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Late in the diplomatic agreement game, Tanzania and other East African states are scrutinizing the true economic development benefits of the European Union-East African Community Economic Partnership Agreement (EU-EAC EPA).
The EU-EAC EPA has been in the works for over three years. Back in October 2014, negotiations were finalized, in September 2015 the “legal scrubbing” process took place, and it appeared as if things were progressing nicely.
However, objections from several of the EAC member states, notably Burundi and Tanzania, threw a spanner in the works in late 2016. Since then, the final signing of the contract has been postponed three times, and EU sanctions on Burundi—one of the signatories—have further complicated matters, leaving the fate of the accord hanging in the balance.
The EU-EAC EPA was designed to boost trade and development cooperation between the two regional groups. It gives the EAC duty-free, quota-free access to the EU market for exports, and imposes a ban on trade restrictions, helping East African states work toward desired eradication of non-tariff barriers. However, and this is where the African states have raised concerns, the EPA brings about a slow opening of the EAC to EU imports. In what is described as an “asymmetric liberalization” of trade between the two blocs, the EAC is expected to enable free passage of 82.6% of all goods coming from Europe over a period of 15 years.
On the one hand, opening up to the EU market will give East Africa access to 510 million consumers. Trade between the EU and EAC was valued at USD7.34 billion in 2015, with EAC exports representing USD2.88 billion of this amount. In addition, since Europe is a major donor, financer of projects, and supplier of development cooperation to East Africa, facilitating linkages between the two areas is expected to bring other benefits to the EAC.
On the other hand, there are fears that East Africa will be flooded with EU imports, something that could jeopardize domestic and African industries that are in their infancy. The Tanzanian administration in particular has highlighted that the EU-EAC EPA goes against everything championed in the country's Five-Year Development Plan, geared around stimulating local production and driving economic growth through industrialization.
Of particular concern is the EU's Raw Materials Initiative (RMI), which gives European markets easier access to primary and secondary East African products, and could lead to a drain of such items from the region, threatening possibilities for in-country value addition.
On another note, all the countries in the EAC, barring Kenya, already have free access to EU goods under the Anything But Arms agreement, owing to their respective statuses as least developed countries (LDCs). Tanzania, Burundi, South Sudan, and Rwanda are not expected to graduate from LDC status for the next 10 years at least, meaning there is little need to worry about alternative trade deals for another decade.
Adding insult to injury, early in 2017 the UN warned the EAC against the EPA. The UN Economic Commission for Africa (UNECA) claimed that in strengthening trade deals with the EU, the EAC risked losing other valuable trade partners. Welfare, industrial output, and GDP would also suffer, it said. Losses through taxes on goods destined for the EU would cost the EAC USD1.15 billion.
As if to prove this point, figures show that 91% of current EAC trade with the EU is made up of primary commodities such as tea, coffee, fish, and tobacco. Just 6% of trade is made up of manufactured goods. Conversely, 50% of trade between the EAC and the rest of Africa comes in the form of value-added products.
It does not help that the East African states also have their own agendas to consider. With already heightened tension between some members of the community, there is concern that further discord could reduce mutual trust in the EAC. And as the months roll on, it looks like the EU will have to hold its horses.
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TABLE OF CONTENTS
Guest Speaker
Hon. Patricia Scotland, Secretary General, Commonwealth of Nations
TBY talks to Hon. Patricia Scotland, Secretary General of the Commonwealth of Nations, on the advantages of being a member of the Commonwealth, the need to celebrate diversity, and Tanzania's war against corruption.
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Libérat Mfumukeko, Secretary-General, East African Community (EAC)
TBY talks to Libérat Mfumukeko, Secretary-General of the East African Community (EAC), on Tanzania's importance to the EAC, the major achievements of regional integration, and obstacles ahead of a monetary union.
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Raymond P. Mbilinyi, Executive Secretary , Tanzania National Business Council (TNBC)
TBY talks to Raymond P. Mbilinyi, Executive Secretary of Tanzania National Business Council (TNBC), on its work to support the private sector in the country, tackling challenges in the economy, and clamping down on corruption.
read articleReview: Banking
The Quest for Depth
If Tanzania is to meet its 2025 vision of attaining middle-income status, it will need to corral its bank-centric financial and capital markets for greater depth by extending participation and rendering credit more accessible to SMEs, women, and the young to spur economic growth.
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Dr. Baghayo A. Saqware, Commissioner , Insurance, Tanzania Insurance Regulatory Authority (TIRA)
TBY talks to Dr. Baghayo A. Saqware, Commissioner of Insurance, Tanzania Insurance Regulatory Authority (TIRA), on achieving universal healthcare coverage, the brilliance of microinsurance, and how to partner with public and private entities to increase the industry's penetration.
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Legal Thunder
With the stepping down of Minister of Energy and Minerals Sospeter Muhongo in May 2017 over transparency issues and the introduction of three new laws that give the government the right to renegotiate or revoke existing mining and oil and gas rights, private players in the country are unsure of what future lies ahead. On the other hand, project-specific developments bode well for a sector in need of a breakthrough.
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Kapuulya Musomba, Managing Director, Tanzania Petroleum Development Company (TPDC)
TBY talks to Kapuulya Musomba, Acting Managing Director of Tanzania Petroleum Development Company (TPDC), on the planned expansion of the Mtwara-Dar es Salaam natural gas pipeline, entering northern industrial hubs, and empowering nascent industries.
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Marc Den Hartog, Managing Director, Shell/BG Tanzania
TBY talks to Marc Den Hartog, Managing Director of Shell/BG Tanzania, on the critical need for economies of scale, the importance of developing LNG for export, and why renewables must be taken into account in any long-term plan.
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Hon. Charles Mwijage, Minister, Industry, Trade and Investment
TBY talks to Hon. Charles Mwijage, Minister of Industry, Trade and Investment, on how to reach middle-income status, employing the private sector toward this end, and what sets the country apart from the rest of East Africa.
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Despite being the second most common element in the universe, helium is in short supply on earth. With global reserves of the gas steadily dwindling, and demand steadily increasing, the discovery of a whopping 1.53 billion cbm of helium in underground chambers in Tanzania could not have come at a better moment.
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Gilliard W. Ngewe, Director General, Surface and Marine Transport Regulatory Agency (SUMATRA)
TBY talks to Gilliard W. Ngewe, Director General of Surface and Marine Transport Regulatory Agency (SUMATRA), on transportation budget allocation and cross-sector dialog and partnerships.
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Jared H. Zerbe, CEO, Tanzania International Container Terminal Services Limited (TICTS)
TBY talks to Jared H. Zerbe, CEO of Tanzania International Container Terminal Services Limited (TICTS), on regional trade flows and Tanzania's potential to take a leading role in orchestrating cargo movement.
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East Africa’s “Geneva”
If Rome wasn't built in a day, it is not surprising that Tanzania's project to revamp eight of its largest cities is entering its eighth year of implementation. A release of further funds from the World Bank has given the project a new lease of life.
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Lost in the Maize
Agriculture accounts for 30% of Tanzania's GDP, and the sector has experienced above-average output in recent years compared to the rest of the African continent. However, the sector's development is held back by poor rural farming practices and general infrastructure bottlenecks.
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Fred Kafeero, Tanzania Representative, Food and Agriculture Organization (FAO)
TBY talks to Fred Kafeero, Tanzania Representative of the Food and Agriculture Organization (FAO), on the organization's long-term support for Tanzania's development, recent initiatives in agriculture, and financing.
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Reap What You Sow
In 2006, the Tanzanian Ministry of Water and Irrigation set a target for Tanzania's agriculture sector: to irrigate 1 million ha of land by 2020. More than 10 years on and moving ever closer to the deadline, this target has not yet been met, though the first seeds are being sown.
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Hidden Gems
Tourism is frequently described as the jewel in Tanzania's economic crown. In 2016 alone, the industry contributed over USD2 billion in revenues. However, for at least three years, the government has expressed concern that tourism is not well distributed across the country.
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