Nairobi: The search for a binding pact to safeguard the multi-billion-shilling export trade with Europe has taken a new twist with East African partners resolving to push for new classification of Kenya. EAC negotiators, driven by fear that items produced cheaply by highly efficient EU firms could flood the common market, have also called for revision of the Economic Partnership Agreements to cushion upcoming enterprises.
“Given that the EU subsidises its agricultural sector to the tune of 60 billion euros a year, signing EPAs could squeeze smallholder farmers out of the local market,” Tanzania’s former president Benjamin Mkapa said in a statement sent to the Business Daily last week.
He was speaking in Arusha at a four-day EPAs workshop attended by regional legislative assembly members, ambassadors from EAC partner states’ missions in Brussels and Geneva, permanent secretaries, and World Trade Organisation representatives.
The region’s negotiation partner, the European Commission (EC), was also represented at the forum that also drew participants from the regional business community and civil society.
Uganda, Burundi, Rwanda, and Tanzania are classified as Least Developed Countries (LDCs) which are allowed to sell goods in the EU duty and quota free without reciprocating. This leaves only Kenya as the EAC nation that must sign EPAs with the EC to safeguard her mainly horticulture and fish market in Europe.
Signing the pact will effectively eliminate current market access barriers that have slowed the entry of EU’s agricultural products such as wines and spirits, chemicals, plastics, paper, textiles, footwear, and glassware into the region.
The East African Custom Union Management Act provides that the five EAC countries have to enter into such agreement as a bloc. Yet if LDC members in the region sign EPAs, they will be forced to reciprocate their current duty-free access to the EU market by eliminating tariffs on at least 80 per cent of products from the EU.
“Kenya can’t go it alone, but LDC members are reluctant to open their market,” said Mr Mkapa who is the current chairman of South Centre, an intergovernmental organisation of developing countries.
“The third option is for the entire region not to sign the EPAs after weighing the market lost by Kenya against the threat of not being able to industrialise in future as a result of cheaper EU goods.” At the end of the four day meeting, the five countries resolved to push for Kenya’s inclusion on the list of LDCs and reject the EPAs clause that requires them to open up their markets to EU products.
The European Union is the second largest destination for Kenya’s exports after Africa. Out of the Sh409 billion worth of goods that Kenya exported to various destinations in 2010, the EU accounted for Sh109.4 billion. Africa accounted for goods worth Sh188.9 billion and America Sh24.4 billion.
The EAC team also said the EU’s Rules of Origin are too punitive. The team asked the Euyropean Commission to lower the threshold for EAC partner states.
Go it alone
Last week, Kenyan officials maintained that the government would not push for an amendment of the bloc’s treaty to go it alone in signing EPAs with EU.
“Kenya resolved to sit in the EAC negotiation team to pursue the matter to its logical conclusion,” said Mr Richard Sindiga, the Economic Affairs director at the EAC ministry. We did not set pre-conditions for these negotiations and have seen no reason to want to go it alone”, he added.
Data from the EAC secretariat indicates that the EU is the single largest market for the bloc’s exports, absorbing 23.4 per cent of its exports in 2010 compared to 33.6 per cent exports to the rest of the world.
Even with the current restrictions, the EU still leads other trading partners as a source of imports with 19 per cent of goods bought from outside the region coming from the bloc.
“We therefore need to preserve, protect, and grow this market and ensure that it works for us”, said Dr Richard Sezibera, the East Africa Community Secretary-General.
Last week, EAC negotiators resolved to reject the EC’s bid to compel the region to eliminate tax on its mineral exports. They are also not ready to liberalise their services sector as demanded by EC negotiators, a statement from Arusha added.