East Africa strikes free trade deal with the EU

The East African Community moved closer to striking a deal on Economic Partnership Agreement negotiations with the European Union after Brussels softened its stand on development support – a key demand of African states that has stalled the talks for nearly three years.

The deal was struck at a recent meeting of EAC and EU officials in Brussels where the Europeans reportedly agreed to finance priority development programmes in East Africa, removing a major obstacle to conclusion of the deal.

An EAC official, who attended the meeting, told Business Daily that the European Commission (EC) had asked East African states to prepare a list of priority projects and programmes that require EU funding for possible approval in the next two weeks.

Development needs

That move is expected to pave the way for the signing of the Framework for Economic Partnership Agreements (FEPA) by the end of this month.

“Both parties also agreed to work towards defining and addressing the development needs associated with the EPAs to promote sustained growth, strengthen regional integration, foster structural transformation and competitiveness that will increase production in the countries concerned,” said our source.

EAC wants an enlarged development budget from the Europeans in exchange for trade liberalization, but the EC has maintained that it is already spending a lot of money in the region, and cannot take an additional burden.

Last month, however, the parties reportedly agreed on an EAC-EPA-Development Matrix, but the EAC requested for more time to refine it with a list of priority projects and programmes before March 22, 2010.

“Once the EC side receives the refined list, we can be sure of signing FEPA by the end of this month and a comprehensive EPA by the end of the year,” said our source.

On Wednesday, the East African Business Council (EABC), an umbrella body of business associations, celebrated the breakthrough with a congratulatory message to EC and EAC for sorting out the contentious issues.

“The prolonged impasse on contentious issues in FEPA had created uncertainty in the business community, especially in Kenya, over access of their goods to the European Union,” said Ms Agatha Nderitu, the EABC’s acting executive director.

Highly competitive

“Agreeing on how to proceed is a positive development that should enable us to make recommendations with a clearer road map,” she said.

EC and the EAC initialed FEPA in 2007 to replaced the earlier non-reciprocal trade agreements that are now banned by the World Trade Organisation family, setting an initial deadline of sealing a deal for full EPA by 2008.

However, disagreements over key issues such as economic development, export taxes, and Most Favoured Nation (MFN) treatment clauses have prevented the negotiators from sealing a deal.