What you need to know:
Trade negotiators claim it is not worth it for Kenya and the EAC region to append their signature on the agreement in its current form.
In the first part of the Economic Partnership Agreement (EPA), a pact that is looking to flung open the domestic market of Least Developed Countries (LDCs) like Uganda for the European Union (EU) countries manufactured goods, we revealed how this deal is silently disintegrating the East African Community (EAC) bloc instead of unifying it in the spirit of regional integration.
We also exposed the inherent dangers EPAs to Uganda and its dire implications to the regional trade ties – see part one of the story: Economic Partnership Shakes EAC Trade Ties.
In this second and final part of the series, we disclose what is at stake for EAC as Kenya plays her final card. We also explore the possible way forward out of this conundrum.
After showing her hand for all to see because of fear of attracting tariffs on mainly flower and vegetable exports to European Union (EU) countries if she doesn’t sign the Economic Partnership Agreement (EPA), Kenya has sacrificed what some have termed as “long-term success for a short term gain.”
According to continental trade and investment treaty analysts such as Mr Rangarirai Machemedze and Ms Jane Seruwagi Nalunga, an expert on multilateral, bilateral, regional and national trade and investment policies and agreements in particular, Kenya should factor in the long term losses that the EPA will inflict on itself and the region in terms of loss of revenue, negative impact on industrialization and intra-regional trade, and on overall development.
Following thorough review of the EPA, experts conversant with trade and investment treaties as well as multilateral and bilateral negotiations from the continent (Africa) still came to a conclusion that it is not worth it for Kenya and the region to append their signature on the dotted line for as long as the agreement is in its current form.
Ms Nalunga who is also an expert on trade, tax and investment related issues believes there is an urgent need to rethink the EPA with a view to make it mutually beneficial while addressing the longstanding challenges inhibiting regional countries’ aspirations for structural transformation. As for Mr Machemedze, the whole deal needs an overhaul, a position Civil Society Organisations from the continent and range of private sector players spoken to concur with.
EU’s cherished dream
Upon his appointment, late last year Ambassador and Head of the European Union Delegation to Uganda, Jan Sadek, didn’t waste time asking Uganda to sign the EPAs and have it out of the way.
Speaking during the Uganda – EU Business Forum, 2022, he told President Museveni that EPA is still on the agenda and hasn’t been signed yet – urging the President to see to it that it is concluded. He was of the view that the agreement will mark a new milestone in the economic relations between Uganda and Europe.
He said: “I have been pleased to learn about the Ugandan interest in signing the Economic Partnership Agreement with the European Union which would guarantee immediate duty-free and quota free access to the EU market for all exports. The European Union Market is a very lucrative market of 500 million inhabitants. So let's work on this together.”
Smitten by the rallying call of the new EU boss in the country, President Museveni in response, during the second Uganda - EU business forum, said: “I am very glad to hear the Ambassador asking us to sign. We had some internal issues among ourselves, but we value that market access to EU…”
President Museveni came just short in directing that EPA gets signed. Until then, he was one those willing to have the region cut the deal as a bloc as opposed to individual countries negotiating and committing to the agreement as solo member states.
In the State of the Nation address last month, President Museveni said regional integration efforts and promoting intra-Africa trade, are taking root. He noted that Uganda now exports more to Africa than the rest of the world, with 86 percent of “our exports” translating into $3.8 billion in value (nearly Shs14 trillion) to Africa in the 12 months to February, 2023 and 57 percent $2.5 billion (Shs9.1 trillion) to the six EAC countries.
He then concludes that that point by saying: “As Africa, we need to build regional infrastructure to improve connectivity within the region and reduce trade transaction costs. This way, we shall be able to pull our populations out of poverty much faster because we shall attract more investments.”
This message seems in total contrast to the remarks he (President Museveni) made at the second Uganda - EU business forum – months apart between the two events.
Holding EAC hostage
Experiences from the EPA negotiations indicate that the EU has been using underhand methods to put African countries under excessive pressure to choose between regional integration aspirations on the one hand and access to EU market on the other.
For instance, the EU put in place deadlines for concluding the EPAs by revising her Market Access Regulation 1528/2007 to clearly indicate that any ACP country which will not have signed or ratified the EPAs by October 1st 2014 would be removed from the list of beneficiaries of the Duty Free Quota Free Market Access to the EU market. This condition forced Non-LDC countries like Kenya to ratify the EPA.
The new Market Access Regulation would in effect lead to an imposition of a tariff on a number of key products including fresh flowers and fish – which for Kenya’s case happens to be part of her exports to EU countries. As a result of this pressure, and the need to maintain its’ Duty-Free Market Access, Kenya signed and ratified EPAs on September 1st 2016 and on 20th September 2016, relegating the promise to negotiate and sign the pact as a bloc.
In a joint statement between Kenya and EU issued on February 17th 2022, the two parties renewed their intention to bilaterally implement the EPA.
Rwanda also signed the EPA on September 1st 2016 but is yet to ratify. The rest of the EAC countries by then Uganda, Burundi, and Tanzania did not sign the EPA. As of last month, Kenya had made up its mind and is officially in partnership with EU.
According to UNECA study, the EPA would result into revenue shortfalls estimated in excess of $32.4million for Tanzania; $5.6 million for Rwanda; $107 million for Kenya; and $7.6million for Burundi. This revenue shortfall would have serious implications on the EAC partner states’ ability to mobilise resources for their development and lead to EAC’s reliance on aid and increased indebtedness, which according to IMF estimates, is quickly approaching “concerning levels”.
Not a bad deal but…
In the course of research and investigation, it also emerged that EPA is a good deal for the region to the extent that country’s negotiators have a clear position and can hold their own amidst pressure from the experienced EU negotiators.
“The EPAs are not a bad thing, but you have to negotiate with your interest and position in mind. The challenge is that we negotiate these agreements from a weakn point of view as opposed to strength,” Mr Francis Gimara, a well-respected attorney with experience in regional integration law said in a side line interview after the launch of the annual CSG Scan for 2022/2023 recently.
He continued: “When it comes to trade negotiating agreement, these developed countries will have no less than 200 experts including lawyers to negotiate an agreement that suits their objectives. For our case, it is only a handful of people are involved yet we should be in position to deploy our very best in such negotiations.”
There is now a consensus by regional CSOs comprising of various experts, asking the EAC governments, before deciding to sign, to do a deeper analysis of the EPA text, the liberalisation schedules, and assess its impact on the EAC’s development objectives. Expert analysis by the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI Uganda) titled: The inherent dangers for the EAC signing the EAC-EU EPA, reaffirms this position.
Further, EU shouldn’t pressure EAC partner states into prematurely signing the agreement before the above analysis.
As for Kenya, she should explore the alternative options available, such as the Generalised System of Preferences plus (GSP+) where her top 27 exports to the EU including the much cited flower and horticulture exports will access the EU market duty free and quota free.
At the beginning of the negotiations, the EU had promised that as per the Lomé Acquis, no country will be worse off whether or not it signs an EPA. That position should be followed to its logical conclusion, according to a statement by members of the East African Trade Network (EATN), a consortium of CSOs working on trade, investment, fiscal and related issues in the East African Community.