15 February 2012

East Africa: Mkapa Cautions EAC On Economic Partnership Agreements

Arusha — FORMER President Benjamin Mkapa has warned East African countries that signing of Economic Partnership Agreements (EPA) would deny them chances to develop into an industrialized region.

Mr Mkapa, who is the current chairman of the South Centre, was addressing a high level meeting on EPA negotiations, taking place at Ngurdoto Mountain Lodge in Meru District. The workshop is organized under the auspices of the Arusha-based, East African Community (EAC) Secretariat.

"Study by the South Centre shows that the EAC already has a "hubs and spokes" trade relation to the European Union in which only 6 per cent of our total exports are in form of manufactured processed goods whilst 94 per cent of exports are primary products, mainly raw materials," he said.

"If we sign the EPA (and other sub-regions do so too), we would be giving up the better option we have before us, which allows for real industrialization", stated the former head of state. Mr Mkapa told the high-level gathering that any bilateral or multilateral trade agreement must be of service to the development of the East African Community and these agreements cannot be seen as ends in themselves, but instruments for development.

He was giving a keynote address on the Role of Multilateral and Bilateral Trade Agreements in Fostering Trade and Development in Africa. Mr Mkapa said it was imperative to ask several questions in regard to the trade agreements being negotiated in the region, for example, whether they do help the region to increase its domestic production capacities, encourage diversification and industrialization.

He stressed the importance of increasing food security, quality employment, and supporting the region's move from being largely raw natural resource exporters towards being producers of more sophisticated products. The former president noted that answers to these questions should point the direction for what the region does with trade agreements, in particular the EAC and EPA.

He put forward three options for the EAC as far as EPA negotiations were concerned saying, Kenya could sign the EPA alone so that it can retain its preferences in flowers and fish. To follow this direction, he said would destroy the EAC Customs Union. The least developed countries (LDCs) would not be able to open up their markets to Kenya if they do not want EU goods to flood their internal markets.

The second option was for the entire EAC region to sign the EPA. In this case LDCs in the WTO which do not have to take tariff cuts in WTO trade liberalization rounds will have to cut their tariffs to zero for at least 80 per cent of trade with the EU. This would have deep ramifications on the ability of the region to industrialize.

"Given that the EU remains a major food exporter and still subsidizes its agricultural sector to the tune of 60 billion Euros a year, this could shrink the size of the local markets that small farmers in the region sell on", he noted. The third option was for the entire region not to sign the EPA. In this case, he noted that Kenya would lose its preferences on flowers and wondered how important this sector was, in comparison to opening up the EAC market to EU.

The Chairman of the South Centre, whose intervention was open-ended to allow for robust exchanges and implementable recommendations to the ongoing discussions concerning EPAs, FTAs, Regional Integration processes, bilateral and multilateral agreements, declared that he had no political or governmental authority nor statutory prescriptions to give to the participants.

The Secretary General of the ACP Group of States, Dr Mohamed Ibn Chambas, informed participants that the workshop was taking place at a critical moment when developments in Europe, including the ratification of the Lisbon Treaty and other external factors such as slowly ebbing global recession, brought about by the economic and financial crisis, had triggered new thinking on the development path that EU should follow.

Dr Chambas, who was represented by Mr Morgan Githinji from the ACP Secretariat, said the Euro zone was still in a crisis whose outcome was still unclear. The EAC Secretary General, Dr Richard Sezibera, disclosed to the participants that the European Union was one of the region's key trading partners, contributing 20.3 per cent of total EAC trade in 2009.

The EU accounts for the biggest share of EAC's total exports at 23.34 per cent compared to 33.56 per cent for the rest of the world. In terms of imports, the EU still leads other trading partners with 19.09 per cent of EAC's total imports originating from the EU. It continues to be a major export destination for EAC's agricultural products averaging 25 per cent of total exports.

"We therefore in East Africa need to preserve, protect, and grow this market and ensure that it works for us", asserted Amb. Sezibera. The Secretary General noted that while building on the current momentum to enhance the trade potential of the region, addressing the supply side constraints should and must take a centre stage to make the EPA process more meaningful and beneficial.

"This has and will continue to be an important aspect in our negotiations", affirmed the Secretary General. EAC Director General of the Customs and Trade Directorate Mr Peter Kiguta said as a Customs Union, the EAC was negotiating trading arrangements as a bloc with other parties, notably the Economic Partnership Agreement (EPA) with the EU, and also the Tripartite Free Trade Area with member countries of COMESA and SADC.

He noted that unlike negotiations on the EPA, WTO negotiations were not coordinated at the regional level. Mr Kiguta said the aim of the workshop was to ensure that the engagement of the EAC partner states in the WTO multilateral negotiations and also in the bilateral negotiations with EU was coordinated.

He said such an approach will enable the EAC region to maximize and benefit from the ongoing negotiations, while minimizing the challenges encountered in the negotiations in terms of processes and substance. Members of the East African Legislative Assembly as well as National Parliaments, EAC ambassadors from the Partner States' Missions in Brussels and Geneva, Permanent Secretaries, representatives from the WTO, ACP, EABC, Business Community and Civil Society are attending the workshop.

The South Centre is an intergovernmental organization of developing countries that originated from the South Commission, founded in 1987 under the Chairmanship of Mwalimu Julius Nyerere, and comprises such eminent personalities as Mahathir Mohammed, Manmohan Singh, Enrique Iglesias, Michael Norman Manley, Shridath Ramphal, Carlos Andrez Parez and Abdus Salam.

It functions as an independent policy think tank, whilst also holding observer status at the United Nations and other development agencies.

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