Trade agreement with EU slowly takes shape

Kenya and other member states of the East African Community (EAC) are currently negotiating new economic partnership agreements (EPAs) with the European Union (EU).

Trade relations between the African, Caribbean and Pacific (ACP) countries and the EU had, since the 1980s, been guided by non-reciprocal trade preferences which granted nearly all products originating from these ACP states duty free access to the European market.

But despite this preferential treatment, the ACP states were hampered by a narrow export product range and other challenges.

Their share of total EU imports fell steadily over the years.

To remedy the situation, the two regional blocs sought to negotiate an alternative trade agreement that took not only north-south trading opportunities into account, but factored in south-south trading and regional co-operation as well.

This shift took place against the backdrop of increased pressure from the World Trade Organisation (WTO) to move away from non-reciprocal trade.

The ACP states and the EU agreed in Cotonou in 2001, to establish a new trade regime in the form of Economic Partnership Agreements (EPAs) to be signed between the EC and countries willing and ready to do so by December 31, 2007.

The EU undertook to provide non-reciprocal, duty free market access to all ACP countries except South Africa during the intervening period.

The non-reciprocal trading arrangement was based on a WTO waiver, granted at the 4th ministerial conference in Doha in November 2001 which was set to expire at the end of 2007 on the assumption that it would not be necessary after that.

Most ACP countries, Kenya and its EAC partners among them, were however unable to beat this deadline.

Initial indications were that the EAC countries would sign a framework on the economic partnership agreements (FEPA) by end of July this year.

This, however, did not happen.

According to EAC officials, certain contentious issues, especially with regard to development and aid to trade, were yet to be satisfactorily addressed.

If Kenya does not sign the FEPA, its trade terms with the Europe will revert to the less generous market access terms available under the General System of Preference (GSP).

This would mean that some of the products it has been exporting to the EU at zero duty will attract duty of between 8.5 and 15.7 per cent costing the country an estimated Sh100 billion in revenues.