Europe ’Awol’ from decisive EAC meeting on trade accord

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"To be honest, I don’t know why they didn’t turn up; they didn’t communicate to us," Peter Kiguta, director-general of customs and trade at the EAC Secretariat, told The New Times.

The New Times (Uganda) | 1 October 2014

Europe ’Awol’ from decisive EAC meeting on trade accord

By Kenneth Agutamba

The East African Community’s (EAC) last-minute efforts to have negotiations of the contentious Economic Partnership Agreement (EPA) concluded before today’s deadline were dealt a huge blow after European Union (EU) delegates failed to turn up for a decisive meeting in Nairobi last week.

The EU Director-General of Trade was supposed to lead a delegation to Nairobi to attend what had initially been tipped to be "the last round of negotiation" in which the proposed trade pact would finally be initialised before final ratification by the EAC ministers of trade.

The meeting was supposed to last four days, from September 23 to 26.

Sources have intimated to The New Times that the ’boycott’ was a last-minute development that left the EAC delegation of high ranking government officials surprised.

"To be honest, I don’t know why they didn’t turn up; they didn’t communicate to us," Peter Kiguta, director-general of customs and trade at the EAC Secretariat, told The New Times by telephone.

Emmanuel Hategeka, the permanent secretary in the Ministry of Trade and Industry, who was part of Rwanda’s delegation to the negotiations, also said he was surprised by the EU team’s absence.

Before the meeting, permanent secretaries of trade ministries, who formed EAC’s delegation, had high hopes that the meetings would finally bring years of negotiations to a conclusion and even had slim hopes of having the deal signed before deadline.

Now all that is shuttered.

"I think you can now say that we will indeed miss the deadline, that’s for sure," said PS Hategeka.

In Arusha, Kiguta said the Secretariat has already written to their European counterparts to ask them when they can have the meeting and where. It is likely the next meeting will be held in Europe. The EAC says they are open-minded.

"We are waiting for their response and, hopefully, if we can have the meeting, the ratification could happen in three months, at most," Kiguta said.

In Kigali, a hopeful Hategeka also thinks the two parties both want the process concluded and sees no reason for a long delay.

"We have come a long way to give in now. As EAC, I feel we have done our part and now the ball is in their court," Hategeka said.

Implication:

News of the collapsed meeting is expected to agonise EAC exporters whom, after the passing of the October 1 deadline, can expect to have their commodities taxed hitherto nonexistent duties, before they enter the EU’s 28-member-state market.

"Unless the European Parliament sits and decides to postpone the deadline until we have the EPA signed, EAC exports are likely to suffer heavy taxes which will make them more expensive hence less competitive on the European market," Kiguta said.

That is especially the case for Kenyan horticulture exporters, who had put their hopes in last week’s meeting to yield an agreement between the EAC and Europe to safeguard their lucrative market for flowers and other products.

"Kenyan exporters will pay duties until the EPA is ratified. It’s painful for them, they are asking for quickening of the process to make it shortest possible," said Jane Ngige, Kenya Flower Council chief executive.

It is speculated the price of Kenya’s flowers could rise by up to 8 per cent after today.

Kenya is the lead exporter of fresh rose flowers to Europe with a market share of about 38 per cent and exported 124, 858 tonnes of flowers in 2013, according to the Kenya National Bureau of Statistics.

Exporters from other EAC countries are unlikely to suffer as much as Kenya as they can still enjoy preferential treatment from EU under the Everything But Arms (EBA) arrangement reserved for least developed economies.

Rwanda can enjoy EBA benefits but Hategeka cautions that it’s unwise to start speculating on an unpredictable situation, saying it would be in everyone’s interest to have the EPA concluded for all to benefit.

Rwanda’s exports to EU include vegetables, fruits and coffee; these may not suffer EU taxes but EBA is a unilateral agreement controlled by EU, who could freeze those benefits if they so wished.

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What’s EPA?

The EAC partner states belong to the African, Caribbean and Pacific Group of States (ACP), under which they would enjoy a special trade relationship with EU.

Godfrey Ssali, a policy analyst at the Uganda Manufacturers Association, said that relationship has been guided by the ACP-EU Agreement signed in Cotonou, Benin, in 2000 to last until 2020.

Under the Cotonou trading component of the ACP-EU relationship, EU would grant preferential access to the European market for products from the ACP member states.

But the Trade Cooperation Chapter of the Cotonou Agreement under which the EU extended non-reciprocal trade preferences to ACP countries expired on December 31, 2007, and the Cotonou trading regime was not compatible with international trade rules under the World Trade Organisation (WTO).

The incompatibility arose because the EU discriminated amongst her other trading partners; by exempting exports of the ACP to EU from tariffs-[WTO discourages trade discrimination of members]. The EU risked legal challenges from WTO members, who felt it discriminated by this arrangement.

To guard against legal challenges to the incompatibility under WTO rules, the EU had to work out a reciprocal WTO-compatible trade agreement with ACP countries.Under the Cotonou Partnership Agreement, parties agreed to conclude the newly WTO-compatible trading arrangements with EU and progressively remove barriers to trade between them to enhance cooperation in all areas relevant to trade.

These trade arrangements are the ones referred to as the Economic Partnership Agreements.

However, given that many ACP countries are members of regional economic unions such as Ecowas and EAC, Europe had to negotiate EPAs not as bilateral relationships but with regional blocs of member countries.

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Controversial trade clauses:

The EAC, which is an economic bloc of five states, has been collectively negotiating its EPA with Europe since 2007, but an agreement continues to elude them. The deadline expires today.

Several contentious clauses proposed by Europe have been rejected by EAC, whose own amendments would also be counter-rejected by EU causing the delay.

But experts note that EAC is doing the right thing to run a fine toothcomb through the EPA proposals that once signed would be legally binding in case of any breach.

As of last Friday, the formerly long list of contentious issues had been trimmed to just four; these regard taxes on EAC exports to Europe, [EU reportedly wants no taxes], domestic taxation policies, consequences to EAC customs union after EPA signing and relations with other agreements such as Cotonou.

The EAC had harmonised its position on those four points during a Ministerial Council meeting on September 20; it’s that position that should have been presented to the EU last week and hopefully have negotiations concluded.

Now the future of the EU-EAC economic partnership temporarily hangs in balance as the EAC waits to hear from its European counterparts.

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source: New Times