epa

Sermon on the Mountain: EAC’s Ratification of EPA

So, from the rain forest Machame camp, through the Alpine desert to the snowy peak, there was one topic that I found more interesting while I discussed with Tanzanian guides. Mt.Kilimanjaro is the highest Mountain in Africa, and it took us 7 days to get to the top. Our topic of discussion while we climbed the mountain was the Economic Partnership Agreement, EPA. I asked the guides; why doesn’t Tanzania want to sign EPA? Do you know your brother Kenya will suffer if you do not sign?

What are EPAs?

Economic Partnership Agreements are trade pacts between the EU and other regional economic blocs across Africa, the Caribbean and the Pacific (ACP). These negotiations are a build-up on the Cotonou Agreement, 2000, as a comprehensive engagement between the EU and the ACP. EPA in this context is a trade treaty between the EU and EAC (East Africa Community) states. The treaty’s main objective is for provision of full duty-free and quota-free market access conditions for goods originating in the EAC, to the EU market in exchange for free access to the EAC market for EU goods.

A decision made on the 14th of April 2012 by the EAC in a summit held in Kampala, Uganda resolved that EAC states negotiate as a bloc for Economic Partnership Agreement (EPA) with the EU. This is also in line with Article 37 of the Protocol on the Establishment of the East African Community Customs Union. The Protocol provides that EAC partner states should negotiate as a bloc on matters pertaining participation in the World Trade Organisation and ACP-EU arrangements.

This means that for the treaty to commence all the EAC countries have to ratify EPA. The first deadline for ratification of EPA was 1st October 2016 but was later extended to 2nd February 2017 by the European parliament after cries from Kenya, and from the EAC. Kenya and Rwanda first ratified, the Uganda despite her initial signs of reluctance. Burundi, which is going through political unrest after President Nkurunziza was re-elected for a third term in controversial elections, has not signed in retaliation for EU sanctions. Tanzania has also not ratified the treaty after expressing reservation with terms of the agreement.

Why EAC must sign EPA as a bloc

If EAC fails to sign the EPA, partner states will operate in different trading regimes. Note that Kenya is a developing country, while Uganda, Rwanda, Burundi, and Tanzania are Least Developed Countries. Failure to sign EPA means that Kenya’s exports to the EU market will attract duty under the Generalized Scheme of Preference granted to developing countries while exports from other EAC member states would continue enjoying the “Everything but Arms” trade arrangement with the EU. Since 2007, Kenya exported to the EU under the Market Access Regulations (MAR), but this was to be abolished on 1st October. The European Union is Kenya’s biggest export destination. – Flowers, french beans, fruit, fish, textiles, coffee and tea. The high taxes on these products make Kenya’s products less competitive, therefore not cost effective. It also means thousands of employees in the agriculture industry in Kenya will lose their jobs and tens of thousands of farmers will lose out.

Why Tanzania does not want to sign EPA

In my discussion with the Tanzanian guides in Kilimanjaro I wondered whether Tanzania wants to undercut Kenya’s economic dominance in the region. They laughed at the notion and referred to President Magufuli’s reservations on the viability of EPA. They argued that EPA is not in the best interest of Tanzania and her people. When I pointed out that they will benefit they humorously said that they have Mt. Kilimanjaro which they cannot export Kilimanjaro to the EU, they will not sign EPA. One guide gave an example of a German investor who after frustration from the government on his ambition of exporting coffee from his farm in Moshi, he constructed a factory and now sells coffee as a finished product in the domestic market. This is an example of value addition as opposed to exporting raw materials.

Tanzania argues that due to British exit from the EU, there are economic and constitutional uncertainties, and since Britain is their core export destination it has little to gain from EPA. The main reason however has been that the EU-EAC Economic Partnership Agreement has a negative impact on emerging industries in the region. Former President Benjamin Mkapa is arguably the harshest critic of EPA. Recently while officiating the Mwalimu Nyerere International Festival at University of Dar es Salaam, he said, “I don’t understand how such a powerful trade bloc can have a free trade agreement with the developing economies of Africa. There is no way that our small economies can have free trade agreement with Europe”. Intellectuals such as the University of Dar es Salaam’s retired law Professor Issa Shivji have argued against the pact, “EPAs are not good for us because they will destroy our industries”. Prof Shivji argued, adding that EPAs would simply allow European heavily subsidized manufacturers access to the region’s market.

They have a point since the EU-EAC deal is primed on trade in goods and not services. EAC exports are primary, unprocessed agricultural products and minerals. The EU, on the other hand, exports highly manufactured products and machinery into the EAC market. Our products to the EU can be termed as low value and that will enhance the trade imbalance that favours the EU. Experts warn that the EU exports may negatively affect the manufacturing industries across the EAC region and that the bloc will become a dumpsite for EU agricultural products. This is because the EAC agricultural products will not compete with EU products given the European government subsidies its goods and has modernized technology that the EAC lacks. The fall of the agriculture sector, which is the backbone of the bloc’s economy will lead to the collapse of the manufacturing industries.

Moving forward

Since the good parliament of the European Union decided to save Kenya from the blushes and extended the deadline on the signing and ratification of EPA, EAC now has the opportunity to look at the issues raised by Tanzania. Discussions should also involve Burundi. That way,  we can all sing the same song the next time we perform for the Europeans and I can have another exciting debate (this time on EAC integration) with the guides in the mountain.

BY FELIX OMBURA

This article appears in our weekly digital law magazine, The Deuteronomy Vol 7, Issue 4 of October 28th, 2016

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