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TRADE-EAST AFRICA: Chaos On Eve of EPA Deadline

Analysis by Aileen Kwa

NAIROBI, Nov 8 2007 (IPS) - On the eve of the deadline of the finalisation of the economic partnership agreement (EPA) negotiations, chaos reigns.

Ministers of the East and Southern African (ESA) grouping are gathering in Brussels, Belgium, next week for negotiations with the European Union (EU). It remains to be seen whether talks will stall and be carried over to next year, or if an ‘‘EPA-lite’’ will be accepted.

An ‘‘EPA-lite’’ refers to an interim agreement covering the two components of , on the one hand, market access in goods and, on the other, development.

There is chaos at two levels. Firstly, the 16 country ESA grouping is, at this late stage, splitting into two parts, throwing talks into confusion. The East African Community consisting of Kenya, Tanzania, Uganda, Burundi and Rwanda have a common customs union and have decided to sign their own EPA with the EU.

Indian Ocean states (Mauritius, Seychelles, Madagascar and Comoros) have also decided to negotiate a separate EPA. These countries have spent the last two years negotiating with the EU from a joint ESA text. It is unclear how new texts will be stitched together within the short time available before the end-of-year deadline.

The shifting configuration of country groupings for the negotiations, however, is not even the main problem. There are still major differences between the EU and ESA countries on very basic issues.

First and foremost, there has been no meeting of minds about what constitutes ‘‘development’’. Both the EU and African countries have agreed that ‘‘development’’ sits at the heart of the EPA negotiations. Yet both sides are worlds apart translating what this means in practical terms.

The ESA countries, defining development as the strengthening of their industrial and agricultural production base, have pushed hard for the EU to commit to a list of development projects, with financial commitments attached.

The EU has not been enthusiastic and has apparently tried to sidestep such conditions. The EU has been successful in persuading the ESA grouping to downgrade their demands.

The implementation portion of the ‘‘development chapter’’ in the EPA text has been converted into a ‘‘development matrix’’. Now that the matrix has been worked out by ESA, both sides are quarrelling over where to put it.

ESA wants it appended to the EPA text to ensure that it is legally binding on the EU. The EU has declined, indicating that they will only make a reference to it in the text. Now, the EU is backtracking even further. It is unclear if such a reference will even be made in the ‘‘development matrix’’.

In any case, the EU side has vehemently insisted that they cannot provide financial assistance in the EPA.

According to Jane Nalunga of the non-governmental Southern and Eastern African Trade Information and Negotiations Institute (SEATINI), ‘‘When we came up with the negotiating draft, we put in a chapter on development. The EU said no, let us remove it.

‘‘They didn’t say right from the beginning, ‘We won’t consider it’. They said, ‘Remove it and put it in a development matrix. We will make a reference to it in the text.’ Now that we have done that, they say, ‘This is a Christmas shopping list.’ They don’t even want a reference to be made to the matrix in the text.’’

Nathan Irumba, SEATINI executive director, argues that ‘‘the whole problem is that EU has lured countries into EPAs by promising them that there would be development programmes. That is a lie from the beginning – there will be no development programmes. There is only the EDF (European Development Fund) – and there is no new money there.’’

The ESA countries are still angling for a firm commitment from the EU to provide development funding. As one Kenyan trade ministry official noted, ‘‘We need support to improve our competitiveness so that we will be able to withstand the liberalisation commitments’’.

Disagreement over the much-vaunted (by the EU) ‘‘development’’ dimension of the EPAs could bring the talks to a grinding halt in the coming days.

There is also no agreement on the scope of products that can be exempted from tariff elimination. The ESA countries had initially asked for 57 percent of their tariff lines to be protected. The European Commission (EC) refused to accept the list and have asked ESA to shorten it.

Now the EC is insisting that the exception list should be limited to only 10 percent, while the ESA countries are aiming for 30 percent. According to Nalunga, ‘‘In Kenya, with all its tribal sensitivities – different regions and tribes wanting to protect different crops – it will be politically sensitive limiting the protection to only 10 percent.’’

A previous assessment by the United Nations Economic Commission for Africa showed that unless the ESA countries protect up to 40 percent of their trade with the EU, it is likely that their industries will be negatively impacted.

In addition, there is also no agreement on the very important issue of the timeframe for tariff elimination. All agricultural and industrial products which are not in the sensitive list will have their tariffs eliminated over time. The EU is insisting on a maximum of 12 years, whilst the ESA countries have asked for 25 years.

Domestic support and export subsidies in agriculture are another area of contention. ESA countries have expressed the fear that their agricultural producers will be displaced by unfair imports of subsidised EU agricultural goods. IPS has learnt that the Europeans have flatly refused to even discuss this. These issues, they say, are an internal affair.

The two sides have also struggled over the issues of review and benchmarking. Both sides agree that there should be an in-built mechanism for review in the EPA text. The ESA countries have identified certain development benchmarks.

They want their liberalisation commitments to be pegged to these benchmarks. If the development benchmarks have not yet been attained by the time of the review, they want to be able to go back on the liberalisation timetable.

The EU has been dismissive of this position, insisting that a mechanism for review should be aimed at expanding the scope of liberalisation and not allow backtracking on those commitments.

With such wide divergences on major issues, it is uncertain if the ESA and the EU will be able to sign on the dotted line by the end of the year.