EU and EAC seal EPA deal
The EU and the East African Community (EAC) finalised their Economic Partnership Agreement (EPA) on October 16, 2014. According to a press release by the European Commission, negotiators from both regional blocs initialled the EPA deal, which “is now going to be presented for approval according to the domestic procedures of each partner.” This step seals the third EPA between Europe and an African regional grouping, with Brussels having already concluded two other such agreements involving the Southern African Development Community (SADC) and the Economic Community of West African States (ECOWAS), this past July. In Africa, the EU is still in the process of negotiating EPA deals with the country blocs of Eastern and Southern Africa (ESA) and Central Africa.
Reciprocity in trade flows
The EU-EAC EPA contains commitments from both parties: The EU pledges to ensure duty-free-quota-free (DFQF) access to its market for all EAC products. The DFQF provision is particularly vital for the developing country Kenya, which, unlike the four other least-developed members of the EAC (Burundi, Rwanda, Uganda and Tanzania), has seen its preferential margins in Europe eroded after negotiators failed to meet a deadline for conclusion at the beginning of this month.
Currently, Kenya’s exports to the EU are categorised under the latter’s Generalised System of Preferences (GSP), which implies tariffs on Kenyan exports and thereby is less favourable than the DFQF scheme. Meanwhile, the LDC members of the EAC continue to benefit from DFQF access to the EU under the Everything But Arms regime.
Last week, while praising the conclusion of the EPA, the Kenya Association of Manufacturers (KAM) also called for a swift implementation of the deal in order to place Kenya on an equal footing with the LDC members of the EAC. In this context, Betty Maina, CEO of KAM, said that "it will take three to six months to sign the agreement, but consultations are underway between government and private sector on how to cushion Kenya exporters to the EU against the effects of the GSP tariff system.”
The EU Commissioner for Trade Karel De Gucht seconded this affirmation by expressing his hope that the “EPA will be signed and implemented soon.” In case of successful implementation, the EU will benefit from greater reciprocity in trade flows with the EAC: In the agreement, the five East African countries have committed to increase the share of their duty-free imports to 80 per cent over the next 15 years, which brings the deal into compliance with the reciprocity requirement of the WTO. Moreover, the EAC members have acquiesced to a most-favoured nation provision, which will automatically extend any trade concession made to third countries to the EU.
“Balanced outcome” on export taxes
Regarding one of the main sticking points in the EPA negotiations, namely export taxes, the European Commission spoke of a “balanced outcome” achieved among the delegations.
The political dimension of export taxes was one of the most contentious issues in the EPA talks. Export taxes are perceived to be trade-distorting by some countries, while others insist on maintaining some policy space for their use, given their potential as a tool for industrial development. Since the text of the EU-EAC EPA is not yet publicly available, it could not be determined how negotiators resolved this contentious issue.
The process to establish EPAs between the EU and various regional groupings of African, Caribbean and Pacific (ACP) countries began over a decade ago, with the goal of ensuring trade reciprocity, promoting sustainable development, and advancing integration between the parties involved.
Trade flows between the EU and the EAC totalled 5.8 billion € in 2013. EU imports from the EAC (2.2 billion €) are intensive in coffee, cut flower, tea, tobacco, fish and vegetable products. The EU’s exports to the EAC (3.5 billion €) are mainly constituted of machinery, mechanical appliances, equipment and parts, vehicles as well as pharmaceutical products.
sources: European Commission, EU strikes a comprehensive trade deal with East African Community, October 16, 2014; ShanghaiDaily, Roundup: Kenya's exporters welcome EU-EAC trade deal, October 16, 2014; Reuters, East African states agree duty-free trade deal with EU, October 15, 2014.