The signing of the highly anticipated trade agreement between the East African Community and the European Union has been delayed again.

At the latest EAC Sectoral Council on Trade, Industry, Finance and Investment meeting in Arusha on May 30, the ministers pushed the final negotiations to July 14 due to meetings scheduled on the national budgets. The Economic Partnership Agreement (EPA) final talks between the EAC-EU ministers were earlier set for mid May.

The move could delay completion of the negotiations and partner states may fail to meet the October deadline, according to business analysts.

Head of the EU delegation to Kenya Christophe De Vroey said even if the agreement were sealed by July 21, the parties may not beat the deadline.

“The document will still have to go through various processes before it is implemented, including being presented to the EU parliament, and it will take a minimum of five to six months before it is implemented,” he said.

This means that Kenya, being the only member of the bloc that is listed as a non-Least Developed Country, will be the most hit by this delay, which will result in the country paying a 10 per cent import duty to access the EU market. “It is important that the agreement is signed before the October 1 deadline so that some form of interim ratification can be in place to avoid the imposition of duties, though as a temporary measure,” said Kenya Flower Council chairman Richard Fox.

At their last ministers meeting, in Nairobi in March, the Joint EAC-EU Senior Officials reached an agreement on some outstanding clauses — including the Rules of Origin Text and Product Specific Rules, as well as the Most Favoured Nation Treatment Clause (MFN) — but the experts deadlocked on five articles, which they have referred to the EAC and EU ministers for the final decision.

These include duties and taxes on exports, domestic support and export subsidies, relations with the Cotonou Agreement, good governance on tax matters and consequences from Customs Union agreements.

The ministers were told that the EAC-EU experts failed to agree because each party had different views based on benefits to individual parties. On the Duties and Taxes on Exports clause, the EU insisted that the parties not institute new duties or taxes in connection with exportation of goods to the other party that are in excess of those imposed on like products for internal sale.

The EAC can however impose a duty or tax in connection with the exportation of goods, with the authorisation of the EPA Council. This would be to either foster the development of domestic industry or maintain currency stability when the increase in the world price of an export commodity creates the risk of a currency value surge.

On the domestic support and export subsidies, the EU does not agree to the inclusion of provisions in the EPA disciplining the use of domestic support as this is handled at the multilateral level. They only agreed to eliminate export subsidies for agricultural exports to the EAC.

“The EU party shall exclude EAC countries as destinations for export refunds for all agricultural products with effect from the entry into force of this agreement,” the EU stated.

The EAC, however, wants to include in the EPA provisions the elimination of domestic support and export subsidies for agricultural products destined for EAC countries.

On relations with the Cotonou Agreement, the EU says nothing shall be construed so as to prevent adoption by the EU or EAC of any appropriate measures consistent with and pursuant to the agreement. The EAC has proposed to delete the entire article, arguing that it is not directly related to trade.

Joint declaration
The EU proposes a sentence in the agreement on good governance to indicate that parties recognise the importance of co-operation on the principles of good governance in taxation through the relevant authorities. But the EAC does not agree to negotiate this issue as it is of the view that this is dealt with in the partner states’ domestic laws and in other international instruments.

Source: The East African

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.