually reaching 82.6 per cent of imports from the EU by 2028.

Source: The New Times, (wavuti.com cross-posted this from www.trademarkea.com)