Recently there have been back and forth regarding the Economic Partnership Agreements. (EPAs). Apparently within the East African Community it is only Kenya who is keen on the agreement. Uganda has promised to sign, Rwanda had signed buy not ratified while Tanzania has flatly refused to sign. Burundi and South Sudan are yet to sign .This played out in the recent EAC Summit held at Arusha
What are Economic Partnership Agreements? (EAC- EU- EPA)
Simply put these are Agreements concluded by the European Union with regional blocs of African Countries. They are meant to promote sustainable development and to reduce poverty
They have been negotiated between the EU and the African Caribbean and by supporting regional integration processes in Africa Caribbean and Pacific and Countries (fondly referred to as ACP Countries).
As regards the EU-EAC EPA, the issues remains, if it is supposedly meant to deals with bigger issues such as poverty reduction, how come there has been less enthusiasm among the EAC countries, with the exception of Kenya, to concluded the pact?
It is instructive that a cursory look the EAC website reveals just a paragraph about the EPA among other “initiatives”. Perhaps this is a clear sign of this Regional Economic Bloc’s attitude towards the EPA.
So why does Kenya find itself in a tricky situation regarding EPA.
The United Nations through the World Economic situations and prospects (WESP) classifies countries into different categories namely developed economies, economies in transition and developing economies.
Further the United Nations Economic and Social Council (UNESCO) classifies countries as Least Developed Country (LDC) based on the recommendations by the Committee on Development Policy.
As at December 2018 the EAC countries that were listed as LDCs are Burundi, Rwanda, South Sudan, Uganda and Tanzania.
The above classification is quite significant in the EAC-EU EPAs stalemate for various reasons.
First from the list it is apparent that it is only Kenya that is considered a developing economy in the EAC at the moment .What this means is Kenya stands to lose a lot by not carrying through with the Economic Partnership Agreements. But why is this so?
Well, once the EAC as bloc sign and ratifies the EAC-EU EPA each country is supposed to open up its market by up to 82.6 percent over a period of 15 years.Ofcourse most of EAC members were and still are skeptical about the likely effects especially the completion that local industries would face. But this is a discussion for another day.
Is Kenya a lone Ranger?
Now as far as Kenya is concerned the damage was done sometime in 2016.In the text of the EPA, the negotiations and conclusion of EAC EU EPA was to be completed before 1st October 2014. Further there was a condition that should there be no conclusion by the set time then EU regulation 1528/2007 would expire. Simply put Kenyan products would not access the EU market duty free quota free but they would attract duty of between 5- 22 % .
Remember the other EAC members could not be affected in any way! They, as Least Developed Countries were to continue to trade (and still) do duty free quota free under the everything but Arms (EBA) initiative.
EBA was designed by the European Union to enable Least Developed Countries access the EU market duty free quota free on all products except arms. As it is the EAC countries with the exception of Kenya (a developing economy) are enjoying the perks under EBA.This explains their reluctance to conclude the EAC EU EPA and Kenya’s eagerness to have the pact going.
Likely effects?
What this could mean in the long run is manufactures may find it cheaper to operate in the countries that enjoy EBA as opposed to setting up in Kenya with higher duties. The resultant effects are obvious.
Interestingly EAB as established by EU Regulation (978/2012) has not expiry date! A country just needs to operate within the LDC zone! Is Kenya stuck? What should Kenya do?
Patrick's Trade Digest 