East Africa: Ministers move to protect industries from threats of EPAs

East African Business Week (Kampala) | 29 October 2007

East Africa: Ministers Move to Protect Industries From Threats of EPAs

John David

East African trade ministers have thrown a new spanner in the works as the countdown to the December 31, 2007 deadline for signing a new trade partnership deal with the industrialized EU states narrows to less than 60 days.

The ministers held a secret meeting in Nairobi away from the full glare of anti-globolisation activists and agreed to sign the contentious Economic Partnership Agreement (EPA) only if an amendment ensuring that the region’s taxation regime remained intact.

The East African Community (EAC) is operating under a common taxation regime, which allows tax-free importation of raw materials, a 10% tax on semi-finished goods and a 25% tax on all industrial products such as cars and heavy machinery.

The ministers adopted a report compiled by an expert panel of the EAC, which recommended a joint negotiating position for the five East African states and agreed to present a common regional position during high-level talks with the European ministers. The talks begin in November.

The ministers who met in Nairobi on October 11, endorsed recommendations of an EAC Expert Working Group. The experts had recommended the region should comply with a directive by the EAC Heads of State of forming a joint front in the talks.

The position taken by the ministers is an emphasis that the region is not ready to give in to pressure to sign the EU pact if it would erode its customs territory.

However, the European Union (EU) says it will allow East Africa to apply all protectionist policies and exclude all sensitive products from the EU from entry. The EU is also ready to renegotiate the rules of origin to enable the region more flexibility.

The EU has signaled its willingness to continue the negotiations into early 2008 to avoid the disruption of trade between Europe and Africa but warned that the region must brace for the signing of the trade deal or risk losing its investments in the horticulture sector.

Mr. Harvey Rouse, the Head of Political and Trade Section of the European Commission in Nairobi, said Brussels had taken note of the lack of progress on the EPAs especially within Eastern Africa and was considering an extension of the time frame.

"There is a clear need to sustain current market access preference to the EU to avoid macro-economic instability and disruption of economic activities, especially in the agricultural sector where growth has relied on the EU market preference for the past 25 years," Mr Rouse told the East Africa Business Week.

"We have also agreed to rewrite the rules of origin to further improve the market access opportunities for Kenya and other Africa Caribbean and Pacific (ACP) exporters," he added.

The tough stance taken by the EAC ministers is seen as good news to the region’s manufacturers who would be shielded from cheaper and highly subsidized imports from the EU states.

Rouse said the EU would not sell subsidized products to the African markets and reiterated that the signing of the trade accord would allow African states more flexibility to enjoy cheaper machinery imports from Europe.

Kenya and countries in the region will be able to protect and exclude sensitive products and take advantage of long transition periods of adapting to the new trading arrangement in order to nurture the region’s growing manufacturing industries, Rouse said.

During the adjustment period, the EU will provide "very substantial" technical and financial support to help with implementation of the new arrangements, Rouse added.

He said cuts on import taxes granted to other parts of the developing world like India have proved that carefully timed tariff cuts can benefit consumers and local companies that need cheaper machinery, raw materials and parts for assembly.

The EPAs is perceived as a way to force African states to remove the protection veil around markets and give free access to European dairy and cattle products to gain entry into the African consumer market at no tax and to great advantage for the EU farmers.

East African countries retreated into a smaller segment of the larger negotiating unit consisting of all states in the Eastern and Southern Africa (ESA) region.

The ESA states, which brings together 16 states mostly members of the Common Market for Eastern and Southern Africa (COMESA), has been the negotiating cluster for the signing of the EPA, which is meant to replace the soon to be defunct Cotonou agreement.

Europe is pushing for a reciprocal trading system with African states which guarantees its producers an unfettered access to the region’s markets at the same rate at which it opens its doors for cheap raw materials and agricultural products from Africa.

However, African trade watchdogs are opposed to the proposed trade regime, saying it would leave already impoverished states poorer while wipping out the already weak and infant industries which need government support to survive.

The EAC ministers demanded that an increase in aid for trade funding for the region would also become a key negotiating position.

"The Ministers were further unanimous that the issue of development needs should be uploaded into the current EPA negotiations framework in order to address the supply side constraints," the EAC Secretariat said in a statement issued a day after the talks.

"These development issues should be leveraged with clear benchmarks and budgeted priorities so as to establish a clear and long term partnership," they said. Analysts see the new position taken by the EAC ministers as a climb up and a move to arm-twist the EU into allowing the poor African states to protect domestic industries. "In adopting this parallel approach, the EAC will ensure that its harmonized common proposals will be part of the negotiating process.

source: AllAfrica.com