Europe warns EAC over delayed trade pact

Brussels on Thursday said its patience in the long-drawn out negotiations for a new trading pact with East Africa had run out, signalling that the flow of goods from the region to Europe may soon hit a rocky path.

The European Union said it will no longer tolerate indecisiveness on the economic partnership agreements (EPAs) and demanded that the Council of Ministers meeting in Arusha this morning resolve the matter.

“More than two years after initialling the framework EPA with the EU, the East African Community has not signed it yet, a situation that cannot be sustained,” said the EU head of delegation in Tanzania, Mr Timothy Clarke.

“We would like to convey a clear message to the EAC ministers that it is now time to follow through with the clear forward-looking agreement of 2007, when negotiations on a framework EPA were concluded, and turn this new trade and development partnership into reality,” he added.

The warning means the EU could fix a deadline by which East Africa must sign a new EPA or risk restricted access of its goods to Europe.

Failure to conclude the deal could, for instance, mean that all EAC member states be forced to trade with Europe under the less attractive market access terms provided for in the General System of Preference (GSP).

For Kenya, such a move would mean that key exports to Europe such as cut flowers would start attracting duty at between 8.5 and 15.7 per cent scheming off an estimated Sh10 billion in lost revenues. They currently attract none.

EAC and EU have since 2007 been holding high-level negotiations for a new deal following the expiry of the one in which Europe granted duty-free market access to goods from all the African Caribbean and Pacific (ACP) nations except South Africa.

The old deal was based on a non-reciprocal trading terms with Europe and was discarded on the grounds that it failed to yield much fruit for the ACP countries because of its narrow export product range and the failure to comply with World Trade Organisation rules.

The two blocs have been negotiating an alternative agreement that opens trading opportunities between them without blocking the growth of south-south trade.

The new EPA was to have been signed by December 31, 2007 when the old Cotonou agreement expired but disagreements over key aspects of the deal forced the EAC to sign a temporary agreement to prevent a fallout and loss of access to the lucrative European market.

Failure to beat the deadline was also linked to the EAC’s opposition to the development assistance and trade in services clauses of the pact.

“We are keen to come up with an agreement that is acceptable to both sides. It would be foolish for us to rush discussions for purposes of completing without getting a good deal for our people,” Kenya’s Trade minister Amos Kimunya told journalists in Nairobi.

He said the EAC was still monitoring changes in the EU’s team of negotiators.

“There were changes on the EU side at the commissioner’s level and we have been following that to see how they affect our ongoing negotiations. The important thing for us to remember is that all these negotiations must in the long run serve East Africa in the best possible way,” he said.

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.