It is now emerging that Kenya lost out in the trade talks with the European Union mainly due to lack of support from its partners in the East African Community.

As time was running out for the EAC to conclude the talks last month, the five EAC countries were summoned for a crisis meeting in Arusha, Tanzania.

The five — Kenya, Tanzania, Uganda, Rwanda, and Burundi — were expected to take a common position to take to Brussels, Belgium, to unlock the stalemate in the negotiations to allow Kenya to access the European market duty-free.

Tanzania seemed to be particularly disinterested, not even bothering to send a representative to the meeting held on its territory.

The lack of commitment from most members of the EAC to attend scheduled meetings, Smart Company has learnt, is one of the reasons the negotiations took long and failed to yield results before the 1 October deadline.

NOT URGENT
Over the past five years, Kenya has been negotiating the Economic Partnership Agreements (EPAs) deal that would have seen exports from the region enjoy duty-free, quota-free access to the EU together with other EAC members.

The expiry of the deadline has hit Kenya hardest because the other EAC member states are classified as Least Developed Countries (LCD) and, thus, continue to enjoy the privileged EU market access even without the EPAs deal.

This presents the worst indictment of the frosty relations between the EAC countries, leading Kenya to express frustration at its failed efforts to convince the other EAC members of the importance of fast-tracking the negotiations and making them understand the implications to its economy.

“One of the challenges is that we are negotiating as a group with countries belonging to the Least Developed Countries… so to them, it is not as urgent as it is to us,” Foreign Affairs principal secretary Karanja Kibicho said last month.

The European Union decreed that the EAC must sign new EPAs before exporters can continue enjoying preferential access to the EU market.

SIMILAR MARGIN
Policy-makers and businesses are increasingly growing impatient over the delay in concluding talks on the trade pacts between Europe and East Africa.

“We are talking about new taxes of up to 15 per cent on some of our most popular products in Europe. This basically means that the retail price has to go up by at least a similar margin, which leaves us at a disadvantaged position,” said Fresh Produce Exporters Association of Kenya chief executive Stephen Mbithi.

Kenya is expected to lose at least Sh7.8 billion in duty paid for its exports to the EU and risks the collapse of an economy employing more than 150,000 people.

At least 67 per cent of Kenya’s exports to Europe will be affected and will attract duty of between four and 24 per cent, thus threatening the competitiveness of the products.

Negotiations started in 2004 and the agreements were expected to have been signed and ratified by 2007 to safeguard the horticulture sector.

A source from Kenya’s delegation to the EAC’s negotiating team said some members have been openly non-committal on arriving at a compromise with the European Union.

Even as it emerged that the region has requested the European Union for another meeting to salvage Kenya’s precarious position, it remains to be seen if there will be renewed commitment to push through the negotiations.

TRADING BLOCS
The European Union has expressed disappointments over the failure by the EAC to strike a deal in time to avoid a last-minute rush.

“It is regrettable that we have not arrived at a deal after all this time… we are negotiating with a region that is not used to negotiating as a bloc on trade issues,” European Union ambassador Lodewijk Briet said in a media session on Friday.

Kenya is disadvantaged because the EU insists that it cannot negotiate with a single country. “EU is negotiating on behalf of its 28-members and, therefore, we expect the EAC to do the same on behalf of its five members,” Christophe De Vroey, the head of communication at the EU delegation in Kenya, said.

The EU, considered to be the largest single market, is the main export market for most of the regional economies. For Kenya, it accounts for 23 per cent of its exports, Tanzania 14 per cent, Uganda 17 per cent, and Burundi 40 per cent.

Kenya is the only country in Africa whose exports will be subjected to a higher tax regime in the EU. All the other trading blocs in the continent have signed EPAs.

The EU estimates that the delay will cost the economy at least Sh400 million a month while industry players such as the Kenya Flower Council put the loss at Sh1 billion. The Kenya Association of Manufacturers estimates the loss at Sh637 million.

NO BINDING FRAMEWORK

It is not the first time that failure by the EAC to act in unison is standing in the way of mutually beneficial economic policies.

Tanzania and Burundi for the better part of last year refused to attend a series of infrastructure talks launched by Kenya, Uganda, and Rwanda on the premise that the projects would not benefit them.

Earlier in the year, a quest by the region to implement a single tourist visa suffered a setback after Tanzania, supported by Burundi, indicated that it was not ready to join the arrangement.

The other three EAC countries went ahead and implemented the visa under what has come to be known as the Coalition of the Willing (CoW) that involves Kenya, Uganda, and Rwanda.

In the absence of a legally binding framework to implement economic projects in the EAC, action and pace have largely been dependant on the willingness of the different countries. In February, a World Bank Group report revealed that the EAC bloc was performing poorly in implementing the Common Market Protocol.

The East African Common Market Scorecard 2014 noted that old regulations restricting movement of goods, capital, and people were still in the law books while fresh restrictions have been enacted through legislation or in administration.

SEEKING EXEMPTIONS
“Laws and regulations of the EAC partner states, however, still present barriers to increased cross-border trade and foreign direct investment in the region,” noted the report.

Although the region began addressing the movement of goods well before the Common Market Protocol was adopted in 2010, there are many issues that are yet to be dealt with.

In addition to the failure to eliminate non-tariff barriers (NTBs), countries are frustrating the implementation of the common external tariff by repeatedly seeking exemptions to the law.

According to the report by the global lender, Tanzania was found to be the worst performer in eliminating NTBs at 66 per cent. This is in comparison with Rwanda, which had eliminated 94.1 per cent and Kenya at 85.5 per cent.

Tanzania and Burundi regulations make the two nations the most difficult to move capital in and out of their borders.

According to the World Bank, some of these regulations include a law in Burundi that reserves shares in privatised companies for citizens and Tanzania’s categorisation of EAC investors as “foreigners”.

Source: Daily Nation

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.