Europe warns EAC over delayed trade pact

The EAC has also claimed that the EU introduced changes to the negotiating text, an allegation that Brussels has denied.

“What is being prepared for signature is exactly the same text that was initialled in November 2007. No new issues have been introduced to this text by the EU side,” Mr Eric Van Der Linden, the head of EU delegation in Kenya told Business Daily.

Mr David Nalo, the Permanent Secretary in the EAC Affairs ministry, however maintained that an agreement on the pending issues was looming.

“Only a few issues on development assistance and the most favoured nation (MFN) clause are holding back consensus,” he said.

The MFN is a status granted to one nation by another in international trade and offers the recipient nation trading advantages such as low tariffs that others do not enjoy.

Under the WTO rules, any country granting another the MFN status to lower a trade barrier or open up a market must do so for the same goods or service for all its trading partners whether rich or poor, weak or strong.

The EAC is concerned that the EU could lock them into a water tight favoured trade arrangement at a time when they are deepening integration of their economies with the planned merger of the Common Market for Eastern and Southern Africa (Comesa), the Southern Africa Development Community (Sadc) and the EAC itself. EAC argues that the EPAs might lock them into a single commercial relationship without room to diversify their target markets.

Though the WTO prohibits a nation from using the MFN clause to discriminate against any of its trading partners as the EU is demanding from the EAC partner states, some exceptions are allowed.

The WTO says countries can set up a free trade agreement that applies only to goods traded within the group — discriminating against those from outside or offer developing countries special access to their markets. A country can also raise barriers against products that are considered to be traded unfairly from specific countries.

In services, countries are allowed, in limited circumstances, to discriminate but the agreements only permit such exceptions under strict conditions.

On Thursday, the EU warned the EAC of dire consequences should it fail to find a breakthrough soon.

“The situation, as it stands now, is untenable” Mr Clarke said “ACP countries which signed EPAs enjoy free access to EU markets, but they also took legally binding commitments, while a number of others including EAC countries which initialled but did not sign the FEPA, enjoy the same free access without any legally binding commitments. This is inconsistent and in fact the current situation is contrary to both EU law and World Trade Organisation rules,”

He said the EAC countries are likely to regret missed opportunities even as they eyed wider integration under a common market.

“Further delay in the signature is also a missed opportunity for the EAC to further integrate into the world economy and sends mixed signals at a time when EAC is pushing for broader regional integration. I would encourage EAC Trade ministers’ meeting in Arusha tomorrow (Friday) to give a clear signal that they are willing to sign the FEPA as initialled in 2007 and be the last EPA region to obtain legal security for the agreed market access to the EU” the EU official said.