The Star, Kenya
EPAs will take the EAC countries to early grave
24 April 2012
By Oduor Ong’Wen
East African governments are negotiating for Economic Partnership Agreements (EPAs) with the European Union (EU). The EPAs are free trade agreements based on the principle of reciprocity. They require Africa to open up its borders to duty and tariff-free goods and services from Europe. But numerous studies posit that this unequal partnership will have disastrous consequences on African citizens.
Farmers will face increased competition from Europe’s highly subsidized goods; citizens shall lose the benefits of most government social welfare schemes due to loss of government revenue; regional integration of markets will be threatened as well as the individual partner states’ government’s loss of policy space to protect, respect and fulfill their citizen’s human rights.
At the end of 2007, under immense time pressure from EU deadlines and threats of reverting to the less favorable GSP (Generalized System of Preferences) trading mechanism, a majority of EAC Partner States initialed an Interim EPA. Controversial Issues within the Interim EPA text include, but are not limited to, the varying negotiation schedules, Most Favored Nation (MFN) clause, stand-still clauses, restrictive rules of origin and, inadequate dispute settlement and safeguard mechanism and many others.
The goods-only interim EPA (or Framework EPA) came along with an agreement to complete negotiations for the comprehensive EPA which includes issues on services, intellectual property rights, government procurement, competition policies and others. However, the stakes remain high. African governments, in an attempt to maintain the few already existing exports with the EU, have been left with the EPA as the only available option.
The potential impacts of the EPAs have remained a subject of heated debate during the negotiations. The EU and defenders of the agreements aver that the following three benefits will accrue from EPAs: they will open taps for the flow of European direct investments to ACP countries; there will be a ‘locking-in’ of the trade liberalization process in these countries, which is good for competition and employment; the restructuring of ACP economies, by combining a modification of the framework of incentives for economic agents (propelling them towards a more efficient use of resources) with financial and technical support of the EU.
However, in both EAC and other African countries as well as in Europe, many analysts have pointed out to imbalances and inequalities inherent in the EPAs.
First, liberalisation of trade, is seen by the EU to be an end unto itself while EAC countries see trade as a means of attaining the broader goal of national development.
Second, EPAs aim at increasing the profit margins of European exporters, rather than lowering the prices to consumers and ACP importers Third, there will be loss of revenue to EAC country governments, thereby undermining their efforts to provide basic social services, as a result of elimination of tariffs as advocated by the EU.
Fourth, the EPA negotiations are pushing ACP countries to liberalise their trade regimes at a ‘sub-optimal’ rate as compared to what they would do unilaterally. Fifth, EPAs in their current design would complicate and frustrate regional integration (by treating differently countries belonging to the same regional grouping e.g. Kenya, a member of the East African Customs Union, is treated differently from fellow EACU members Burundi, Rwanda, Tanzania and Uganda because the latter four are LDCs).
Sixth, EU opposes the strengthening of Lome reflexes which inordinately focus the attention of EAC countries on obtaining preferences (in Brussels) as opposed to recasting their attention on building regional markets as a basis of integration. Seventh, through the strict Rules of Origin, stifling industrial development of the ACP countries.
Though often appearing to be technical in nature, the various issues considered by EAC negotiators as ‘contentious’ will have significant economic and political consequences for their development. Unless some way is found of overcoming disagreements there is a very real risk that negotiations on comprehensive EPAs will not be concluded. This would leave the process of regional integration – one of the original motivations for EPA negotiations in the first place – in several ACP regions, including East Africa, in a difficult position, given that some countries within a region would dismantle tariff barriers for EU imports while neighbouring ones would continue to impose them. For instance, Kenya would be subjected to a lot of pressure while the other partner states in EAC could opt to enjoy the Everything But Arms initiative.
Our MPs who are meeting with their European counterparts in the next week need to take heed.
Oduor Ong’wen is the country director of the Southern and Eastern Trade Information and Negotiations Institute (SEATINI), an African initiative to strengthen the continent’s capacity to play a more effective role in international trade and enhance its place in the global political economy.