Why EAC countries should sign the EPA

Even as the East African countries continue on the path towards integration, it is also a truism that it is about advancing national interests. So, when Rwanda joined Kenya in signing the Economic Partnership Agreements (EPA) with the European Union early this month in Brussels, Belgium, it was viewed as pragmatic.

Even as the East African countries continue on the path towards integration, it is also a truism that it is about advancing national interests.

So, when Rwanda joined Kenya in signing the Economic Partnership Agreements (EPA) with the European Union early this month in Brussels, Belgium, it was viewed as pragmatic.

 

And, while Uganda is also set to sign the pact, it was at first hesitant while Tanzania remains studiously reluctant with concerns of the EPA impact on its economy.

 

Burundi is holding out in protest against EU trade embargo in the wake of its political troubles. South Sudan’s signature is not required until it completes the two-year assentation period to formalise its EAC membership.

 

The deadline for the EAC to have signed as a bloc and collectively benefit from zero-rated entry of their goods into the AU had been set for end September 2016.

However, this has since been extended to January 2017, ostensibly to allow Tanzania and Burundi to reconsider their positions, but also cut Kenya some slack – as the only Middle Income Country in the bloc – and save it from taxes on its goods bound for the EU market. Taxes of between four and 24 per cent would have been imposed from October 1.

It would not be surprising that it is in Rwanda’s keen awareness of this fact, particularly as it relates to its aspirations to Middle Income Country status, that analysts saw the unhesitant signing of the pact as pragmatic.

Kenya’s predicament handily illustrates.

Up to 200 firms and four million Kenyan jobs are at stake if the EAC doesn’t sign the pact as a bloc.

The World Bank projects that Rwanda, along with Tanzania and Uganda, will graduate from Least Developed Countries bracket to developing countries status within a span of a decade.

And, given its high rate of economic growth – up to 7 per cent per annum – Rwanda could attain Middle Income status in as little as 5 years, according to the projections.

But the issue is with Tanzania, which, in a nutshell, it has expressed strong reservations on trade liberalisation to this stipulation: That, against 100 per cent access to the EU, the EAC states will gradually open up 82.6 per cent of its total trade to European Union firms in over 25 years under EPA.

As articulated in a recent article by the country’s former president, Benjamin Mkapa, and affirmed by President John Magufuli during the just-concluded extraordinary summit of the EAC Heads of State in Dar es Salaam: “Such a high level of liberalisation vis-à-vis a very competitive partner is likely to put our existing local industries in jeopardy and discourage the development of new industries.”

Presuming Tanzania and remaining other EAC countries attain Middle Income status during the course of the 25-year period, would it not work for all as a self-interested pack to strengthen EAC’s bargaining position after the proposed EPA elapses?

And what is to prevent the individual EAC countries to continue in the development of their industries, especially given that the opening up of the regional market to European goods will be gradual?

“There’s nothing like a free lunch,” and, given three countries are willing to sign, the 100 per cent access from the word go against a gradual 80 per cent could be considered something of a bargain.

It also seems to me that European competition in the EAC market cannot necessarily be a bad thing. The saying, where I come from, is that when the cows graze, they never finish grass for one another. Everyone gets their worth and goes home happy.

Not to mention that it is in competition from outside that the consumer tends to gain with the enhanced quality of locally manufactured products.

That’s why, I don’t buy Tanzania’s argument that being signatory to the EPA will have a devastating impact on regional industrial production.

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