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EPA negotiations: Is EAC at the crossroads?
Workers package and weigh ginger. There is more ginger on the market though demand remains constant. File photo
What you need to know:
The East African Community (EAC) should reflect on the process thus far, and make important decisions about its future trade relations with the European Union (EU). Annette Mutaawe Ssemuwemba points out that failure to ratify the Economic Partnership Agreement (EPA) may bring negative ramifications for some countries, especially Kenya, which is not a beneficiary of the “Everything but Arms Initiative.” Unlike the rest of the EAC nations which are Least Developed Countries, Kenya is considered a developing country
In February 2004, 12 years ago, Economic Partnership Agreement (EPA) negotiations were officially launched between the East and Southern African (ESA) countries and the European Union (EU). Negotiations were meant to conclude in 2007. But the process is still trudging along and deadlines have passed. During this time, however, progress has been made despite the complexities surrounding the negotiations. In this article, l do not intend to put up a case for or against EPAs but rather to enlighten interested readers on the meaning of “EPAs” and situation surrounding the completion of the agreement.
On October 16, 2014, the East African Community (EAC) comprising of Burundi, Kenya, Rwanda, Tanzania and Uganda finalised the negotiations for a comprehensive Economic Partnership Agreement (EPA) with the EU. Among the many conclusions included commitment for immediate duty-free quota-free access to the EU market for all EAC exports. It also proposes for the EAC to liberalise the equivalent of 82.6 per cent of imports from the EU by value. The remainder would be progressively liberalised within 15 years from the moment the EPA enters into force.
2.9 per cent of it will be liberalised only within 25 years. There are other features on Non-Tariff Barriers (NTB) elimination, Rules of Origin and development cooperation among others. This “legal scrubbing” process was completed on September 11, 2015 with a tentative signing timeline of October 2016. A tentative signing date of July 18 was set but with a few days left, the ceremony was called off owing to limiting factors raised by some partner states.
Uncertainty
From a private sector perspective, especially for business involved in trade with the EU, this must be very confusing. It is difficult to make business and investment decisions when surrounded by uncertainty. For negotiators, conclusion of a negotiation process brings excitement and relief, and the postponement of the signing must have caused frustration. Some stakeholders were, however, pleased with the development owing to their opposition to the agreement. The reluctance to sign besides discontent by some stakeholders, point to underlying dissatisfaction with the agreement and perhaps the process.
It should be noted, however, that signing of the agreement does not signal the end of the process, as the ratification process is equally a complex process that can last years. To illustrate how complex this processes can be, in West Africa, negotiations of EPA were closed in February 2014, initialling of the text was completed at the end of June 2014 and since then, signatories have not completed the process for ratification. Closer to home in Southern Africa Development Community (SADC), negotiations were successfully concluded and the agreement was signed by the EU and the SADC EPA group on 10 June 2016.
Ratification is on-going though it is not clear how long the process will last. Given the challenges experienced so far in the EAC/EU negotiation process, it is not clear how long its own ratification process will last. With all the above in mind, it means an EPA is not about to be concluded with the EU.
It is imperative therefore that EAC reflects on the process thus far, and make important decisions about its future trade relations with the EU. Failure to ratify EPA may bring negative ramifications for some countries, especially Kenya, which is not a beneficiary of the “Everything but Arms Initiative”, because unlike the rest of the EAC countries it is considered a developing country. Some options such as applying for Generalised System of Preferences plus or GSP Plus treatment have been proposed for Kenya going forward. However, EAC is committed to negotiating as a bloc, so the option of individual country pursuits or negotiations with the EU is out of question.
Caught at the crossroads, EAC must mobilise itself for speedy review and quick resolution of the matter. When negotiations started 12 years ago, it was never anticipated that the United Kingdom (UK) would exit the EU and these mitigating circumstances may justify re-negotiation recognising, of course, that time is of the essence and economies do not remain stagnant. It is important to understand the magnitude of loss or gain to the EAC as a result of Brexit and whether there is justification for review of the agreement. This decision can be reached quickly.
According to the Uganda Bureau of Statistic, Gross domestic product (GDP) at market prices oscillated from 7.8, 2.8 and 4.8 in 2010, 2012 and 2014 respectively. This is illustrative of the situation in Uganda and definitely the rest of the EAC. Burundi has experienced a period of insecurity that has changed the economic profile of the country.
During the proposed review period, EAC should consider undertaking deeper analytical sector studies to develop a current picture of the situation with a view of proposing changes, validating the current agreement and if there is a change of mind regarding the whole agreement, communicate swiftly. In this endeavour, civil society and private sector need to get actively involved and perhaps lead this effort to ensure that their voices are heard.
Time is running out because the ACP-EU Partnership Agreement also known as “Cotonou” runs to 2020 subject to future amendments. The better part of this duration has been spent negotiating. Time and financial resources have been spent on the negotiations and there should to be a return on this investment in form of a mutually acceptable position between the EU and EAC that also takes into account private sector and civil society interests and deepens trading capacity of the EAC to the EU.
My aunt in Bisanje village – Masaka District Uganda, periodically supplies hot pepper to an exporter. Sometime last year, her consignment was rejected on grounds that hot pepper exports to the EU had been banned. She sought me out to explain this situation and l made the best effort of explaining sanitary and phytosanitary standards. With a weird blank expression, she stared back at me and asked when the next ban can be expected so that she can move into new business and hence avoid losses.
Clearly, she did not understand my explanation. l did not have an answer to her question because l do not know when a scrupulous exporter might overlook standards leading to a total ban of all pepper exports, l do not know whether there will be new packaging requirements that affect exports, l do not know whether new markets supplying pepper to the EU could become more attractive, I do not know whether EU consumer tastes will change. She expects that l should know but l do not. I do, however, know that Uganda will continue exporting hot pepper to the EU under the “Everything but Arms” initiative. I therefore gave her the reassurance that her business remains relevant.
Nonetheless, it made me realise the need to explain trade agreements and related technical aspects in a simple manner that can be understood by citizens. Information outreach needs to be deepened with information shared in a language that can be easily understood. This will enlighten the community about business and international trade prospects especially for exports. I have the conviction that trade plays a critical role in development and poverty reduction. As part of an export network, her business has the potential to improve her wellbeing and that of her family. The country needs more people like her.
Making a case for the EPA deal
The Economic Partnership Agreement (EPA) intends to enhance regional integration and economic development in the African, Caribbean and Pacific (ACP) countries. The agreement based on the principle of asymmetrical market opening, meaning that it provides a better access to the EU market for ACP partners. EPA notably offers unprecedented market opportunities for agricultural and fisheries products.
EPAs replace the previous market access regime of unilateral preferences for ACP countries. EABC is currently petitioning the EAC partner states to sign the deal. Kenya is facing a tough choice as the clock ticks towards the October 1 deadline for the ratifying of the EPA with EU.
*The views expressed in this article are the author’s own.
Annette Mutaawe Ssemuwemba is the deputy CEO in charge of strategy and results – TradeMark East Africa.
