Wednesday, 24 May 2017

EPAs: Why Kenya's trade with EU will not suffer

Kenyatta: Kenya signed and Ratified EPAs
 Contrary to popular opinion, Kenya's trade with EU is unlikely to suffer any loss should Tanzania and her minions refuse to sign Economic Partnership Agreement. In fact Kenya and Rwanda could gain from this reluctance.
The European Union has stonewalled a fishing expedition by EAC to delay the signing of the Economic Partnership Agreement.  The Union has rejected any discussion on “sanctions in Burundi until the political situation improves.” This is a sign that the EU is losing patience with the laggards.

The reluctance by three EAC member states, led by Tanzania, to pen the Free Trade Area deal with the European Union has turned into a fishing expedition.

A fishing expedition is a situation where one  begins to look for wild reasons to justify a wrong decision. 
Kagame: Rwanda signed and ratified EPAs
 Initially, Tanzania, which has refused to sign the deal twice-in 2014 and 2016- argued that the deal with stymie her industrial growth. Then termed it “colonial” before “ducking off the radar to hoist “sanctions against Burundi.”

 In the last Heads of States Summit held in Dar-Es-salaam last Sunday, Tanzania’s worry about the threat to industrialization simply disappeared and was replace by “sanctions against Burundi.”

This amounts to introduction of red herrings to delay commitment to EPAs. 

The reasons are not hard to find; Uganda, Tanzania and Burundi are classified as Least Developed Countries, LDCs. These countries were handed a lifeline to trade with European Union under an arrangement called Everything But Arms, EBAs which enables them to export to European Union duty-free and quota-free. 

Only Kenya is classified as a developed country which does not qualify for EBAs. Kenya is therefore the greatest beneficiary of EPAs, which  grants her the same benefits as EBAs.

Second, a look at the trade data is also telling. Kenya dominates exports to the European Union. For example in 2016, the whole region, that is EAC, earned 2,443 billion Euros worth of exports. Of these Kenya pocketed 1,280 billion Euros. That is 52.4 per cent of the total exports. Tanzania was a distant second, earning Euros 632 Million accounting for 26 per cent of the total while Uganda earned Euros 443 million accounting for 18 per cent of the total earnings. Rwanda earned the rest, that is, Euros 88 million.

 Analysts fear that the growing European Union impatience with EAC could soon result in the withdrawal of EBAs, which is simply an arrangement born out of EU generosity. If tossed out of the window, both Uganda and Tanzania will be locked out of the EU market with dire consequences to employment at home.

 Tanzanian exports to EU are dominated by the beverages and Tobacco category which accounts for 31.8 per cent earning a cool Euros 201 million in 2016, food and live animals was second accounting for 31.1 per cent earning Euros 197 million.

These basic agricultural commodities are the largest employers in all developing countries. Any disruption of their trade has dire consequences to poverty alleviation and employment.

Unlike Kenya and Rwanda which have already signed and ratified the deal,Tanzania and” her friends” do not have a fall back option should Europe play hard ball. Kenya and Rwanda can now opt to use “variable geometry” which  grants them the right to go ahead and single-handedly pursue trade deals meant for the bloc.

 Since the European Union has rejected the introduction of the Burundi sanctions into EPAs agenda, the two signatories are likely to  pursue their agenda, That means that , contrary to what many say, Kenya and Rwanda 's trade with the EU is unlikely to suffer should the push come to shove.

The trade data exposes Tanzania’s fear of a threat to her industrialization agenda as hollow. Her imports from EU are dominated by machinery and chemical imports which account for 67 per cent of the total imports. While her exports of manufactured goods, largely mineral exports, accounted for 18 per cent of the total.

Such facts must have emerged during the “encouragement sessions” that we reported about last week. This is why Tanzania ducked out of radar, hoisting Burundi sanctions instead.



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