Our Projects are
Transforming African Trade
Quick Contacts
2nd Floor, Fidelity Insurance Centre Waiyaki Way, Westlands
In July this year, a deal-signing ceremony between the East African Community (EAC) and the European Union was put off indefinitely.
This was after Tanzania and Uganda declined to sign the European Partnership Agreement (EPA).
One of the reasons the two countries cited in their stand was Brexit – Britain’s landmark referendum vote on June 24 to leave the European Union – casting a cloud of uncertainty over the future of the preferential trade deal.
At the time, Tanzania and Uganda argued that after Brexit, it was necessary to wait and see if Britain, operating outside the EU, was a more strategic partner to East Africa or not.
But the other more pertinent reason why Tanzania in particular declined to sign on and which it once again raised last week, was that scholars from the University of Dar es Salaam reportedly cautioned that signing and ratifying the deal would jeopardise Tanzania’s industrial sector. President John Magufuli’s main concern for pushing the ratification of the deal to January has always been the future of the country’s fledgling industrial sector. He has all along argued that ratifying the EPA as it is would flood Tanzania with cheap agricultural and manufactured imports.
In addition, the country is weary of being a station for sourcing cheap raw materials for EU industries, especially as it continues to seek out the best way to exploit newly-found natural gas deposits.
Kenya ratified the deal in September, insisting the EPA provides an opportunity for the country’s farmers and exporters rather than a risk.
The EPA deal allows for the import of agricultural and manufacturing goods from the EU countries into the EAC. This presents a potential risk of crowding out the region’s indigenous industries. According to Sekou Toure from the University of Nairobi’s Institute of Diplomacy and International Studies, Tanzania’s neighbours should take heed of the country’s self-preservation stance.
“Tanzania’s concerns are legitimate and should be taken into consideration. It’s important to note the EU-EAC deal is basically primed on trade in goods and not services,” says Mr Toure.
Time lag
“EAC exports are mostly primary, unprocessed agricultural products and minerals while the EU exports highly manufactured products and machinery into the EAC market.”
This is likely to widen the balance of trade between the EU and countries currently in favour of the EPA – Kenya and Uganda.
Kenya’s trade officials argue that the EPA provides a time lag of eight years before agricultural imports from the EU can enjoy duty-free access to the EAC. The time lag is expected to allow enough time for the EAC countries to strengthen the capacity of their industries to allow them compete with an influx of imports.
This time lag is, however, thought to be inadequate. Data from the Kenya national Bureau of Statistics indicates Kenya’s trade balance with the EU has nearly doubled from Sh68 billion in 2010 to Sh105 billion in 2014 in favour of the latter.
In the same period, the country’s manufacturing sector has remained stagnant, with its contribution to the GDP remaining at an averaging 12 per cent for over two decades. This has left the regional manufacturing industry exposed to cheap imports from India and China that have crowded out local goods from the regional market.
This time lag is, however, thought to be inadequate. Data from the Kenya national Bureau of Statistics indicates Kenya’s trade balance with the EU has nearly doubled from Sh68 billion in 2010 to Sh105 billion in 2014 in favour of the latter.
In the same period, the country’s manufacturing sector has remained stagnant, with its contribution to the GDP remaining at an averaging 12 per cent for over two decades. This has left the regional manufacturing industry exposed to cheap imports from India and China that have crowded out local goods from the regional market.
