Post date: Wed, May 1, 2019
Category: International Trade
By: Dr. Samwel O. Otieno,

Preamble

The Economic Partnership Agreements (EPAs) which is the trade instrument envisioned to define trade relations between the European Union (EU) and the East African Community (EAC) as Regional Integration Configurations remains elusive. This follows a report presented by Uganda’s President H.E Yoweri Kaguta Museveni who is the immediate former Chairman of the East African Community during the just concluded 20th Ordinary Summit of Heads of State of the East African Community held on the 1st February, 2019 at Arusha, Tanzania. H.E. Yoweri Museveni reported that after meeting the European Commission President Jean-Claude Junker on 27th September, 2018 in Brussels, Belgium, in the company of the EAC Secretary General Dr. Libérat Mfumukeko and representatives from EAC Countries, there was still no breakthrough on the issues that had been raised by the EAC member countries which have stalled conclusion of the EPAs.

Continued failure to register a breakthrough doesn’t augur well for the two regional blocks in signing the EPAs. The stalemate has necessitated a call for an extension of engagement between the EAC and the EU for four months. Will four months see the unanimous signing of the partnership agreement? What are the issues at play? What are the policy implications for the EAC and Kenya in particular? These remains pertinent issues before EPAs is concluded.

Background on EU trade relations with the EAC

East African Community (EAC) members comprise of six (6) partner States namely the Republics of Burundi, Kenya, Rwanda, South Sudan, the United Republic of Tanzania, and the Republic of Uganda. The EAC Countries being domiciled in Africa are also members of the African, Caribbean and Pacific (ACP) Group of States that was created by the Georgetown Agreement, Guyana in 1975. The ACP’s group’s main objectives were sustainable development and poverty reduction within its member states, as well as their greater integration into the world’s economy. While the ACP was created in 1975, the European Economic Community (EEC) was created earlier under the Treaty of Rome in 1957. Members of the EEC had long-standing economic relationships with developing countries, some of which were still their colonies at the time of the Treaty signing in 1957. The EEC Countries main objectives was to continue with the relationship in terms of solidarity and commitment they had with their colonies and other overseas territories.

The Lomé Treaty, 1975

The two regional integration blocks namely the ACP and EEC entered into an agreement on trade and aid agreement during the Lomé Convention signed in February 1975 in Lomé, Togo. This, therefore, marked the initial trade negotiation and duly signed agreement between the ACP and the EEC on areas of co-operation and trade in particular.

In the Lomé treaty, free trade regime that existed between the EEC and the ACP States since 1957 was maintained, procedures were streamlined to encourage the imports of products from these countries, and customs duties were abolished for most products imported into the EEC. The Convention established a customs preference zone between the EEC and the associated states. The Lomé Convention has been considered a highly innovative model of international cooperation. In many ways, it acted as a pilot scheme for other forms of cooperation. Some of the original features included an equal partnership. The partnership was the cornerstone of the first Lomé Convention. It gave ACP countries the responsibility for their own development by entrusting them with a lead role in managing resources, with the EU playing a supportive role in the form of aid and trade. Lomé cooperation provided predictable aid flows over a five year period as well as non-reciprocal trade benefits. It is under the Lomé I (1975) that Stabex scheme to help stabilize export receipts on a wide number of agricultural products such as cocoa, coffee, groundnuts, and tea was initiated. The EU also agreed on separate trading Protocols on sugar, beef and veal, bananas, and rum. For example, under the Sugar Protocol, the EEC bought a fixed sugar quota each year from ACP producers at guaranteed prices, higher than world market prices among other initiatives that lasted from 1975 to 2000 when a new agreement christened the Cotonou agreement was signed.

Cotonou Agreement, 2000

The Cotonou agreement signed in Contonou, Benin in June, 2000 is the successor to the Lomé Conventions, which lasted for 25 years from 1975 to 2000. A major difference from the Lomé Convention is that the partnership was extended to new actors such as civil society, the private sector, trade unions and local authorities. From the year 2000, the Convention between the European Union and ACP countries was renewed under the name of the Cotonou agreement.

The renewed agreement was envisioned to create a free trade area between the ACP and the EU.  The ACP states were to benefit from the standard gains from trade such as increased market access to the EU, reduced prices of EU exports for ACP consumers, and associated competitive effects to foster economic growth and hence development. On the same note, major innovations were introduced to improve the overall impact of aid, trade and political cooperation between the ACP and the EC.

Some of the principal issues under the Cotonou agreement encompasses Differentiation and regionalization. The ACP states formed regional blocks namely the East African Community (EAC), South African Development Community (SADC),  Economic Community of West African States (ECOWAS), Economic Community of Central African States (ECCAS) to name a few. Therefore, Cotonou agreement heralded negotiations anchored between the regional blocks with the EU. It’s on this basis that the current Economic Partnership Agreement (EPAs) is being negotiated between the EAC and the EU. This approach has encountered hurdles as the countries constituting Africa regional blocks are at different levels of development as per the United Nations Development Programme (UNDP) Human Development Index that classifies countries into different levels of development such as Low Human Development or Least Development Countries (LDCs), Medium Human Development or Developing Countries (DCs) and Very High Human Development or Developed Countries. In the EAC context, a majority of member countries are classified as LDCs with Kenya being the only country classified as a Developing Country (DC). This has implications when Countries under a regional trade block negotiate together.

The most radical change that was introduced under the Cotonou Agreement concerns trade cooperation. (Under the Lomé agreement, the principle of Non-reciprocity was in place, this ensured there was a non-reciprocal treatment of goods and service from the ACP countries. For example, Everything But Arms and Ammunitions (EBA) was introduced which conferred duty and quota-free access to all products originating from Least Developed Countries (LDCs) of which most constitute membership of EAC). However, in the EPAs, Reciprocity has been introduced. The concept of reciprocity ensures both parties ie. The EAC states and the EU are to reciprocate in terms of market access by treating goods and services from each trading block in a reciprocal manner by applying the principles of reciprocity and non-discrimination. It simply means that not only the EU provides duty-free access to its markets for ACP exports, but ACP countries are also to provide duty-free access to their own markets for EU exports.

Signing and Ratification of EPAs

Only the Republic of Kenya has signed and ratified the EPAs. The Republic of Rwanda signed the agreement together with Kenya in September, 2016.The remaining Four Countries have not signed the EPAs. The remaining Countries have raised pertinent issues that require clarification before appending their signatures. The continued non-signing of the agreement by all the EAC member states is not in conformity with the principle of regionalism as contained in the Cotonou agreement. It was envisaged that the EPAs would be signed as regional blocks with the EU. However, unanimity in signing the EPAs remains elusive among the EAC partner states.

The EPAs can only enter into force upon ratification of the agreement by all member states of the EAC as envisaged under the principle of regionalism. However, due to challenge of attaining unanimity in ratifying the treaty as a regional block, the principle of variable geometry which entails some members proceeding with the ratification of the agreement has been muted in certain quarters to ensure existing stalemate is addressed.

Issues of concern among the EAC Members States.

1. The EAC member states comprise of member states at different levels of development as per the UNDP’s HDI classification. The majority of EAC Countries are classified as Least Developed Countries (LDCs) with only Kenya being classified as a Developing Country. Under Lomé agreement, LDCs enjoy market access to the EU under the Everything But Arms and Ammunitions (EBA) which extends duty and quota-free access to all the products originating from the Least Developed Countries in Africa to the EU. Most of the LDCs therefore, are benefiting from this market access arrangement. There is concern that implementation of the principle of reciprocation under EPAs will disadvantage the LDCs.
2. The EAC countries are concerned that signing a bad EPAs will compromise the region’s interests in subsequent trade negotiations. This, therefore, implies that concerted effort should be made to ensure that the countries do not sign a bad EPAs.
3. Countries that have not signed the EPAs, argue that the trade agreement in its current form will have negative implications for their industrialization strategies.
4. Only Kenya and Rwanda have signed the EPA deal, but being a Single Customs Territory, the other EAC members must sign the pact to make it enforceable.
5. Burundi has not signed, citing the existence of EU embargo on Aid and therefore cite resumption of EU aid to Bujumbura as a precondition for its signature.
6. Uganda, on the other hand, is awaiting concurrence with other member states before signing the EPAs. Uganda will sign the EPAs if a consensus is reached among EAC members.
7. The effect of the Most Favoured Nation (MFN) clause on the future engagement of EAC with third parties is a pertinent issue of concern which needs clarification before signing the EPAs.

Four Months Extension

The 20th Ordinary Summit of Heads of States of the East African Community after being presented as a follow-up report arising from the 19th Ordinary Summit resolution, indicated that no satisfactory and conclusive answers had been reached after a meeting convened between the EAC and the EU on 27th September, 2018 in Brussels.  It is on these grounds that the 20th Ordinary Summit after deliberation, approved an extension of four months to obtain answers and concurrence on the pertinent issues that have been raised by member states who have not signed the EPAs.

With a new Chairman of the East African Community H.E. President Paul Kagame of the Republic Of Rwanda whose country has already signed the EPAs, it is hoped that the pertinent issues raised by member states who have not signed the EPAs will at last be addressed between the EAC and the EU to enable a unanimous concurrence and signing of the EPAs within the four months extended period.

The next four months will therefore, be a defining moment for the EAC and EU to conclude the EPAs. This is overly ambitious.

Proposed Way forward.

The Republic of Kenya is the only Developing Country in the EAC should strive to push for implementation of variable geometry in line with the interests of the Country as contained in the Constitution of Kenya, 2010 and the National Trade Policy with an aim of transforming Kenya into a Competitive Export-Led and efficient Domestic Economy.

Taking into cognizance the various non-converging interests of independent states forming the EAC, it is not going to be easy to reach consensus on all issues raised and addressing them to the satisfaction of all member states. Alternative means of entering a contractual agreement on EPAs needs to be explored.

Pertinent issues raised by other member states of the EAC who have not signed the EPAs needs to be critically taken into consideration. Kenya, in particular, needs to gauge the relevance of these issues and thereafter strategize on how to overcome the challenges pointed out. Policies on how to upscale competitiveness of Kenya’s manufacturing firms vis-à-vis imports from the EU and support the manufacturing sector to be more competitive is paramount.

Conclusion

Trade relations between the EAC and EU is a progressive idea which should be strengthened for the economic development and well-being of citizens of member parties to the EPAs. However, due to the pending clarification of contentious issues raised by member states who have not signed the agreement in order to attain concurrence among member states pending ratification of the agreement is important. It’s however, overly optimistic and ambitious that within four months, all the issues raised will have been addressed. We hope the well-being of member states populace will be at the forefront in reaching a consensus between the EAC and the EU.

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