Exploring pros and cons of EAC-EU Economic Partnership Agreement


THE EAC Heads of States are due to meet on the 6th April, this year, to discuss among other issues the way forward regarding the EAC-EU Economic Partnership Agreement (EPA).

The EAC-EU EPA negotiations began in 2002 and were concluded on 16thOctober 2014 after 12 years. The EAC-EU EPA was scheduled to be signed on 18thJuly, 2016. However, Tanzanian Government made a decision not to sign citing its far reaching implications on Tanzania’s quest to industrialise and on the region at large.

This decision was supported by the Tanzanian Parliament. Burundi has also not signed because it is under EU sanctions. On the other hand, Rwanda and Kenya signed the agreement on 1stSeptember 2016, with the latter ratifying it on the 20th of September 2016.

Uganda’s position has as yet to be clarified. Certainly, during this Summit meeting, the EAC Chairmanship that is held by Tanzania is going to be passed to Uganda. His Excellency Yoweri Kaguta Museveni, the President of the Republic of Uganda, who is going to be the next Chairman, once remarked that “Agreement needs consensus between Presidents”.

Addressing a joint press conference with visiting Ugandan President Museveni in Dar es Salaam recently, President, John Pombe Magufuli commented that EPA would lead us to neo-colonialism. No rush It is hoped that, Burundi and Uganda are not going to rush and sign and ratify the EAC-EU EPA before the critical issues raised by Tanzania are fully addressed.

Kenya has market access on the basis of EU’s Market Access Regulation (MAR) 1528/2007 and its successor MAR 1076/2016 since it ratified the EPA in accordance with Article 3(b) of the MAR (the ratification of the EACEU EPA which has permitted Kenya to be covered by MAR did take place within a reasonable period of time).

The LDCs in EAC were never included in the list of countries that could trade under the MAR. Hence, the MAR does not oblige LDCs in any way to sign or ratify an EPA. Their non-signature or non-ratification of EPA has no effect on Kenya.

None of the situations mentioned in Article 3 of the MAR that would trigger a potential removal of Kenya from the list of countries under the MAR apply, unless Kenya itself terminates the EAC-EU EPA (Article 3(c) of the MAR).

In other words, Kenya continues to have the same market access according to terms of the MAR. The EAC LDCs continue to have duty- free- quota-free market access on the basis of EU’s Everything but Arms (EBA) which is in place permanently.

EBA was a European Union trade-related deliverable in the 3rd UN Conference for LDCs in 2001. LDC status is not everlasting. Once every three years, the UN Committee for Development Policy (CDP) reviews the level of development of LDCs (the next triennial review is in 2018).

If the CDP recommends graduation from LDC status for two consecutive reviews, an LDC would normally be removed from the category of LDCs after three years (sometimes longer). Subsequently, there is a “smooth graduation” process which means that EBA is not phased out immediately (e.g. this has been the case for Cape Verde).

At that point a trade agreement such as EPA could be one of the options in terms of maintaining market access in the EU; in the most positive case this would be around 2024-2027. Why the EPA is problematic.

There are several key areas in which the EAC-EU EPA goes far beyond our WTO commitments, and we fear, this could lead to permanent stagnation of our industries and development, as well as put real opportunities for intra-regional EAC and African trade in jeopardy.

Specifically, Tanzania’s concerns include, issues related to EAC industrial development; effects of the EU subsidies and domestic support to their farmers on EAC farmers accessing EU market; multilateral and bilateral safeguards; tariff revenue losses resulting from substantial trade liberalisation; elimination of export taxes; implication of the standstill clause; effect of Most Favoured Nation clause under EPA to the future EAC engagement with third parties; effect of BREXIT while UK is one of the major trading partner of EAC countries; rationale of Burundi signing EPA while the EU has imposed embargo on her exports; how to proceed in the event that some EAC Partner States sign the EPA and some do not sign; and how useful is the Development Chapter of the EPA, given that the EU committed to fund only a meagre share of the EPA Development Matrix Development.

This Article will try to shed light on some of the key issues of concern under the EAC-EU EPA and show how most of the elements included in the Agreement are not compatible with the World Trade Organisation (WTO). The EAC EPA has eroded flexibilities that were hardly negotiated by developing countries and least developed countries (LDCs) under the WTO.

Throwing the doors wide open for EU goods Starting with issue of liberalisation, according to the EAC EPA, the EAC has offered to liberalise 82.6 per cent of her imports from the EU over a 25 year transition period by initially liberalising 65.4 per cent on entry into force of the Agreement.

However, in the WTO, four of the five EAC countries are LDCs namely: Burundi, Rwanda, Tanzania and Uganda and need not take on any tariff liberalisation in the Doha Round due to the recognition by all WTO members of their economic vulnerability.

Even Kenya, has been given lenient liberalisation commitments in non-agriculture market access negotiations (NAMA), under Paragraph 8 of TN/MA/W/103/ Rev.3 for ‘low tariff binding’ countries) and Small and Vulnerable Economies (SVE) treatment in the agriculture negotiations (Footnote 11 and Annex I of TN/AG/W/4/Rev.4). What EAC countries are been asked to do under the EAC-EU EPA is much more than what Brazil, China and India are been asked under WTO.

The EU argues that this 80 per cent level of liberalisation in the EPAs is required for WTO compatibility. However, Article XXIV’s ‘substantially all trade’ has never been defined in the WTO. The extensive liberalisation under the EPA will lock the region into a free trade area with Europe, thus adversely affecting the ongoing regional integration efforts especially under the SADC-COMESAEAC Tripartite Free Trade Area and the Continental Free Trade Area(CFTA).

Moreover, other WTO members such as the USA, Russia, Canada, Japan, India and Brazil will also demand to have same reciprocal arrangement with EAC and thus make us forego the special and differential treatment (SDT) we are enjoying under WTO.

Prof Lucas N. Saronga is former Director of Trade in Tanzania and an International Trade Negotiator with WTO and EPAs, currently working as a consultant with newly formed “Platform” for stakeholders to raise awareness, build and strengthen their capacity to effectively participate in the national, regional and multilateral trade negotiations.

(Tel. +255 784 942 301 ; Email: lucassaronga@ gmail.com)

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