Kenya has been pushed into a tight spot after Europe set a November deadline to conclude long running negotiations with East Africa over the signing of new trade and economic partnership agreements.
The new deadline followed an unsuccessful round of talks in Dar es Salaam this week aimed at unlocking a stalemate on the signing of a framework on the Economic Partnership Agreement (FEPA).
“We didn’t agree and both sides agreed to maintain the status quo as we work towards beating the new November deadline,” David Nalo, the permanent secretary at the East African Community (EAC) Affairs ministry said.
“It was agreed that signing a framework on the EPA would be an illegality at this stage because the original deadline of July 2009 had lapsed. All negotiations would now be focused on having a comprehensive EPA by November,”
Among the sticking issues ahead of the Dar es Salaam talks had been a demand by EAC states for an enhanced development budget to compensate them for revenue losses expected to result from removal of tariffs on EU imports.
The EC has argued that it already disburses a lot of budgetary allocation in development support to the region and will not make additional commitment.
Analysts said the new November deadline now leaves Kenya in a precarious position because its stands to be the biggest loser should the EAC fail to sign EPAs with Europe.
Due of its position as a non-member of the Highly Indebted Poor Country (HIPC), failing to sign the EPAs would force Kenya to trade with the EU on the less generous General System of Preferences (GSP) platform.
That means the country’s exports that currently enter the European market on zero tariffs will start attracting duty of between 8.5 per cent and 15.7 per cent.
The Trade ministry estimates that loss of tariff preferences with the shift to GSP would cost Kenya investments worth $700 million and thousands of jobs in the horticulture sector.
Tanzania, Uganda, Rwanda and Burundi on the other hand have little to worry about because they are currently categorised as members of the HIPC club and have the option of trading with Europe under the concessionary Everything-But-Arms (EBA) clause of the WTO rules.
Unfortunately for Kenya, the provisions of the EAC custom union management Act require that all the five EAC countries jointly discuss trade terms with external parties.
“It is quiet frustrating for us because of the obvious losses that we face. We must keep pushing for a deal because it is for our own good,” a senior official at the Trade ministry told Business Daily.
The deadlock at the Dar es Salaam talks was however largely expected following a build up of discontent within the East African political class and civil society amid claims that the region was likely to lose out should it accept the deal as currently proposed by Europe.
Signs that the three day talks would hit the rocks came through on Tuesday when Mr Eric van der Linden, the head of the EU delegation in Kenya, said that the possibility of landing a new deal remained unlikely and cited “negative opinion” from the political class.
Last week, EALA urged EAC member states not to sign the EPAs until all outstanding issues are resolved.
Top on the list is investment and government procurement as well as the terms of trade that EU is offering but East Africans sees as tilted in favour of Europe.