EA trading ‘free’ as Europe deal lapses
East African | Monday, August 24 2009
EA trading ‘free’ as Europe deal lapses
By CATHERINE RIUNGU
The East African Community is trading “free” with the European Union — without a binding agreement — following the expiry of an interim arrangement and the failure by teams negotiating from both parties to settle on a comprehensive Economic Partnership Agreement.
The interim arrangement entered into last November was to forestall interruption of trade after the Cotonou Agreement was outlawed by the World Trade Oganisation when it came to an end in December 2007.
In the year and a half since then, the EU and the East African Community, together with other Africa, Caribbean and Pacific trade blocs, have failed to agree on the way forward, with the July 31 deadline by which an Economic Partnership Agreement (EPA) was to have been in place, having come and gone.
Kenya’s Trade Minister Amos Kimunya said the EAC wants to sign the EPA “as soon as we can,” but indicated that this was not likely.
Mr Kimunya explained that while the EAC is ready, the EU has its own issues at the moment such as the new European Commission, which is taking office in November, as well as a new European Parliament.
“With these impending changes, nothing can be concluded for the time being, not until the new bodies settle in,” he said.
Though exporters from Kenya are growing jittery over the failure of the talks, Mr Kimunya said there was no need to panic because the parties were still negotiating and no change was likely until a conclusion is reached.
Among the contentious issues is the Most Favoured Nation (MFN) clause over which both parties have failed to arrive at a middle ground.
Uganda’s technical team negotiating the EPA in the Ministry of Tourism, Trade and Industry has now left the MFN issue at ministerial level, a senior official told The EastAfrican.
“I cannot comment on this issue because it is now at ministerial level,” said Silver Ojakol, Commissioner for External Trade. Mr Ojakol added that the MFN clause was not the main reason that prevented the East African Community from concluding a full EPA with the EU at the end of last month.
While it remains controversial and the EAC wants it reviewed before further talks on other areas can go forward, there are other sticking points on which agreement is yet to be reached.
Trade in services remains a thorny issue as do intellectual property and investment, explaining why the region missed the July 31 deadline. However, once these, along with the MFN clause, are adequately reviewed to the EAC’s satisfaction, the region will be in position to move, sources from the ministry said.
Negotiators said the talks, meant to craft new rules of engagement following the expiry of the earlier agreements, collapsed in July, following EAC member states’ strong objections to Europe’s introduction of new trade-related issues.
Tanzania Trade Minister Mary Nagu said her country, with the support of other EAC member states, was opposed to any attempts by the European Union to include government procurement, environment and sustainable development in the agenda.
Ms Nagu said the three issues have been classified as contentious even at the World Trade Organisation and cannot be included in EPAs negotiated under the WTO framework. Delay in signing a new EPA is particularly risky for Kenya, whose key exports to Europe such as flowers and vegetables now risk losing the concessionary terms under which they enter EU markets.
The five EAC member states — Kenya, Uganda, Tanzania, Rwanda and Burundi — are among the 80 countries of the Africa, Caribbean and Pacific that must sign new pacts with the EU to secure their markets.
Hope that the EAC would finish its negotiations with Europe and sign a pact in July began to falter before the deadline when the bloc’s Arusha-based Secretariat revealed that member states wanted a special deal on development assistance.
EAC Secretary-General Juma Mwapachu said though member states were willing to sign a deal on the framework, concern over development assistance had prevented them from doing so.
“We need some breathing space so that we work towards what is best for us with regard to development. They need to have some provisions to address the supply-side constraints,” he said.
EAC member states insist that the development assistance framework provided for under the European Development Fund is not sufficient to cover the risks the region will be exposed to under a new EPA.
“We are willing to sign the framework any time the EU addresses our concerns on development,” Mr Mwapachu said.
Experts at the UN Conference on Trade and Development have warned African states to ensure that the new pacts have specific components on development.
“Infrastructure improvement should be among the key priorities of these EPAs,” Unctad said.
While the EAC argues that the MFN clause gives the EU unfair advantage, the EU has maintained that it must get an exclusive grant for at least 80 per cent of the region’s market, in return for the 100 per cent market access it is giving EAC goods.
The private sector in Kenya is getting jittery over what it describes as the reluctance the government to push for the conclusion of the talks and is asking that the Interim EPA be officially extended until an EPA is arrived at.
“We are on edge again,” said Fresh Produce Exporters Association of Kenya chief executive Stephen Mbithi, adding that horticulture exporters are now wary of possible tariff headaches down the line.
They are afraid to conclude orders that could be subjected to tariffs mid-way and want the negotiations not only concluded but signed and sealed.
Private sector sources who spoke to The EastAfrican said the Ministry of Trade does not seem to understand the urgency of the matter, a situation they partly blame on the change of guard there.
The ministry has had a change of both the minister and permanent secretary over the past year.
Not only was the ministry split into two in March to accommodate the expanded ruling coalition, and put under a new minister following the defeat of former minister Mukhisa Kituyi as a Member of Parliament, his successor Uhuru Kenyatta was moved to the Treasury and replaced with Kimunya.
Kituyi’s PS David Nalo was then replaced by Cyrus Njiru. The changes have negatively affected the negotiations, since the new officials have to be taken through the drill all over again.
But Mr Kimunya says the interim agreement will not expire and the EAC will not sign until it is convinced that it will be for the benefit of all.
Traders are now trying to push the minister to get the IEPA extended to at least the end of the year, hoping that by then the EPA will have been signed. And in case this does not happen, then they want the IEPA signed into law.
EAC Presidents Mwai Kibaki of Kenya, Jakaye Kikwete of Tanzania and Yoweri Museveni of Uganda committed themselves at the time of agreeing to the IEPA that the interim deal would be taken back to the EU for interpretation and translation into some 21 languages, and return to the region so that the three principals could sign it to make it legally binding.
According to the WTO, the MFN is a status handed by a nation to another in international trade, meaning that the receiving nation will be granted all trade advantages such as low tariffs that any other nation also receives.
Exceptions, however, allow for preferential treatment of developing countries, regional free trade areas and Customs Unions.
Should the EAC miss out on signing the EPA, trade with Europe would revert to the less generous market access terms under the Generalised System of Preferences (GSP), with government estimates showing that such an arrangement would see some products currently exported to the EU at zero duty attracting rates between 8.5 and 15.7 per cent.
Kenya’s Trade Permanent Secretary, Dr Cyrus Njiru, has however downplayed the fresh concerns and said EAC states are optimistic of signing the EPA on time. “The deadline is not cast in stone. We are willing to sign when we are ready to,” he said, noting that most of the issues in the negotiation text had already been agreed on.
President Kibaki recently said Kenya would conclude negotiations with Europe and sign the framework by the end of this month. Meeting this deadline, however, now seems unlikely.
The ACP countries and the EU agreed through a partnership signed in Cotonou, Benin in 2001, to establish a new regime in the form of EPAs, which were to be concluded by December 31, 2007.
However, in the intervening period until December 31, the EU offered to provide non-reciprocal, duty free market access to all ACP countries except South Africa.
The non-reciprocal trading arrangement was based on a WTO waiver granted at the 4th Ministerial Conference in Doha in November 2001. The waiver was to last till the end of 2007.
Additional reporting by Julius Barigaba
