Is the collapse of the Economic Partnership Agreement looming?

Kampala.

As it stands now, the Economic Partnership Agreement (EPA) seems to have hit a dead end, Daily Monitor has learnt.

Simply put, EPA is an initiative by the European Union (EU) to secure free market access in the region and reciprocate in equal measure. Should the deal remain frozen as it appears to be the case presently, regional products to the EU market and vice versa would eventually be trading on different terms and not necessarily the preferential treatment that the embattled deal seeks to institute.

The ministry of Trade under the express directive of President Museveni will not proceed with the signing of the EPA until all the East African Community (EAC) partner states are in agreement with the details contained in the deal as well as its repercussions on each of the member’s economy.

Speaking at a public policy dialogue on reversing Uganda’s declining trade balances and value of exports recently at the Uganda Management Institute in Kampala, the minister of Trade, Ms Amelia Kyambadde disclosed that the deal has been temporarily put on hold pending further consultations and consensus.

She said: “Uganda will not sign the EPA until everybody is on board. We have to wait for the other EAC countries and once that is done then we can proceed. Tanzania has some few issues that need to be dealt with and once that is done we shall proceed.”

“The President has said we should first all reach a way forward so that we can sign it (EPA) together as a bloc. He (President Museveni) doesn’t want the repeat of the so- called coalition of the willing. But for our part we are ready but we cannot do it alone.”
Coalition of the willing

The tripartite arrangement, also known as the “coalition of the willing”, involving Uganda, Kenya and Rwanda, emerged as one of the sticky issues in 2013 when the Council of EAC ministers was considering the Monetary Union Protocol.

The coalition of the willing agreements entered by the said countries sought to construct grand infrastructural projects such as rail lines and an oil pipeline that would stimulate and open up the regional economies.

Tanzania was particularly unhappy with this arrangement, describing it as a recipe for disaster. In its recommendation to the heads of state, Tanzania indicated that the tripartite arrangement poses the risk to disintegrate the community rather than integrate it.

And for that, Tanzania, among other things, recommended that all the plans and infrastructural projects that the three countries endorsed in mid that year should be revised and given a regional appeal, rather than it appearing as an initiative of the “coalition of the willing”. Tanzania also recommended that all such tripartite arrangements must be sanctioned by the EAC Secretariat as opposed to individual partner states.

Fears of some members
Tanzania, an important member of the Community is unwilling to sign the agreement until she is certain that the treaty reflects her aspirations as well as provide a window to get out should it turn out to be a raw deal.

As the largest member of the Community, Tanzania also wants to further understand how the exit of Britain from the EU bloc will impact on the agreement, and not until that is certain, she is not prepared to sign the deal.

Burundi that looked to be on the fence has now sided with Tanzania on grounds that it shares the same fears and aspirations.

However, Mr Patrick Gomes, the Secretary General of African Caribbean and Pacific Countries (ACP), in his submission during the 32nd conference between ACP and EU held in Nairobi in December last year, said that Uganda, Tanzania and Burundi’s slowness in signing the EPA may see them lose development aid from the EU. He said: “EPA comes not only with

the EU. He said: “EPA comes not only with trade opportunities with EU but development aid as well. So signing as a bloc is a best option.”
Treaty
According to Article 7(1) (e) of the Treaty establishing the EAC, variable geometry grants flexibility, which allows for progress in co-operation among a sub-group of members within the larger integration scheme, provided this is done within the realm of the overall integration process of the bloc.
So far, it is only Kenya and Rwanda that have signed and ratified the EPA deal with the EU. This was done in October last year; and the deal can allow them to proceed without the other members.

However, EAC being a Single Customs Territory, the other EAC members, Tanzania, Uganda and Burundi must also sign the pact to make it enforceable.

Consequences
The EAC member countries’ decision to extend or delay the signing of the EPA with the EU may have consequences in the due course, according to the EU.
The EU Head of Delegation to Uganda, Ambassador Kristian Schmidt, in an earlier interaction with this newspaper, said: “There are no immediate effects but there may be consequences in due course that only the EPA can prevent.

Mr Schmidt said the EU understands that the EAC partners need some time to continue their internal process.

“This is why we pursue a situation in which the EAC-EPA is implemented by all EAC countries as a bloc, in order to provide a predictable and uniform trade scheme for all EAC members that respects their Customs Union and preserves duty-free quota-free access to the EU market for all of them, regardless of their income status, in the long term,” he said.

He added that for all the EAC countries to benefit from free full access to the EU in the long term regardless of their income, the EPA concluded between the EU and the EAC must enter into force. “For this to happen, all five EAC countries should sign, ratify and implement the agreement,” he emphasised.

Expert’s voice
In his opinion, Dr Fred Muhumuza, a Kampala-based economist, thinks that by Uganda signing the EPA may not add much value to the trade.

“As a country, most of our trade problems with the EU have little or nothing to do with a trade arrangement but rather raising quality and quantity,” Mr Muhumuza said.

He said that the EPA will not resolve such domestic structural issues that require government commitment, adding: “Besides, we should not be thinking of how we plan to proceed with the new EU since Britain, one of our key partners in that region, is going out. From the export side, the bulk of our revenues comes from flowers, fish, coffee and diaspora remittances.”

Mr Muhumuza thinks that with the current global trend towards trade agreements on bloc basis, and US President Donald Trump signing an executive order to cancel one of the most successful ones, Uganda and the region need to re-evaluate what the future means for such agreements and conclude what version of EPA we need.

“EPA may have been overtaken by events. Not signing this soon, will not be a fatal deal but waiting till the situation clears is better,” he said.
Civil society weighs in
A civil society statement by about 15 members across the region, among them SEATINI, on the EU-EAC EPA and the Rendezvous Clause negotiations issued jointly late last year called for the EAC partner states to rethink the signature and ratification of the EU- EAC EPA.
“We note that the EAC concluded the EPA negotiations after 12 years of engagement with the EU not because it was contented with the provisions of the agreement but rather in order to meet the October 1 2014, deadline so that Kenya, a non-LDC, won’t be removed from the list of beneficiaries of the duty-free quota-free market access to the EU.

It further stated that according to UN Economic Commission for Africa (UNECA, 2005), the EPA will result into revenue shortfalls estimated at $9.5m (Shs32b) for Uganda; $32.5m (Shs110b) for Tanzania; and $5.6m (Shs19b) for Rwanda, and $107.3m (Shs364b) for Kenya.

Current status

During the opening of the EALA Session in Kampala a fortnight ago Speaker Daniel Kidega of East African Parliament, in his wisdom, said: “The region should be cautious while signing tax-free trade agreements with the European Union.”

The East African Community Heads of State Summit, which was to be held in the first week of this month, was postponed to February. This follows regional ministers of Trade and East African Affairs’ failure to agree on some of the issues to be ratified, top among them being the Economic Partnership Agreement (EPA) with the European Union.

As the Community waits for the exact date scheduled for the summit in February, anxiety growing in Kenya, waiting on the EAC Council of Ministers converging to persuade its regional partners to finalise discussions on the ratification of the EPA by the February 2 deadline.

In an interview with Daily Monitor on the latest development on EPA, Mr Emmanuel Gyezaho, the press and information officer at the Delegation of the European Union to Uganda, said: “We have been informed a while ago that the summit will take place in February and we do hope that indeed this will lead to a constructive East African Community decision.”

Trade situation

East Africa is a geographically and economically homogeneous region committed to regional integration.
The East African Community (EAC) consists of Burundi, Rwanda, Tanzania, Uganda (all of which are Least Developed Countries or “LDCs”) and Kenya (which is a non-LDC).

The EAC established a Customs Union in 2005 which was fully-fledged with zero internal tariffs as from 2010.
The EAC, in fast tracking its economic integration process, ratified a more far-reaching common market protocol in July 2010.

In November 2013, EAC Members signed a protocol on a monetary union. The integration agenda of the EAC is strongly political in nature as its ultimate goal is to become a federation.

All the countries in the East African Community are members of the World Trade Organisation.

Exports to the EU from East African Community are dominated by coffee, cut flowers, tea, tobacco, fish and vegetables.

Imports from the EU into the region are dominated by machinery and mechanical appliances, equipment and parts, vehicles and pharmaceutical products.
EAC will be more exposed to EU’s dumping of subsidised agricultural products under the EPA than through the World Trade Organisation because of the much deeper liberalisation in the EPA.