The fate of the region’s long running search for a binding preferential trade pact with Europe hangs in the balance after the East African Community refrained from providing direction on crucial trade pacts last week.
Lack of feedback from the regional body by the end of this month could leave traders open to higher tax levies and lock them out of established markets.
The economic partnership agreements (EPAs) are seen as the only recognisable trade instruments through which the region will safeguard its preferential relations with Europe in the years to come as the world shifts away from non-reciprocal trade pacts of yesteryears.
In Tanzania, where a total of Sh604 billion worth of goods was exported to Europe under preferential terms in 2008, reality is fast dawning on traders that it can only take a miracle for the EAC countries to agree and sign a binding pact with Europe by the end of this month as earlier scheduled.
For Tanzanian exporters, this legal void has created a lot of uncertainty in their operations. They cannot tell for how long the European Commission will continue to extend the preferential trade relations.
And even as those preferential terms last, exporters are well aware of the enormous risk they are exposing themselves to since there is no treaty to turn to in case of a dispute.Kenyan exporters, on the other hand, fear that should the EAC could lose the preferential trade terms because of failure to reach consensus at Arusha. Only the Kenyan produce face tariffs and export quotas in Europe, since the rest of the members are least developed countries (LDCs)
The region —under the EAC configuration — has been negotiating the contents of EPAs with European Commission since 2007 — the deadline that World Trade Organisation gave its members to scrap all the non reciprocal preferential trade agreements such as the ones Europe used to extend to its former colonies.
Under the pact’s legal framework, EU has offered 100 per cent duty free market access with exception of ammunition and transitional arrangement for sugar and rice in exchange for 82.6 per cent liberalisation of trade with EAC subject to an exclusion list accounting to 17.4 per cent to the trade.
Early this month, EAC secretary- general Juma Mwapachu blamed the delay on electoral politics that has engulfed the region for most part of the year, beginning which saw general elections conducted in Burundi, Rwanda and Tanzania this year. Kenya and Zanzibar also conducted referendum in August this year.
Mr Mwapachu said the region was now ready to restart the negotiations on EPAs after getting funds from donors, a view that has been faulted by some partner states.
“Based on the pace at which things are moving in the region, it is quite safe to predict that the region will not be ready sign EPAs in the next two years,” said a senior government official who cannot be named because of direct involvement in the negotiations.
“If Tanzania suspended her participation in trade negotiations this year because of national elections, we expect similar interruptions from Uganda which is holding her elections next year and Kenya whose election comes in 2012,” said an official who requested not to be named.
Even if the negotiators were to finally meet and agree on the legal text on EPAs, the process is likely to be prolonged by the many differing voices that have emerged in recent times.
Both the civil society organisations in the region and members of the East AfricanLegislative Assembly (EALA) have vowed to reject any pact that is not equitable and economically beneficial to the region’s citizens. Duty freeThe instrument evolved from the Hong Kong Ministerial meeting in 2005 which came up with a declaration that developed countries shall grant duty free, quota free market access to LDCs on 97 per cent of tariff lines.
The meeting also urged the emerging developing countries to grant similar preferences to LDCs to do so. While the call has seen emerging economies such as Brazil, India and China extend quota and duty free status to goods from LDCs, NGOs from Africa are still worried that composition of such exports are mainly primary commodities.
“The 97 per cent tariff lines that is extended to LDCs is made up mainly of natural resources and agricultural commodities which are exported in primary forms while the excluded three per cent include value addition and other sectors that are strategic to the region’s development agenda,” argues Victor Ogalo, programmes officer at CUTS International’s Nairobi resource Centre.
At a meeting held in Arusha early this month, civil society organisations from across Africa drew the battle lines, vowing to press for the change in trade engagement with LDCs when World leaders meet to review the progress of the preferential trade terms next year. Africa is the continent with the highest concentration of LDCs in the world.
In a statement — dubbed the Arusha declaration — released after the meeting, the NGOs said any future preferential trade pacts must recognise trade as a key avenue through which LDCs could achieve significant poverty reduction and development
“LDCs need these preferential schemes to increase exports, create jobs, and attract investment. However, past and present tariff preference schemes remain restrictive and complex, especially in their rules of origin and lack coordination across countries, leading to their suboptimal utilisation,” said the statement that targets the forthcoming United Nations LDC-IV forum in Istanbul.
Mr Nicholas Rudaheranwa, a Ugandan national working at the Economic Affairs Division of the Commonwealth Secretariat said the skewed pacts that poor countries have signed with their developed counterparts have only encouraged export of primary commodities.
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