Businesses are growing anxious over failure to conclude talks on trade pacts between Europe and East Africa that were started five years ago.
The pacts would replace the current preferential trade deals that the World Trade Organisation (WTO) has rejected.
“The lengthy nature of the talks is causing a lot of anxiety among businesses which need to plan,” said Jane Ngige, the chief executive of the Kenya Flower Council (KFC). “The inconclusive talks leave many gray areas in terms of what the future holds.”
Kenya is particularly under pressure to sign Economic Partnership Agreements (EPAs) with Europe or risk massive disruptions to the economy.
“The government has done a lot with regard to the EPAs but we hope more effort will be added to clear the uncertainty,” Ms Ngige said.
The five EAC members signed an interim trade deal with Europe in 2007 to guarantee continued duty-free and quota-free access to the latter’s market following the expiry of the non-reciprocal trading arrangement based on a WTO waiver granted in 2001.
But years later they are yet to agree on a new trade platform with several self-set deadlines to conclude the negotiations being breached due to lack of consensus.
Should Kenya miss out on signing the EPAs, its trading with Europe would revert to the less generous market access terms under the General System of Preference (GSP).
The Trade ministry estimates showed that such an arrangement would see some of its products which it has been exporting to the market at zero duty attracting charges between 8.5 and 15.7 per cent. This development would in turn wipe out an estimated Sh100 billion in trade and investment especially in the horticulture sector.
Other EAC members could, however, still find a lifeline under Everything But Arms (EBA) initiative that covers so-called least developed countries (LDCs). Kenya is not an LDC.
Under EBA, poor nations are granted duty-free access to the EU for all products, except arms and ammunition and 41 tariff lines concerning rice and sugar, for which duty-free quotas are established until full liberalisation is achieved for rice (January 2010) and September 2015 (sugar).
Technocrats in East Africa claim Europe is partly to blame for delayed conclusion of EPA talks after it introduced issues such good governance in tax areas, trade and environment and obligations from Custom Union agreements.
“EAC has clearly told EU that introduction of new issues in EPA negotiations will delay completion of negotiations. EAC has strongly objected to this introduction of new issues,” Joseah Rotich, Kenya’s chief trade development officer and one of EAC negotiators, says. The EU, however, denies the claims and has since threatened to terminate the interim offer signed in 2007 — a move that would deny the preferential market access terms to countries that shall have signed full EPAs with it by January 2014.
Under EPAs, the EU will open its market 100 per cent to African, Pacific and Caribbean (ACP) countries in exchange for a promise by developing countries to liberalise 82.6 per cent of their markets. The countries are also negotiating new rules of origin.
Negotiators in EAC maintain that the demands by EU for a deal by January 2014 is untenable even though the bloc remains committed to sitting through the talks to conclusion.
“EAC is committed to conclusion of the negotiations. However, it does not agree with proposed deadline to conclude the negotiations since it will put pressure on the negotiation process,” Mr Rotich argues.
EAC ambassadors in Brussels are also lobbying the EU Parliament to drop the proposed deadline to amend regulation 1528/2007. Negotiations at technical and senior officials’ levels have been scheduled for next month to push on with the EPA agenda.