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EAC Sceptical of Trade Agreements With Europe

The Observer, Uganda

EAC Sceptical of Trade Agreements With Europe

By Joseph Olanyo

19 September 2012

In his keynote address on the role of multilateral and bilateral trade agreements in fostering trade and development in Africa early this year, former Tanzanian president, Benjamin William Mkapa, raised critical questions and warned East African Community (EAC) countries that signing an Economic Partnership Agreement (EPAs) would deny the region chances to develop into industrialized nations.

"If we sign the EPA and other sub-regions do so too, we would be giving up the better option we had before us, which allows for real industrialization," Mkapa said.

Mkapa, the current chairman of the South Centre, an intergovernmental organisation of developing countries, stressed that Least Developed and Developing Countries must always ask whether trade agreements will help increase domestic production, encourage diversification and industrialization, increase food security, provide quality employment and support the region’s move from largely raw natural resource exporters, towards producers of more sophisticated products.

He concluded that the answers to these questions would point the direction for what we do with trade agreements, in particular, the EAC EPA. EPAs are reciprocal free-trade agreements currently being negotiated between the European Union (EU) and the African, Caribbean and Pacific (ACP) countries. The agreement essentially entails the further liberalisation of ACP countries with far-reaching implications on the economic, social and cultural rights of the people in the ACP countries.

Launched in September 2002, the negotiations were slated to be completed by December 31, 2007. However, 10 years later, EPA has continued to raise uncertainties among stakeholders. The main argument is whether to sign EPAs in its form or not. At a two-day symposium on Trade Liberalization, the EPAs and their impact on Sustainable Development in Uganda organized by SEATINI Uganda in Entebbe last week, trade experts, parliamentarians, civil society organisations (CSOs) and ministry of Trade, Industry and Cooperatives officials, raised pertinent questions on the stalled partnership. MPs on the National Economy and Trade committee argued that they would not sign agreements that do not benefit the country.

"EPAs cannot be the way to go because there is no level field. Uganda was the biggest negotiator of AGOA, but the least beneficiary of AGOA.

"We liberalized without regulation and now we have nothing to plough back. As parliament, you need to scrutinize agreements before rushing to sign them," said Mukitale Birahwa, the committee chairperson.

However, Cyprian Batala, the acting commissioner External Trade, said the country was already moving towards signing the EPAs.

"We have agreed on a regulatory framework to guide us on this and all issues under economic development have been agreed upon. But signing EPA doesn’t mean we are going to trade with the EU 100%," Batala said.

Asked when the EPA would be signed, Batala said: "Negotiations are still progressing and therefore, too early to prejudge."

But a number of stakeholders hold the view that Ugandans should not expect much from EPAs since a number of issues have to be addressed.

"An agreement is a give and take. What are we signing, what are we giving and what are we taking?" asked Jane Nalunga, country director, SEATINI Uganda.

Uganda liberalized her economy under the Structural Adjustment Programmes (SAPs) which, among others, saw the adoption of policies like liberalization of her economy, privatization of her public enterprises and deregulation. These policies have had mixed results, many of which have been drastic to her economy.

Statistics from Uganda National Bureau of Statistics (UBOS) show that the economic prosperity which SAPs preached has led to continuously increasing trade deficits for Uganda which have surged up to $2,583.9 million in 2011. The UBOS report said this has led to deindustrialization and subsequently to unemployment as imports from developed countries have increased and displaced domestic firms.

This has also put Uganda’s opportunity to transform, develop and industrialise her economy in jeopardy, according to the report. The EPAs demand that EAC opens its market to goods from the EU over a period of 25 years in three phases. In the first phase (2008-2010), EPAs demand that the EAC liberalizes 64% of imports from the EU; while in the second phase (2015-2023), 16% of imports will be liberalised.

In the last phase, (2020-2033), the EAC will liberalize 2%; making a total of 82% of liberalised imports from the EU. Trade analysts say this extensive liberalisation will not only lock in the reforms undertaken under the SAPs and expose Uganda’s agricultural and industrial producers to unfair competition, but also deepen since SAPs involved tariff reduction while EPAs involve tariff elimination which is irreversible.

There is also great concern that EPAs will make the realization of the Millennium Development Goals (MDGs) by 2015 more difficult once the economies of developing countries are further liberalized. This, the experts said, will lead to reduced domestic production and productivity, deindustrialization leading to increased unemployment and, subsequently, increased poverty.

Dr David Kibikyo, an economist at Kampala International University, contends that there is need to assess what policies the government can put in place in order to address Uganda’s development challenges through structural transformation of her economy, which will enable her to attain sustainable development.

"Industries perform poorly because government is not doing its role properly. Can we think of exporting things in form of a supermarket? If the EU wants to collaborate with us, we can trade in form of a supermarket," Kibikyo said.