East Africa's EU trade agreement in peril
The EAC is currently a common market, which allows for goods and services to be traded between the five countries free of any tariffs or quotas, as well as free movement of labour and capital.
The EPA deal between the EAC and the EU was agreed to by all member states in October 2014 and was to be signed and ratified in August 2016. Kenya played its first move this year when it tried to rush the EAC members into signing the deal early on July 18, seemingly to coincide with the visit of the EU Commissioner for Trade who was in Nairobi for the UN Conference on Trade and Development.
Initially, everyone agreed, but at the eleventh hour, first Tanzania and then Uganda, said that they would not sign until further negotiation had taken place.
Kenya’s motives for trying to rush the deal are no secret - if the EPA has not been signed by October 1, then all existing trade deals with the EU will lapse and each country will have to negotiate with the EU according to the bilateral trade laws that apply to them. In the case of Tanzania, Uganda, Rwanda and Burundi this is not important. As least developed countries they automatically qualify for tariff-free exports to the EU under the Everything-But-Arms agreement.
Kenya, however, is categorised as a developing country and as such needs to pay between 4.5 percent and 19.5 percent on all its exports to the EU. It can also request a softer deal under the General System of Preferences Plus, which could waiver tariffs on up to two-thirds of its exported goods.
Any increase in tariffs will have serious implications for the Kenyan economy. In 2015, exports to the EU were worth approximately €1.25 billion (about R19.51 billion) - around a quarter of Kenya’s total exports.
Kenya is the world’s third-largest flower exporter, after Colombia and Ecuador. In 2015 flower exports to the EU were worth €475 million. Exports of fruit and vegetables were €689m. An increase in tariffs will push many farmers out of business or encourage them to move their operations to neighbouring countries - something Tanzania and Uganda are well aware of.
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