Will Kenya Sign Slanted EU Economic Partnership Agreement?

Intra Africa Trade
Europe is attempting to monopolise African trade with slanted Economic Partnership Agreements

AFRICANGLOBE – A row is brewing between Kenya’s new government and her regional counterparts over its readiness to sign the European Union’s Economic Partnership Agreement (EPAs).

It’s really a bit of a quandary because while Kenya is under pressure to sign, thanks to lobby groups that argue that the government’s delay was a threat to the country’s fish and flower sectors, the other EAC member countries are under pressure not to endorse the deals thanks to lobby groups in their countries that say that the EPAs are a threat to their national economies.

The chief executive officer of Kenya Flower Council (KFC), Jane Ngige, is spearheading the move to urge her government to endorse the deal. She told the press in May that failure to sign the deal could spell doom for the country’s horticulture sector. She said the country stands to lose its duty free quota and free access in the European market.

However Jane Nalunga, the Uganda country director of Southern and Eastern Africa Trade and Negotiations Institute (SEATINI), says Uganda should not be pressurized into taking the cue from Kenya. She suggests that Kenya could be making a mistake because it can still get other alternatives within the region and Asia for its products.

Dan Kidega, one of Uganda’s representatives to the East African Legislative Assembly (EALA), agrees. “Kenya is engaging in ‘panic mode’ over the loss of penetration into EU market, yet her worries can be sorted as bloc,” he says.

Though he says that while the Joint Trade Negotiations Act that will prohibit individual members from negotiating trade agreements is still pending, Kenya should not succumb to pressure to sign the deal.

It appears Kenya’s opposition Members of Parliament are taking the line of lobbyists in the neighborhood and are now urging the Kenyatta government to re-consider the country’s interests before signing the deal. The negotiations have now been put to a halt.

But one negotiator, Emmanuel Mutahunga, the senior principal commercial officer at Uganda’s Ministry of Trade, Industry and Cooperatives, is more positive. He says Kenya could be right to sign on the dotted line. “Kenya should not wait for the slowest member of the convoy to determine the speed of the rest hence should move on and sign the deal,” he says.

Mutahunga is also the programme manager for EPA- related Trade and Private Sector Support (EPA TAPSS), an EU-funded project under the ministry. Speaking to participants at a recent agricultural dialogue organized by Participatory Ecological Land Use Management (PELUM), a CSO, he outlined the progress of the EPA negotiations in the region and the reason for Kenya’s apparent panic.

Mutahunga said Kenya is in more desperate situation as it is not among the Least Developed Countries (LDC) like all the other four EAC members – Rwanda, Tanzania, Burundi and Uganda – which trade with the EU under Everything But Arms (EBA) arrangement under which all products except arms enjoy tariff free access to the EU market.

Without EPA, Kenya’s exports may be subjected to punitive taxes under the third country or the Generalised System of Preferences (GSP). GSP is a trade arrangement through which the EU provides developing countries and territories with preferential access to the EU market in form of reduced tariffs for their goods when entering the EU market.

“Signing the deal is not good for regional integration,” he said, “But if Kenya sees that it’s going to lose, then let her neighbours address her concern.”

Nalunga, however, insists that because Kenya has a strong private sector, rather than look at EU only, it should focus on the regional market because “EU is demanding much more.” “Kenya, just like Uganda, cannot compete with EU that gives a subsidy of about $2 per cow to promote milk production,” she says.

Secondly, Nalunga argues, “we pay per carbon foot print for exports flown to the EU, which just pushes us out of their market.”

She cited trade barriers in the deal as rules of origin, sanitary and phyto sanitary measures, tariff peaks and tariff escalations, most favoured Nation (MFN) treatment, where if European Commission gives better treatment to a 3rd country, they have to give it to the EAC as well and if EAC gives better treatment to a developed country or any country accounting for more than 1% of world merchandise trade, EAC has to extend the same treatment to EU.

“Members of the ACP group and other African countries are not covered by the MFN provision with respect to the EAC,” Nalunga argues, adding, “This is tying our hands on who to trade with.”

In a recent interview, the EU Delegation in Uganda said they are aware of CSO’s concerns and “are already taking them into account.” “EU is not pushing for the EPAs,” it said. “The ACP countries are asked to make a decision about their future trading relationship with the EU.

Indeed, recently, EU officials in Kenya waived the clause and now EAC can trade with other ACP countries but not with other countries especially China.

The EAC countries committed themselves to allow EU goods into the market over a period of 25 years in three phases. For 2008-2020, they will open up to 64%, up to 16% between 2015 to 2023 and up to 2% in the last phases 2020 -2033, making a total of 82% for imports from the EU. Extensive liberalisation with EU with developed agricultural sector while subsidies remains a contentious issue.

Sarah Kirabo, the board chairman of PELUM, said “this wide spread opening up of markets will expose Uganda’s agricultural and industrial producers to unfair and harsh competition from EU subsidized and more competitively produced goods,” hence , “without adequate protection, Uganda’s farmers and manufacturers will not survive; resulting into adverse impact on livelihoods, employment, and on efforts to industrialize.”

But Mutahunga says the text on ‘Trade in Goods’ addresses issues of non-tariff barriers and trade defense instruments. “This allows EAC to raise tariffs to protect against imports of either goods that are being dumped or where an increase in imports is hurting local industry or are subsidized; otherwise no Party is to raise its tariffs.”

Nalunga warns that the reduction of tariffs affects efforts to industrialise and eventually affects production.

Mutahunga though, says the agreement preserves EAC’s right to continue to levy existing export-related taxes such as on hides and skins and allows the introduction of new export-related taxes in order to foster the development of domestic industry to facilitate value addition or to maintain currency value stability.

Part Two