Arusha — The East African Community (EAC) has denied it is negotiating with China on a free trade agreement (FTA) proposed by the Asian economic giant.

“Currently, there is no EAC-China FTA and no negotiations have begun, in this regard,” an EAC official told The Citizen on condition of anonymity since she was not authorised to speak to the media on policy matters.

She said recent reports on purported discussions on free trade between the EAC and China were due to “miscommunication”.

The official nevertheless confirmed that China had proposed to negotiate with EAC partner states a comprehensive FTA in order to boost trade volumes between the two sides.

China, currently the world’s second biggest economy, had also requested for a joint feasibility study with the community on the proposed trade arrangement.

“This matter was considered by the EAC Council of Ministers in early 2016,” the official said.

She noted, however, that in view of similar requests received from other countries such as Turkey and Singapore, the EAC secretariat decided to undertake a study on implications of such negotiations.

The study will inform the Council of Ministers, which is the policy organ of the EAC, on the way forward and subsequent response to requests by China and other foreign countries.

“In this regard, the secretariat communicated with the concerned parties that the EAC was to undertaking internal consultations on their proposals and would revert after consultations are finalised,” the official said.

In June, last year, the EAC secretariat approved a study on FTA implications which, besides China, also covered Turkey, the United States, Singapore, India, Brazil, the Gulf Cooperation Council and the European Free Trade Area Association.

The draft of the study on the merits of an FTA with China and other trading blocs is expected to be completed by August after which it would be considered by the six EAC member states.

Recently, Kenya announced it that would not sign the FTA proposed by China in order to protect its nascent manufacturing industry.

Nairobi maintains that the current trade balance is heavily skewed in favour of Beijing, and that the proposed trade arrangement would see more Chinese goods access the EAC market at more favourable tariffs.

China already accounts for 25 per cent of Kenya’s import bill under the current common external tariff structure of zero, ten and 25 per cent for raw materials, intermediate goods and final goods, respectively.

“This means that China is likely to get even a larger share of Kenya’s market once we enter into a free trade arrangement,” Mr Chris Kiptoo, the principal secretary in Kenya’s Trade ministry, said last week.

Commenting on the unfolding scenario, Mr Simon Mapolu, a business consultant based in Arusha, said Kenya and possibly other EAC partner states were unlikely to sign such an agreement because such a decision would undermine their industrialisation plans.

“If they (Kenya) sign, they would be creating a competitor. In China, utilities, labour, freight and other factors of production are very cheap. This is not the case with Kenya or even Tanzania,” he said.

Mr Mapolu explained that while Kenya aimed to become a leading manufacturer of basic consumer goods in eastern and central Africa, Tanzania has embarked on its own industrialisation drive.

He added that the region stood to benefit more from the trickle down effects and huge returns from manufacturing investment from China in form of technology transfer, job creation and human resource training.

Source: All Africa

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