EPA and diplomatic chess games in EAC

Dar es Salaam. The East African Community (EAC) is once again facing a delicate diplomatic situation as it seems now more than ever that, after protracted negotiations, member states may have to just agree to disagree on the Economic Partnership Agreement (EPA).

More than the back and forth talks over the possibility of a common ground among the EAC countries, what may have finally sealed the EPA fate is President John Magufuli’s description Sunday of the trade deal as a neo-colonial tool.

Even as its chances of signing the EPA were next to zero, Tanzania had all along been diplomatic in tone while assuring member states that it needed more space to consider its position – raising a little hope among the proponents of the deal.

But Dr Magufuli finally declared Sunday: “It is bad for our country.” He made the remarks after a meeting with his Ugandan counterpart Yoweri Museveni at the State House in Dar es Salaam.

In his description of EPA, the President reiterated the very thing that has prominently played out to split the regional bloc as far as the trade deal is concerned – the need to cover one’s back and protect one’s interests.

Behind the scenes, there has been a lot of lobbying in the East African diplomatic corridors as deadlines were extended to have the deal with the European Union signed.

It slowly evolved into a battle of choice between national interests and regional integration.

“Each member state here is negotiating the deal based on what is stands to benefit, not with integration in mind,” says Morogoro-based lawyer Emmanuel Gideon.

Kenya, the only country and Rwanda to sign the EPA, was on whirlwind diplomacy last year – in its latest bid to convince the region that it badly needed the pact with the European Union.

In September, the country’s Deputy President William Ruto met three EAC heads of state and a Burundian minister in Dar es Salaam to convince Tanzania and Burundi to sign the deal.

Mr Ruto represented President Uhuru Kenyatta at the EAC Heads of State and Government Summit that was to agree on the way forward for signing, ratification and implementation of the East African Community (EAC) – European Union (EU), Economic Partnership Agreement.

He appealed to other East Africa states, especially Tanzania, to endorse the regional trade deal with the European Union that will allow the region’s exports to the European market tax free.

The EPA negotiations have been undertaken by the EAC as a bloc in line with Article 37 of the Protocol on the Establishment of the East African Community Customs Union and the Summit decision of April 1, 2002.

The Protocol provides that EAC partner states negotiate as a bloc on matters pertaining to participation in the World Trade Organisation and ACP-EU arrangements (under the Cotonou Partnership Agreement between the ACP Group of States and the European Community).

But the regional bloc now finds itself in a not-so-uncommon position – a catch-22 situation where conflicting interests between the partner states threaten relations.

On one hand is Tanzania that has just started out on an ambitious industrialisation drive. Granted, President Magufuli’s dream of turning the country into an industrial economy is not easy to realise considering the plethora of challenges – but critics have said EPA in its current form could deal that vision a death knell.

Protect its own interests

Tanzania has said no to protect its own industries – and made it clear that it would be scouting for her own industrial prospects.

Trade, Industries and Investment minister Charles Mwijage said last year that Tanzania was concerned that the EPAs proposed zero rate for all imported goods would put the country on a losing end – not the least by turning it into a source of raw material for European industries.

Members of Parliament also rejected EPA when the agreement was sent to Parliament for debate.

Mr Hussein Bashe (Nzega Urban-CCM) warned that EPA would kill EAC and that not all member states would enjoy the same benefits. “Some are going to earn a lot while others will see their productive sectors collapse.”

Mr Zitto Kabwe (Kigoma Urban-ACT Wazalendo) said: “We cannot allow the government to ratify the deal in its current form. It doesn’t mean that we have closed the chapter or we do not care about the welfare of EAC; all that we want is to make sure that our national interests are protected.”

Kenya, on the other hand, has practically been appealing for its partner states to consider its plight. The EU is Kenya’s biggest export destination, taking up cut flowers, French beans, fruit, fish, textiles, coffee and tea.

Under the trade deal, EU would grant unlimited market access to Kenya for the next two and a half decades. The East African economic giant will also enjoy the exemption from the eight to 12 per cent taxes while selling goods to the EU market.

Without the deal, these taxes will hurt Kenyan exports by making them uncompetitive, forcing exporters to offer hundreds of million shillings every month in cumulative discounts to buyers to be at par with other sellers.

Failure will also hurt agriculture, one of Kenya’s engines of economic growth. Close to 90 per cent of the country’s exports to EU are agricultural, agro-processed and manufactured products.

The scenario might also spell doom to more than 600,000 workers mainly in the flower farms and fresh food producers in the neighbouring country.

Considering that all countries in the region, other than Kenya, are part of least developed countries, access to the EU market is already guaranteed even without the agreement, through the Everything But Arms regime.

Rwanda, which has, since last year, appeared to be leaning towards Tanzania after a diplomatic spate with Dar es Salaam at the end of the fourth administration’s tenure, chose to go with Kenya on this one.

Analysts say that President Paul Kagame’s government had no issues signing the deal considering that his country had been seeking to expand its exports, tap into the EU development funds and boost foreign investments.

Rwanda’s exports have been falling over years, and to cushion the economy from further stress on foreign reserves, the country has embarked on an export diversification plan targeting Europe as one of the markets.

The EU is also one of the country’s leading trade partner. The trade value between Rwanda and EU has been growing steadily reaching 254 million Euros ($282 million) in 2015, according to statistics from EU Commission, though Rwanda imports a lot from EU.

Over half 54 per cent of Rwandan exports to the EU consist of food products, followed by 42 per cent of minerals. A mere 4 per cent of exports come from light manufacturing.

Deteriorating relationship

Burundi, which has been sanctioned by the EU following political unrest, said it would not sign the trade deal, given its currently deteriorating relationship with Europe.

With Uganda, it has always been a case of not wanting to declare its final position. Speaking in Dar es Salaam on Sunday, President Museveni once again chose to not entirely pour cold water on the trade.

“It’s better if the signing of the deal is shelved until further consultations are made,” he said at a joint press conference with Dr Magufuli.

But on July 13, last year, Mr Museveni told a largely European audience at the French Bastille Day celebrations held at the country’s embassy in Kampala that he was not signing the EPA.

“We shall not be signing this agreement until we have discussed it. So advise the European Union Commission’s ambassador not to get excited.”

Though he gave more room for further discussions on the issue, he said the trade deal was aimed at creating disunity among African countries.

He echoed similar remarks to President Magufuli’s, that the EPA was a “form of colonialism”.

It is not yet clear whether or not the trade deal will be part of the main agenda ahead of the EAC Heads of State and Government summit that was initially slated for end of February.

Early last month, Rwandan Trade, Industry and East African Community Affairs minister Francois Kanimba was quoted in some sections of his country’s media as saying that the issue would feature at the next EAC Heads of State summit.

The February 2, 2017, deadline for signing of the EPA lapsed with the partner states still undecided.

Initially, the EU and given the EAC until October last year, before extending it to February 2, to give member countries more time to review the document and come up with a common position as a bloc.

But by the lapse of the deadline, only Rwanda and Kenya had signed the agreement.

Sharply split

Across the region, opinions among economic experts on whether to sign EPA or not have been sharply split with some with the view that the agreements are not ideal as it will open up the region to more European exports, which could promote unfair competition and kill regional industries.

But those for the agreement argue that the deal provides for EAC exports access to European markets duty-free and quota-free, while the European Union access to EAC market provides for a gradual liberalisation of tariffs.

During the previous EAC heads of state summit held in Dar es Salaam, EAC leaders requested for additional time for clarification on some of the contentious issues raised by partner states before considering the signing of the agreement as a bloc.

Prof Gaudence Mpangala, a senior lecturer at the Ruaha Catholic University, says the EU has to re-draft the deal.

But the EU Commission insists that the deal is balanced and fully in line with the EAC Common External Tariff, saying it supports the EAC’s ambitious regional integration project and has what it takes to foster development.

Bad news for Africa

However, writing for Global Research, a centre for research on globalisation, Prof Horace Campbell, the Kwame Nkrumah Chair of the University of Ghana, said last October that the goals of the EPA are detrimental to the future of regional or full continental economic cooperation.

He urged Tanzania to reject the trade deal saying the EPA was more than just a trade agreement. “It commits — or carries the potential of committing — the region to a path of economic retrogression,” he noted.

“If this is the path the East African region wishes to follow, then it should do so with full knowledge of the consequences and prepare to deal with them. If not, then it might wish to pause and take stock. But the choice should be a conscious one, and fully informed.”

Apparently, that decision has been made, and Tanzania won’t sign. What is left to deal with now is the diplomatic situation, EAC states to reassure each other of commitment to the cause of regional integration.