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September 23, 2018

Seeking Better Trade Terms With The EU

Recently, I led the East Africa Community-European Union delegation to a meeting in Kigali, Rwanda, and we resolved eight issues out of 11.

The three outstanding issues include tax and duties on exports; domestic support and export subsidies provided to farmers in the EU in reference to non-trade provisions as per the Cotonou Partnership Agreement.

We made some progress, what remains now is to agree on a few points of concern basically on phrasing of some sentences in the agreement. Although the meeting did not agree on these issues, it deliberated to resolve issues on Economic Partnership Agreements.

The EAC-EU have for sometime now been negotiating on how to engage trade-wise, which has now been escalated to the ministerial level. It is our hope that the agreement shall be achieved quickly at this level and the parties will just initial the agreement and beat the October 1 deadline.

To briefly explain the issues at hand; the EU wants to restrict the EAC from imposing duty and tax on its exports. This is a vital policy instrument that is used by all the World Trade Organisation countries, without restriction, for purposes of value addition to products, industrial development, development of infant industries, food security, environmental protection, currency stabilisation, and revenue collection.

The WTO has adopted an asymmetric approach to the treatment of exports and imports. It does not prohibit the use of export taxes and considers such taxes as a legitimate instrument at the disposal of members.

In relating with EU therefore, this has been one of the points of departure. Given that the export taxes exist beyond the realm of the WTO and the EPA trade regime is expected to be WTO compatible, the EU seems to seek to discipline export taxes within the EAC region.

While the EU is putting a lot of pressure on this issue, its member states used the same instrument to industrialise. It would only be fair therefore for the EU to grant the EAC policy space on this matter that is purely domestic, and should not insist that the EAC seeks approval from an EPA Council to impose a domestic policy. This should be left as a domestic procedure handled by the National Assembly or through national budget-making processes.

In the policy of ‘give and take’ used in negotiations; the EAC agreed to impose export taxes and at the same time notify the EU and allow the EPA Council to review after an agreed time frame. The EAC offer ensures predictability to investors by proposing a longer period before the review takes place. It also ensures transparency in which the EU could raise the matter under the EPA Council should it have concern against export taxes.

The EAC has further offered the EU a balance deal on the domestic support and export support to agricultural products in the EU. The EAC is pushing the EU to eliminate support to farmers that distort the market, both in the EU and EAC.

These are the issues that are still at abeyance and which we hope will be resolved in August. The EAC, chaired by Kenya, has neither been obstinate nor insensitive to that matter at hand. We are well aware of the many products that are at stake and that this whole issue is important to businesses both locally and in Europe.

All we want and seek to achieve, however, is what will be good for the region and that will stand the test of time. In the event of failure to agree before the EU’s self-imposed deadline, the region will come together and put measures in the interim that will cushion businesses. Until then, we remain optimistic that this matter will be resolved amicably soon.

 

Dr Karanja Kibicho is Principal Secretary, Ministry of Foreign Affairs and International Trade

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