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Tanzania 2018 | DIPLOMACY | FOCUS: REGIONAL TRADE BLOCS

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.