EPAs will spur regional trade – EU

By Joan Akello

Kenya’s Vice President William Ruto recently said his government is trying to expedite negotiations to sign EPAs before the October 2014 deadline. The Independent’s Joan Akello spoke to EU officials at the EU Delegation in Kampala about the development.

What does this mean for EAC, EU and Kenya?

Any firm commitment to expediting EPA negotiations is very welcome. To achieve this, we should focus on the substance of the negotiations. EAC-EU EPA negotiations have been kept to a regular pace and schedule over the last year and a half.

Consequently, substantial progress was made on all issues. The parties are now very close to an agreement. The next senior officials meeting should be able to isolate a few issues for a Ministerial meeting, which can then be scheduled to wrap up the EPA negotiations.

In order to avoid a loss of trade preferences for Kenya – as the only non LDC in the EAC – negotiations should be completed as soon as possible especially bearing in mind that the agreement shall require ratification by all EAC States.

What advantages does Kenya get over her regional counterparts by signing this agreement?

The EPA provides EAC a stable relationship with the EU and institutions in which all issues affecting the trade relationship can be addressed.  Correctly implemented, the EPA may also act as a catalyst to consolidate the EAC Customs Union, fully respecting EAC political choices.

The EPA can thus support and strengthen the EAC’s ambitious integration project.  This partnership offers far more than the unilateral preferences under the Everything-But-Arms (EBA) initiative or the standard Generalised System of Preferences (GSP) to boost trade.

If Kenya signs this deal, where does it leave Uganda and other EAC States, considering that the EA Customs Management Act that requires EAC partner States to negotiate as a bloc?

Both EU and EAC are striving to conclude a regional agreement. The EU respects the rules and decisions of its partners without interfering in the configuration of the EPAs.

There is criticism that the non-reciprocal and discriminating preferential trade agreements offered by the EU are incompatible with WTO rules. What is your view about this criticism?

Actually, the Lome and Cotonou Agreements previously contained such non-reciprocal and incompatible trade regimes. EPAs are preferential trade agreements which are fully in line with WTO rules, notably Article 24 GATT.

CSOs say these free trade agreements are forcing developing countries to open up their markets to EU imports. This would have a devastating effect on local economics as well as regional trade, and lead to disastrous consequences for millions of people. Why is EU pushing for this deal?

We are aware of CSO’s concerns and are already taking them into account.

First of all, liberalisation has a positive impact on local industries by lowering the cost of essential inputs. Fertilizers, chemicals, and production technology may be imported more cheaply and increase the viability of local enterprises. Hence, they improve their potential to diversify and move up the value chain, breaking the current dependence on commodities and low value-added craft industries.

Secondly, EPAs do not promote a full liberalisation of ACP economies. An asymmetric approach applied allows ACPs exclude from liberalisation their sensitive products, going up to 20% of their trade with the EU.

Exclusions cover mostly agricultural products which remain sheltered from EU competition.  As for the rest, in order to allow time for domestic preparation, they progressively liberalise it over a period of 15 years after the entry into force of the EPA.

So, the ACPs can keep tariffs on goods they consider sensitive. Even for less sensitive goods, liberalisation will only be gradual. Should this not be enough, the EPA allows ACPs use safeguards and restrict imports from the EU when increases of imports are excessive.

There is also another series of provisions that allow ACP countries to stop imports to preserve food security or to protect industries which are still in their infancy.

Liberalisation is however essential to be able to import cheaply production technology and inputs for their exporting industries, obviously. But also, it may be wise policy to open up the domestic economy and let some fresh wind in. This will activate local enterprises and push them to specialise and gain in productivity rather than leaning back and supplying a ring-fenced local market at overly high prices.

Economic structures between ACP and EU are highly complementary so most sectors of ACP economies don’t compete with EU imports. ACP countries import mainly machinery, equipment and vehicles from Europe. Europe buys primarily basic commodities such as minerals and agricultural goods in the ACP. Relevant competitors to ACP economies are situated in China and other developing countries in Asia or Latin America.

Economic studies indicate that keeping tariffs on 20% of imports ensures protection of relevant sensitive ACP sectors. In the present agreements, countries and regions excluded mainly agricultural products, but also some other processed goods e.g. textiles, paints, wood products, plastics, rubber and glass. These are clearly sectors in which they have domestic industries which they wish to protect.

EU is not pushing for the EPAs. The ACP countries are asked to make a decision about their future trading relationship with the EU – the choice is essentially between a negotiated partnership on the one hand and a unilateral trading scheme on the other.

If they opt for a partnership, they will ensure continued free access to the EU market without any disruption to trade. Countries that do not decide to commit to the partnership on offer will have access to the EU on the same footing as other developing countries, notably through one of the unilateral preferential schemes the EU offers: GSP to all developing countries, EBA to the least-developed, plus the special incentive GSP+ scheme.