After nearly a decade of negotiations and dispute between the European Commission and governments of many African countries, the Economic Partnership Agreements, better known as EPAs, still appear among the major unresolved economic issues of the East African Community (EAC).
In the last few days, the EAC decided to postpone the signing of the EPAs, scheduled for October 1, at least until next January. Tanzania and Burundi were to have signing delayed, and in this way the unity of the regional body has been crippled.
Kenya and Rwanda had decided to go solo, signing individual agreements with Brussels last September 1, despite an earlier agreement that would establish the EAC would act in a unified manner.
The process of negotiation of EPAs between the EU and the EAC had ended October 16, 2014, with the approval of a 640-page document. The understanding includes several agreements on trade with a focus on duty and quota free imports. There are also agreements on economic development cooperation and issues to be discussed after the first five years as provided for in article three, which is on the Rendez-vous Clause.
In the EPAs, there are also several items of concern that Tanzania and Burundi intend to iron out before signing agreements. These include the possible negative effects on the domestic industry that could result from the exemption from import taxes. Tanzania above all feared the introduction of this measure, as according to Tanzania, these agreements are designed to annihilate the local manufacturing sector.
These fears are based on the principle that the locally produced goods will not be able to compete with the quality and price of duty-free goods imported from Europe, which also gives rise to risk of dumping.
Another area of concern is the possibility of reduced revenue because of the agreements for duty-free imports. This is to be understood in the context of international trade, duty from which is among the main sources of revenue for the EAC coffers. There is also the fear of losing the revenue from international trade because of the direct diversion of trade from Asia to Europe.
The East African countries identify an additional uncertainty factor in the recent decision by the British population to leave the EU. Brexit could affect the issue for two reasons: the importance of the United Kingdom to the EU, as well as excellent business relations between the British and the EAC.
For Kenya, Uganda and Tanzania, the United Kingdom is their former colonizer, a major trading partner and an important source of investment and development aid. For this reason, the Brexit factor is definitely a cause for concern, which needs to be resolved before the EAC Heads of State to sign the long-term EPAs.
Article 99 of the EU-EAC EPAs dwells on safeguard measures for those countries, whose balance of trade may be negatively affected by trade imbalance due to EPA duty and quota free imports.
Article 99 thus states that there will be protection measures, as indicated in Article 77 of the EPAs, which includes the aggregation of the competitiveness of EAC, development cooperation in infrastructure, agriculture, fishing, farming, industry private, water and food security, market access and trade facilitation. However, it remains to be seen whether these conservation measures will be effective to limit the effects produced by the exponential increase in imports from the EU, which could be put the survival of local industries at risk.
It seems odd that so much suspicion and uncertainty about these agreements still burden African governments, driven by the fact that the EPAs have allowed the full opening of markets through the elimination of all barriers to the free movement of goods, services, people and capital.
The removal of barriers and the application of reciprocity in EU-ACP trade marked has increased the exports of European Community countries in Southern World Markets, exports which are already facilitated by the policy of subsidies currently in place in Europe, which had encouraged African states to trade with the European Union, but not with each other.
Finally, it should be recalled that before the EPAs, the trade relations between the EU and ACP countries was governed by the Cotonou Agreement, signed in June 2000, with the condition that ACP products, mainly raw materials, could be exported to European markets without being taxed.
Nevertheless, this did not apply to European products exported to ACP countries, which are subject to a protectionist tax system, but one whichwith the introduction of the Economic Partnership Agreements has failed totally.
In practice, it is difficult to consider the EPAs as instruments of growth, because in reality these agreements only set up the liberalization of the market for goods without putting any valid development aid policies into effect.