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TRADE-EAST AFRICA: Officials Confused About Pros and Cons of EPA

Aileen Kwa

KAMPALA, Nov 20 2007 (IPS) - The news that the ministers of the East African Community (Kenya, Uganda, Tanzania, Rwanda and Burundi) are on the verge of signing an economic partnership agreement with the European Union (EU) has been received with mixed reactions by government officials from these very same countries.

The East African Community (EAC) ministers had agreed with their EU counterparts last week that they would sign a framework agreement on trade in goods, market access, development cooperation and fisheries by no later than November 23 this year.

This framework agreement will reduce to zero 81 percent of current EU exports in industrial and agricultural products entering the EAC markets. The elimination of tariffs to zero will take place over a transition period of 25 years.

By the end of the tenth year, there will be a zero percent tariff on raw and capital goods. Tariffs on intermediate goods will be brought down to zero between the eleventh and twentieth year and tariffs on finished items will be brought to zero percent after 25 years.

Built into the agreement will also be a mechanism for the continuation of the economic partnership agreement (EPA) negotiations beyond December 31, 2007. The additional areas to be negotiated include liberalisation of services, intellectual property and the ‘‘new generation issues’’ of investment, competition policy and government procurement.

A negotiator from the region who had been involved in the negotiations felt that the outcome is good for the EAC. ‘‘Of course it is good. If it wasn’t good for us, we won’t have agreed to it.’’ He was pleased about the level of liberalisation, coupled with the exclusion list (19 percent of current trade), and the transition period. Tariff reductions will only commence from 2010.

Other government officials from the region, however, expressed unease. A major issue between the negotiating partners had been over ‘‘development’’. The EAC had presented the EU with a matrix of projects they wanted the richer nations to fund.

According to an inside source from Nairobi, Kenya, who spoke on condition of anonymity, ‘‘what is not clear is what we are getting in the ‘development’ framework. I don’t know how concrete or binding this development framework is. It is a total mess, but unfortunately we are already there.

‘‘Are we getting additional funds? The EU is saying they will be using the current EDF (European Development Fund). We have been conned into this thing. Here we are, opening our markets to the EU, and in return we are getting a ‘best endeavour’ (non-binding) development framework,’’ he told IPS.

‘‘We don’t know, in concrete terms, where the funds are coming from – if there are no additional funds. So this interim arrangement is just about opening up our markets for EU,’’ he said.

Another government official from Kampala, Uganda, raised similar concerns: ‘‘I think there is an EAC development plan. Most probably that is what has been picked up for support under ‘development’.

‘‘In terms of funds, are we getting anything over and above what we would have got (without the EPA) or are we getting the same? Those answers are not very clear and nobody can tell you. We know that the EDF is coming. Maybe it will still be the same amount of money.

‘‘But we are told that the EU has been the major funder of our roads, so we need to agree with them (on the EPA). So it is a bit tricky,’’ the Ugandan official said, on condition of anonymity.

When asked how the package might affect the agricultural sector in Uganda, there was some uncertainty. The Ugandan official commented, ‘‘there is a list of sensitive products which has been excluded from liberalisation. I am told that the (EU agricultural) subsidies are not open for negotiation.

‘‘This means that, tentatively, (the EAC will not open its markets) to those products that the EU is subsidising, such as beef and dairy. But when you look at Rwanda, they are importing a lot of milk from the EU. How are Uganda and Tanzania going to keep the milk out? If there are no border measures, the milk can easily come here.’’

To the question whether the EPA will affect the industrial sector in Uganda, he commented: ‘‘We don’t have much of an industry to talk about, really. Maybe the problem is upcoming industries, I don’t know.

‘‘It could be a catch-22. Maybe we can attract investment or maybe it will discourage our local entrepreneurs who have already started something or who could have started something’’, were it not for external competition.

He gave the example of small grocery stores that are currently being pushed out of the market. ‘‘They are being swallowed by supermarkets. These small shops were supplying extra services. You could get a few things and pay later, and they were in the suburbs. Now, with the coming of supermarkets, some are pushed out.

‘‘They are no longer competitive. We are not sure whether those (EU) people will come in (as a result of the EPA) and displace the small people.’’

He also raised the issue of neighbours benefiting at the expense of Ugandans. ‘‘What if Europeans decide to put up industries in Kenya and don’t come here?

‘‘Unilever is in Kenya and they are bringing all the products here – soap, toothpaste – to our supermarkets. So the people benefiting are Kenyans and there is no guarantee that we will benefit, although we are talking as EAC.’

‘‘When you look at the Kenyan private sector, their export volume is quite high. But when you look at ours, the volume is a bit low. Ours could go under the EBA (the EU’s Everything-But-Arms trade initiative). I don’t know if our private sector is aware of this. If they are not, they might be told that by January, their products will attract a higher tariff.’’

As a least developed country (LDC), Uganda can avail itself of the EBA preferential arrangement of the EU which provides zero duties on all LDC exports.

The Kenyan official had this to add: ‘‘We are better off with the generalised system of preferences (the tariff rates which the EU offers to all countries). The duties are high but they would not have stopped us from exporting and we would not have had to open our markets for the EU.

‘‘But now the EU is telling us to pay a price for the preferences we are receiving from them by opening our markets. Even when we do this, the countries we fear will still be more competitive – India, Korea and others. The EU is already entering into free trade agreements with them. So there is nothing we are gaining by opening up.

‘‘But the political aspect comes into play. The politicians say we need to reassure some of the key players, particularly in horticulture, that trade will not be disrupted (at the end of the year). Just because of horticulture, we are opening up our markets.’’

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