Breakthrough in EAC-EU trade talks

Some progress has been made in talks on Economic Partnership Agreement (Epa) between the East African Community and the European Union. Richard Owora, the head of corporate communication and public affairs at EAC Secretariat, told The New Times that negotiations on the Rules of Origin Protocol, including the product specific rules, successfully ended on March 27. “In addition, both parties agreed on provisions for a comprehensive dialogue on agriculture & rural development policy and transparency on domestic policy measures relating to agricultural support,” Owora said. However, some issues remain outstanding and had been referred to a ministerial meeting scheduled for June. They include export taxes, domestic support and export subsidies, and relations with the Cotonou agreement on prohibition of proliferation of weapons of mass destruction, human rights and corruption. Others are good governance on tax matters and measures to mitigate effects of customs union agreements concluded with the EU. The Ministry of Trade and Industry is monitoring the talks being coordinated by the Ministry of EAC Affairs. Peace Basemera, the officer monitoring the negotiations, said the EAC position of export taxes is that member countries should be free to “impose tax whenever they need to get revenue from exports, and this comes after fostering the development of domestic infant industries” as a temporary measure. Another element is that a country or the bloc cannot be compelled to export food when there is scarcity at home. The EU head of delegation in Tanzania, Filberto Sebregondi, recently said the two sides would reach consensus soon. Sebregondi told The Citizen newspaper that the talks were approaching the end and that the two sides expect positive results. He said that the process that started in 2007 had taken long due to misinformation. He allayed fears that the region would be flooded with cheap European products after the deal is sealed. “The process will be protected by tariffs, so there will be fair competition between the two sides; what I can say is that Epa will boost both sides.” Background The EAC countries are among the African, Caribbean and Pacific (ACP) group of countries with a special relationship with the EU since 1957 when it committed to help promote economic and social development in ACP. The current trading relationship between the ACP and the EU is guided by the Cotonou Partnership Agreement signed in Cotonou, Benin, in 2000, and is based on five pillars: comprehensive political dimension; participatory approaches; strengthened focus on poverty reduction; new framework for economic and trade co-operation; and reform of financial co-operation. Why the EPAs? The Trade Cooperation Chapter of the Cotonou Agreement under which the EU extended non-reciprocal trade preferences to ACP expired on December 31, 2007. The Cotonou trading regime was not compatible with international trade rules under the World Trade Organization because the EU discriminated against other trading partners, by exempting exports of the ACP to EU from tariffs while exports of other WTO members were subjected to either duties or taxes. International trade rules permits this kind of discrimination only when the two countries or trading blocs enter a Free Trade Agreement, or are in a Customs Union, or under a Generalized System of Preferences (GSP) arrangement, a preferential tariff system which provides for a formal system of exemption from the more general rules of the WTO. To guard against legal challenges to the incompatibility, the EU, in 2001, sought a waiver from WTO members. The waiver allowed the EU to derogate from her international trade commitments, and to discriminate in favour of the ACP until December 31, 2007. For the waiver to be granted, the EU had to compensate her trading partners that felt that their trading rights were being curtailed by the ACP-EU trading arrangement. The expiration of the waiver necessitated the negotiation of a reciprocal WTO-compatible trade agreement with ACP countries.