EAC-EU EPA signing postponed as deliberations continue

22 July 2016

The signing of the Economic Partnership Agreement (EPA) between the EU and the EAC (East African Community) due to be ratified in October 2016 has been postponed, coming as a surprise to the international community. The EPA was set to be signed in Nairobi, Kenya, on 18 July 2016.

Various officials from the EAC and its member countries have cited the UK vote to leave the EU and other current uncertainties within global markets as cause to delay signing the document and continue deliberations, taking recent economic developments into account.

The sanctions imposed earlier this year by the EU on Burundi have also been mentioned by commentators as a factor complicating the conclusion of the EPA.

“Signing on July 18 on the margins of UNCTAD 14, has been called off by agreement between both parties. In my view, this will allow more time for consultations,” said Emmanuel Hategeka, permanent secretary for Rwanda’s Ministry of Trade and Industry.

Many observers have cautioned, however, that failure to meet the October ratification deadline could have damaging effects on EAC exports to the EU market.

The EAC includes Tanzania, Rwanda, Burundi, Uganda, and Kenya. The EPA, which has been in negotiation for more than a decade, would allow for immediate duty free quota free (DFQF) access to the EU market for all EAC exports, and for the gradual opening of the EAC market to imports from the EU.

The hesitancy surrounding the EPA manifested a week before the 18 July deadline when Tanzania formally decided not to sign the trade deal. Tanzania’s foreign affairs permanent secretary Aziz Mlima cited the “turmoil” following the Brexit vote as well as the need to protect national interests and Tanzania’s nascent industries as reasons to forgo the deadline. 

Tanzania, having recently entered into their second Five Year Development Plan (FYDP), has been focused on industrialisation as a primary means to development. “Our experts have established that the way it has been crafted, the EPA will not benefit lead industries in East Africa, but instead lead to their destruction as developed countries are likely to dominate the market,” said Mlima.

On the EU side, officials have indicated on various occasions that they see the deal as balanced, while also insisting that it is in line with EAC’s Common External Tariff and would support regional integration and development in the EAC.

The decision to call off the signing also comes after a group of regional civil society organisations warned, during a gathering in Uganda last month, that overall objectives of the EPAs – including sustainable development and poverty reduction – were not adequately addressed.

Some observers indicated, however, that various civil society organisations took a hard stance against the EPA before the EAC members and the EU started to finalise negotiations.

“So, because of their defined stand, they tend to over blow the challenges and to put some issues out of context,” according to John Bosco Kanyangoga, a consultant to the Rwandan EPA team.
  

Which way forward?

The East African Business Council (EABC), a strong supporter of the EAC-EU EPA, has expressed concerns that missing the October deadline could hurt EAC members’ exports towards the EU, in particular for Kenya.

"The signing has been called off so whatever issues are contentious should be brought to the table for renegotiation," said Lilian Awinja, EABC’s chief executive.

Given their LDC status, Tanzania, Burundi, Rwanda, and Uganda are granted preferential access to EU markets under the Everything but Arms Agreement (EBA). The agreement, signed in 2001, gives all LDCs full duty free and quota-free access to the EU for all their exports, excluding arms and armaments.

If the EPA is not ratified by 1 October 2016, the aforementioned four countries would thus still be afforded preferential treatment under the EBA. This would, however, require them to comply with more complicated rules of origin, according to the EABC.

Kenya, on the other hand, is the only non-LDC country within the EAC, and as such stands to be the hardest hit by failure to sign and ratify the document as it would lose its current preferences.

The situation has led some observers to speculate that Kenya might seek to move ahead and sign the EPA alone. European parliamentary member Marie Arena nonetheless recently indicated that for the EU to accept it, the deal would have to be signed by all EAC members.

“It can’t be signed now because we have not all agreed, but we are hoping that we can do it in the near future. We have two more weeks until August 4 [editor’s note: the initial deadline that was set for signing the EPA]. We are engaging with everyone to make sure that all of us agree at the same time,” said Kenya’s Foreign Secretary Amina Mohammed after the signing of the agreement was called off.

Should this endeavor fail, commentators have noted that Kenya should start engaging with the EU on potential alternatives. One potential option would consist of postponing the October ratification deadline to give EAC members more time to iron out their differences.

“Our first proposal is to have the October 1st deadline extended to allow for more time and see whether Tanzania will agree to sign or if Burundi will improve its democratic situation and evade sanction from the European Union,” indicated Bernd Lange, member of the European parliament and chair of a joint delegation of the Trade and Development Committee attending the UNCTAD 14 Conference.

“If none of these happen then I expect that Kenya will apply for the GSP [Generalised System of Preferences] Plus and when it is received then we can begin the market access regulations and save Kenya,” Lange added.

“If this application is brought to the table then we will extend the free market access for Kenya,” continued Lange.

This GSP Plus status would allow Kenya to benefit from zero tariffs on approximatively two thirds of all product lines. Such a status was given in 2013 to Pakistan.
 

ICTSD reporting; “EAC-EU trade deal signing called off,” The New Times, 18 July 2016. “Kenya May Ink EU Trade Deal Alone as Brexit Spooks Neighbors,” Bloomberg, 18 July 2016. “EU legislators push for new EPA deadline to ‘save Kenya’”, Business Daily, 22 July 2016. 

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