Consolidate regional market, forget about EU pact- experts

President Museveni (right) chats with Tanzanian president John Magufuli at the sidelines of the African Union Summit in Addis Ababa, Ethiopia last week. The two are said to be working on salvaging the EAC-EU trade partnership. FILE PHOTO

What you need to know:

Negative. Critics say the region will come out the loser


Uganda and the rest of East African community countries are better off consolidating trade amongst themselves rather than worrying about signing a trade agreement with EU, currently trying to come to terms with Brexit - exit of UK from the EU.

According to the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI-Uganda), the regional countries should prioritise trade amongst themselves instead of trying to surrender its market to the EU through unfair trade agreement.

“It is important to appreciate the fact that while the EU market is important, the EAC market is of paramount importance for all partner states as it constitutes the largest market for the EAC member States and also offers better prospects for industrialisation and development of regional value chains,” reads the SEATINI – Uganda statement.

It further read: “While the exports originating from the region to the EU are mostly primary products (for instance coffee, cut flowers, tea, tobacco, fish and vegetables), those traded within the region include value added manufactured products (such as cement, textiles, steel, plastics).”

Growing trade
Uganda Export Promotion Board (UEPB) statistics indicates that trade between the regional partner states is growing in size and value while the trade between the region and the EU is slowly but steadily taking a tumble.

UEPB’s intention is to encourage more trade among the regional countries as well as working towards elimination of barriers that hampers this development.

The Economic Partnership Agreement (EPA) text being presented for signing, according to the regional non-governmental organisation advocating for fair trade deals and practices, will compromise the EAC efforts to structurally transform their economies, hence retarding industrialisation.

This will have direct bearing on employment and poverty as it will render the EAC countries impotent in as far as dealing with the mentioned challenges.

Worth noting is that at both Partner State level and EAC level, there are efforts to promote structural transformation through several policies and frameworks, but once the deal between the EU and the EAC is signed the much needed policy space for the regional countries will be no more.

“As SEATINI and as part of the wider civil society fraternity, It is our considered view that a careful reading of the EPA agreement arrived at falls far short of securing the regions’ overall development interests and maybe inimical to achieving our aspirations for structural transformation,” reads part of the statement issued by SEATINI-Uganda.

Issues of contention
According to the agreement, the EAC has offered to liberalise 82.6 per cent of her imports from the EU over a 25 year transition period by initially liberalising 65.4 per cent on entry into force of the agreement.

The rationale is that some of these products are currently zero rated because they are either industrial inputs or capital goods (i.e. machinery and pharmaceuticals).
Only 17.4 per cent (1432 tariff lines)
have been excluded from liberalisation to presumably cater for the protection of the sensitive products and infant industries.

This liberalisation seems to be taking a static approach to development which does not envisage Uganda and the East African region graduating to producing either industrial inputs or the capital goods. The zero rating and the Standstill clause (Article 12) effectively constrain the policy space for the region to achieve this aspiration.

It should also be noted that the 25 years provided for the completion of liberalisation process may appear long in the life of an individual but it is actually a short period in the life of a nation.

The liberalisation schedule, on the face of it, caters for the protection of infant industries and sensitive products. However, a careful examination of the schedules brings out clear contradictions.

For example, on one hand, the EAC has protected maize (corn) flour (HS Code, 6 digits 110220) at a duty rate of 50 per cent yet on the other hand, maize (corn) starch (HS Code, 6 digits 110812), which is a bi-product of maize flour has been liberalised. These contradictions equally apply to other products like cassava (manioc) and potatoes.

The combination of the extensive liberalisation, the contradictions within the schedules, the weak multilateral and bilateral safeguards on the one hand; and the subsidies in the EU on the other, which issue the EU has refused to discuss both in the EPA and in the WTO, will further negatively impact on industrialisation and food security in the EAC region.

According to the South Centre (2016), the estimated total cumulative Tariff revenue losses, would amount to €3 billion at the end of the 25 years of implementation of the EPA.
This takes into account tariff and VAT losses as well as trade diversion.

The extensive liberalisation under the EPA will lock the region into a free trade area with Europe, thus adversely affecting the ongoing regional integration efforts especially under the SADC-Comesa-EAC Tripartite Free Trade Area and the Continental Free Trade Area.
There is a false impression being created of linking the signing and ratification of the EPA with access to additional financial resources from the EU.

Article 75.4 of the EAC EPA explicitly states that any development cooperation or support to the EPA Development Matrix will be delivered and implemented through EU existing mechanisms, in particular the European Development Fund and within the framework of the successive relevant instruments financed by the General Budget of the EU. It is apparent that there is no commitment for additional resources in the EAC-EU EPA.

Also, the agreement was concluded before Britain voted to get out of the European Union.

The EAC should take into account the implications of Brexit when considering whether to sign and ratify the EPAs given the fact that the UK accounted for 35.6 per cent of the EAC exports to the EU in 2015.

Therefore, Brexit reduces the value of EU’s market for the EAC.

Trend of events
Origin. The EPA negotiations began in 2002 and were concluded on October 16, 2014 after 12 years of negotiations.

The EAC-EU EPA was scheduled to be signed on 18th July, 2016. However Tanzanian government made a decision not to sign citing its far reaching implications on Tanzania’s industrialisation and on the region at large. This decision was supported by the Tanzanian Parliament.

Burundi not in. Burundi has also not signed because it is under EU sanctions. On the other hand, Rwanda and Kenya signed the agreement on September 1, 2016, with the latter ratifying it on 20th September 2016.

Salvaging deal. Last week President Museveni met Tanzania’s President John Magufuli in an attempt to salvage the deal with the European Union.

They meet at the 28th African Union summit in Addis Ababa, where the two, according to the statement issued last week by President Museveni’s press secretary, Ms Linda Nabusayi, agreed to meet again later this month before the next East African Community summit to resolve this issue once and for role.