Kenya may break ranks with EAC on trade deal with
Business Daily Africa
Kenya may break ranks with EAC on trade deal with
By Allan Odhiambo
8 February 2010
Kenya is considering breaking ranks with its East Africa partners and sign a framework on new economic trade pacts with Europe, citing its disadvantaged position should it fail to do so.
“We have been patient for long and the time may have come to put down our feet and sign the framework. Other regional countries have a fall back position in terms of the Everything But Arms (EBA) should things go wrong,” a senior official at Trade ministry in Nairobi told Business Daily.
Under the EBA arrangement, Europe offers countries under the UN roll of least developed countries (LDCs) free access of all their products to its market except arms and ammunition.
Under the European Union (EU) regulations when a country is excluded by the UN LDCs, it is automatically stripped of the preferential terms but accorded a three year transitional period to adjust to the expected knock effects.
Coincidentally, all East African Community (EAC) member states with the exception of Kenya fall in the LDCs cluster—-explaining Kenya’s growing agitation in the wake of a fresh onslaught from Brussels over long-drawn out negotiations.
“We stand to be the biggest losers at the end of it all if things don’t work,” the ministry official said.
A similar radical option being considered by Kenya was witnessed within the Southern Africa Development Community (Sadc) when Botswana, Lesotho and Swaziland broke ranks with South Africa to sign an interim economic partnership agreement (IEPA) with Europe on June 4, 2009. They were followed almost two weeks later by Mozambique.
Statistics showed that failure to sign a framework agreement as demanded by the EU would translate to an estimated Sh100 million loss in revenue for Kenya in that trade terms with the Europe would revert to the lesser attractive market access terms available under the General System of Preference (GSP).
Some of the key products Kenya has been exporting to the EU at zero duty would henceforth attract duty of between 8.5 and 15.7 per cent.
Local economy
It would also put at risk over 1.5 million jobs and endanger over Sh76 billion worth of investments in the horticulture and fisheries sector and other related industries such as chemicals, farm-input and agri-equipment.
But despite the dangers to the local economy, singing of the framework has remained elusive with sources in the EAC EPAs negotiating pointing a finger at Tanzania and Uganda for adopting a radical stand in which they demanded appropriate provisions for development assistance arguing that under new reciprocal trade arrangements EAC members stand to lose significant tariff revenue because some of the tariffs currently charged on imports from Europe would either be reduced or dropped all together and financial support to offset the expected knocks would be critical.
The East African countries have also demanded more dialogue on the most favoured nation (MFN) clause which is a status granted by one nation to another in international trade, such that the receiving nation will be granted trade advantages (for instance, low tariffs) that others nation do not receive.
In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners whether rich or poor, weak or strong.
A concern by the EAC partners is that the EU is scheming to lock them into a favoured trade arrangement with it despite the fact that they are also eyeing enhanced integration ties such as the planned free trade area (FTA) that would bring together three regional blocs including the Common Market for Eastern and Southern Africa (Comesa), the Southern Africa Development Community (Sadc) and the EAC itself.
The EAC argues that such ties exclusively locking them with the EU are risky and need head room to diversify their target markets without excessively relying on one basket.
The EU, however, warned on Thursday that its patience in the long drawn out negotiations was fast running out.
