EPAs on banking to boost trade within Africa

“Only a few issues on development assistance and the most favoured nation (MFN) clause are holding back consensus,” David Nalo, Kenya’s permanent secretary in the EAC Affairs ministry told Business Daily in a recent interview.

MFN status is 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.

Water-tight agreement

Under 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 services for all its trading partners whether rich or poor.

The EAC is concerned that the EU could lock them into a water-tight trade agreement 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 African Development Community (SADC), and the EAC.

The EAC argues that the EPA may lock them into a single commercial relationship without room to diversify target markets.

Although the WTO prohibits a country 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.

Special access

According to the WTO, countries can establish a free trade agreement that applies only to goods traded within the group, thereby discriminating against those from outside, or offer developing countries special access to their markets.

A country can also raise barriers against products considered to be traded unfairly from specific countries.

In trade in services, countries are allowed, under conditions, to discriminate.