[Deuda-QdQ] East Africa: Officials Confused About Pros and Cons of EPA

Mie Nov 21 10:43:28 CET 2007

TRADE-EAST AFRICA: Officials Confused About Pros and Cons of EPA
By Aileen Kwa

KAMPALA, Nov 20 (IPS) - The news that the ministers of the East African
Community (Kenya, Uganda, Tanzania, Rwanda and Burundi) are on the verge
of signing an economic partnership agreement with the European Union
(EU) has been received with mixed reactions by government officials from
these very same countries.

The East African Community (EAC) ministers had agreed with their EU
counterparts last week that they would sign a framework agreement on
trade in goods, market access, development cooperation and fisheries by
no later than November 23 this year.

This framework agreement will reduce to zero 81 percent of current EU
exports in industrial and agricultural products entering the EAC
markets. The elimination of tariffs to zero will take place over a
transition period of 25 years.

By the end of the tenth year, there will be a zero percent tariff on raw
and capital goods. Tariffs on intermediate goods will be brought down to
zero between the eleventh and twentieth year and tariffs on finished
items will be brought to zero percent after 25 years.

Built into the agreement will also be a mechanism for the continuation
of the economic partnership agreement (EPA) negotiations beyond December
31, 2007. The additional areas to be negotiated include liberalisation
of services, intellectual property and the ‘‘new generation issues’’ of
investment, competition policy and government procurement.

A negotiator from the region who had been involved in the negotiations
felt that the outcome is good for the EAC. ‘‘Of course it is good. If it
wasn’t good for us, we won’t have agreed to it.’’ He was pleased about
the level of liberalisation, coupled with the exclusion list (19 percent
of current trade), and the transition period. Tariff reductions will
only commence from 2010.

Other government officials from the region, however, expressed unease. A
major issue between the negotiating partners had been over
‘‘development’’. The EAC had presented the EU with a matrix of projects
they wanted the richer nations to fund.

According to an inside source from Nairobi, Kenya, who spoke on
condition of anonymity, ‘‘what is not clear is what we are getting in
the ‘development’ framework. I don’t know how concrete or binding this
development framework is. It is a total mess, but unfortunately we are
already there.

‘‘Are we getting additional funds? The EU is saying they will be using
the current EDF (European Development Fund). We have been conned into
this thing. Here we are, opening our markets to the EU, and in return we
are getting a ‘best endeavour’ (non-binding) development framework,’’ he
told IPS.

‘‘We don’t know, in concrete terms, where the funds are coming from --
if there are no additional funds. So this interim arrangement is just
about opening up our markets for EU,’’ he said.

Another government official from Kampala, Uganda, raised similar
concerns: ‘‘I think there is an EAC development plan. Most probably that
is what has been picked up for support under ‘development’.

‘‘In terms of funds, are we getting anything over and above what we
would have got (without the EPA) or are we getting the same? Those
answers are not very clear and nobody can tell you. We know that the EDF
is coming. Maybe it will still be the same amount of money.

‘‘But we are told that the EU has been the major funder of our roads, so
we need to agree with them (on the EPA). So it is a bit tricky,’’ the
Ugandan official said, on condition of anonymity.

When asked how the package might affect the agricultural sector in
Uganda, there was some uncertainty. The Ugandan official commented,
‘‘there is a list of sensitive products which has been excluded from
liberalisation. I am told that the (EU agricultural) subsidies are not
open for negotiation.

‘‘This means that, tentatively, (the EAC will not open its markets) to
those products that the EU is subsidising, such as beef and dairy. But
when you look at Rwanda, they are importing a lot of milk from the EU.
How are Uganda and Tanzania going to keep the milk out? If there are no
border measures, the milk can easily come here.’’

To the question whether the EPA will affect the industrial sector in
Uganda, he commented: ‘‘We don’t have much of an industry to talk about,
really. Maybe the problem is upcoming industries, I don’t know.

‘‘It could be a catch-22. Maybe we can attract investment or maybe it
will discourage our local entrepreneurs who have already started
something or who could have started something’’, were it not for
external competition.

He gave the example of small grocery stores that are currently being
pushed out of the market. ‘‘They are being swallowed by supermarkets.
These small shops were supplying extra services. You could get a few
things and pay later, and they were in the suburbs. Now, with the coming
of supermarkets, some are pushed out.

‘‘They are no longer competitive. We are not sure whether those (EU)
people will come in (as a result of the EPA) and displace the small
people.’’

He also raised the issue of neighbours benefiting at the expense of
Ugandans. ‘‘What if Europeans decide to put up industries in Kenya and
don’t come here?

‘‘Unilever is in Kenya and they are bringing all the products here --
soap, toothpaste -- to our supermarkets. So the people benefiting are
Kenyans and there is no guarantee that we will benefit, although we are
talking as EAC.’

‘‘When you look at the Kenyan private sector, their export volume is
quite high. But when you look at ours, the volume is a bit low. Ours
could go under the EBA (the EU’s Everything-But-Arms trade initiative).
I don’t know if our private sector is aware of this. If they are not,
they might be told that by January, their products will attract a higher
tariff.’’

As a least developed country (LDC), Uganda can avail itself of the EBA
preferential arrangement of the EU which provides zero duties on all LDC
exports.

The Kenyan official had this to add: ‘‘We are better off with the
generalised system of preferences (the tariff rates which the EU offers
to all countries). The duties are high but they would not have stopped
us from exporting and we would not have had to open our markets for the EU.

‘‘But now the EU is telling us to pay a price for the preferences we are
receiving from them by opening our markets. Even when we do this, the
countries we fear will still be more competitive – India, Korea and
others. The EU is already entering into free trade agreements with them.
So there is nothing we are gaining by opening up.

‘‘But the political aspect comes into play. The politicians say we need
to reassure some of the key players, particularly in horticulture, that
trade will not be disrupted (at the end of the year). Just because of
horticulture, we are opening up our markets.’’ (END/2007)

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