A row is brewing between Kenya's new government and her regional counterparts over its readiness to sign the European Union's Economic Partnership Agreement (EPAs).
It's really a bit of a quandary because while Kenya is under pressure to sign, thanks to lobby groups that argue that the government's delay was a threat to the country's fish and flower sectors, the other EAC member countries are under pressure not to endorse the deals thanks to lobby groups in their countries that say that the EPAs are a threat to their national economies.
The chief executive officer of Kenya Flower Council (KFC), Jane Ngige, is spearheading the move to urge her government to endorse the deal. She told the press in May that failure to sign the deal could spell doom for the country's horticulture sector. She said the country stands to lose its duty free quota and free access in the European market.
However Jane Nalunga, the Uganda country director of Southern and Eastern Africa Trade and Negotiations Institute (SEATINI), says Uganda should not be pressurized into taking the cue from Kenya. She suggests that Kenya could be making a mistake because it can still get other alternatives within the region and Asia for its products.
Dan Kidega, one of Uganda's representatives to the East African Legislative Assembly (EALA), agrees. "Kenya is engaging in 'panic mode' over the loss of penetration into EU market, yet her worries can be sorted as bloc," he says.
Though he says that while the Joint Trade Negotiations Act that will prohibit individual members from negotiating trade agreements is still pending, Kenya should not succumb to pressure to sign the deal.
It appears Kenya's opposition Members of Parliament are taking the line of lobbyists in the neighborhood and are now urging the Kenyatta government to re-consider the country's interests before signing the deal. The negotiations have now been put to a halt.
But one negotiator, Emmanuel Mutahunga, the senior principal commercial officer at Uganda's Ministry of Trade, Industry and Cooperatives, is more positive. He says Kenya could be right to sign on the dotted line. "Kenya should not wait for the slowest member of the convoy to determine the speed of the rest hence should move on and sign the deal," he says.
Mutahunga is also the programme manager for EPA- related Trade and Private Sector Support (EPA TAPSS), an EU-funded project under the ministry. Speaking to participants at a recent agricultural dialogue organized by Participatory Ecological Land Use Management (PELUM), a CSO, he outlined the progress of the EPA negotiations in the region and the reason for Kenya's apparent panic.
Mutahunga said Kenya is in more desperate situation as it is not among the Least Developed Countries (LDC) like all the other four EAC members - Rwanda, Tanzania, Burundi and Uganda - which trade with the EU under Everything But Arms (EBA) arrangement under which all products except arms enjoy tariff free access to the EU market.
Without EPA, Kenya's exports may be subjected to punitive taxes under the third country or the Generalised System of Preferences (GSP). GSP is a trade arrangement through which the EU provides developing countries and territories with preferential access to the EU market in form of reduced tariffs for their goods when entering the EU market.
"Signing the deal is not good for regional integration," he said, "But if Kenya sees that it's going to lose, then let her neighbours address her concern."
Nalunga, however, insists that because Kenya has a strong private sector, rather than look at EU only, it should focus on the regional market because "EU is demanding much more." "Kenya, just like Uganda, cannot compete with EU that gives a subsidy of about $2 per cow to promote milk production," she says.
Secondly, Nalunga argues, "we pay per carbon foot print for exports flown to the EU, which just pushes us out of their market."
She cited trade barriers in the deal as rules of origin, sanitary and phyto sanitary measures, tariff peaks and tariff escalations, most favoured Nation (MFN) treatment, where if European Commission gives better treatment to a 3rd country, they have to give it to the EAC as well and if EAC gives better treatment to a developed country or any country accounting for more than 1% of world merchandise trade, EAC has to extend the same treatment to EU.
"Members of the ACP group and other African countries are not covered by the MFN provision with respect to the EAC," Nalunga argues, adding, "This is tying our hands on who to trade with."
In a recent interview, the EU Delegation in Uganda said they are aware of CSO's concerns and "are already taking them into account." "EU is not pushing for the EPAs," it said. "The ACP countries are asked to make a decision about their future trading relationship with the EU.
Indeed, recently, EU officials in Kenya waived the clause and now EAC can trade with other ACP countries but not with other countries especially China.
The EAC countries committed themselves to allow EU goods into the market over a period of 25 years in three phases. For 2008-2020, they will open up to 64%, up to 16% between 2015 to 2023 and up to 2% in the last phases 2020 -2033, making a total of 82% for imports from the EU. Extensive liberalisation with EU with developed agricultural sector while subsidies remains a contentious issue.
Sarah Kirabo, the board chairman of PELUM, said "this wide spread opening up of markets will expose Uganda's agricultural and industrial producers to unfair and harsh competition from EU subsidized and more competitively produced goods," hence , "without adequate protection, Uganda's farmers and manufacturers will not survive; resulting into adverse impact on livelihoods, employment, and on efforts to industrialize."
But Mutahunga says the text on 'Trade in Goods' addresses issues of non-tariff barriers and trade defense instruments. "This allows EAC to raise tariffs to protect against imports of either goods that are being dumped or where an increase in imports is hurting local industry or are subsidized; otherwise no Party is to raise its tariffs."
Nalunga warns that the reduction of tariffs affects efforts to industrialise and eventually affects production.
Mutahunga though, says the agreement preserves EAC's right to continue to levy existing export-related taxes such as on hides and skins and allows the introduction of new export-related taxes in order to foster the development of domestic industry to facilitate value addition or to maintain currency value stability.
Uganda's exports to the EU are mainly composed of primary agricultural products such as coffee, cotton, tea, fish and cut flowers. EU imports to Uganda are mainly manufactured products with a higher value.
EPA concerns:
Kenya is the biggest flower exporter to the EU and its foreign exchange earnings have steadily risen to 293 million Euros in 2012 up from 276 million Euros in 2010. However, if Kenya does not sign the deal, its flowers will be subjected to an 8.5% duty, which will make the flowers less competitive.
Without the EPA, buyers in the EU market may resort to cheaper flowers from other suppliers, which would make Kenya lose in price competition; something Mutahunga says is one of the problems Ugandan flowers also face.
The first phase of the EPA negotiations started in 2002 in Brussels, Belgium at the all ACP level but was launched on February 7, 2003 at the regional level. Uganda belonged to the Eastern and Southern Africa (ESA) that opted to negotiate in six phases that is development issues, market access, agriculture, fisheries, trade in services and trade related issues.
As a result of the complexity of the negotiations , a comprehensive EPA was not concluded by December 2007 as envisaged, instead Uganda and the other four East African Countries -Kenya, Tanzania, Rwanda and Burundi broke away from the ESA group and initiated an interim Frame work EPA(FEPA) on November 27 2007 with the EU.
It is against this background that the civil society in Uganda including SEATINI and PELUM are saying Kenya should rethink the EPA deal and its consequences on regional integration and regional trade.
The EPA negotiations have focused on economic and development cooperation; agriculture; rules of origin; export taxes; MFN treatment; dispute settlement, institutional arrangements and final provisions.
But to date, EU has not registered much success with Kenya and her East African counterparts plus the other ACP countries. For the EAC, the negotiations are expected to end by October 2014. EU officials in Kampala told The Independent that the deal would spur regional integration regardless of the CSOs' concerns.
Mutahunga suggests that there has been a form of compromise. For instance, both Parties have agreed that the following will be negotiated at a later stage: trade in services; trade-related issues including competition policy; investment and private sector development; trade, environment and sustainable development; intellectual property rights; and transparency in public procurement.
Now that ACP countries have delayed to sign the deal, some participants are concerned that the European Commission (EC) has resorted to using strong arm tactics such as setting deadlines. On Sept.30, the EC adopted a proposal amending Regulation 1528/2007 governing the market access of 36 ACP countries to the EU.
The proposal for amendment provides that unless the 36 countries listed in the Annex ratify and implement EPAs by January 2014, they will be taken off the list and thus lose the duty/quota free access of their goods to the European market, which Ngige fears could happen in Kenya's case.
There is also a proposal for reform of GSP. Secondly, it is only the EU that can determine whether a country qualifies - subjected to good governance, democracy, corruption and human rights to qualify for GSP. It has already excluded Myanmar.
An analyst told The Independent that Kenya may not be granted GSP because of the controversy surrounding their President Kenyatta's and VP Ruto's cases at the ICC plus the latest criticism the institution has received from the African Union leaders. "It is wiser if Kenya signs the deal before EU blacklists it on human rights grounds," the analyst said.
It is also claimed that the EU Commission could also reduce the number of beneficiary countries to make GSPs less attractive.
Even with GSP, this represents an increase in tariffs for ACP countries, which hitherto have benefited from duty free access to the EU market. The current GSP will end this December, which means that the new system will be put in place in January 2014, at exactly the same time the EC intends to remove ACP countries from the annex of the market access regulation.
Though the European Parliament rejected EC's 2014 deadline last September, Mutahunga says it made a U-turn this year and stayed the deadline. This means that the ball now rests in the hands of Kenya - to either sign or face the consequences Ngige and other private sector lobby groups are afraid of.
When The Independent contacted the Kenya High Commission in Kampala, Boniface Muhia, the deputy commissioner declined to comment saying the matter was still under discussion in the Kenyan Parliament.
Comments Post a comment