Kenya reads mischief in Tanzania's move to pull out of joint EPA talks

An East African Community meeting called on July 5 will stand out as extraordinary for the region’s trading bloc secretariat.

No one needed to leave their offices during this particular meeting. It was to be conducted via video conferencing.

The main agenda was to put final touches and deliberate on the preparations for signing of a key trade agreement with the European Union that was to happen next week in Nairobi.

The meeting chaired by Uganda’s minister of Trade, Industry and Cooperatives, Amelia Kyambadde, was attended by all other five partner states except Tanzania, which claimed it was not aware of the assembly. This was despite the EAC secretariat confirming it had sent a notification letter to all the partner states.

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Several days later, Tanzania shocked the other members when it said it would not sign the trade deal come next week on grounds that it is not in the interest of local industries.

“We saw the absenteeism of Tanzania from the meeting as part of its reluctance to sign the trade agreement,” a source who attended the meeting told The Standard. Kenya, which stands to be the biggest loser from this development, plans to dispatch a delegation to try and talk Tanzania out of its decision.

The backing out of the trade deal, known as the Economic Partnership Agreement (EPA), promises huge economic cost to Kenyan exporters to the European markets.
Economic Partnership Agreements (EPAs) are trade and development agreements negotiated between the EU and African, Caribbean and Pacific (ACP) partners engaged in regional economic integration processes.
Reliable sources within the Foreign Affairs ministry say Kenya sees the decision by Tanzania as ‘blackmail’ and is taken out of ‘malice’ as part of a series of decisions that have been taken by President Magufuli’s government that promise to hurt Kenya’s economy.

“We see this as blackmail and may be aimed at increasing its share of exports to the EU at the expense of Kenya. The argument that the deal is not good for local industry is hollow because it’s the entire region stand to benefit from better export terms,” explained the source.

The source requested to remain anonymous on grounds it would jeopardise the talks and go against the code of secrecy that is required of negotiating teams. Kenya will be the biggest loser if Tanzania refuses to sign the deal by October. However, Tanzania will continue enjoying preferential treatment for its exports to EU since it falls under the category of least developing countries. Kenya is the only country from the EAC that was dropped from this list after it was classified as a middle-income country, which has seen it lose out on some of the trade privileges it used to enjoy.

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“This really is killing the spirit of EAC given that we are not moving together as one, which is the basic principle of the regional bloc,” he said. A similar stunt pulled by Tanzania in 2014 after it delayed in signing the agreement saw Kenya temporarily placed under what is known as the Generalised System of Preferences (GSP) trade regime.

This saw Kenya’s exports attract duty of between five per cent and 22 per cent, threatening to price Kenya out of the lucrative EU export market. This cost exporters more than Sh600 million in discounts every month to allow traders factor in the new taxes and remain competitive.
More than 87 per cent of Kenya’s exports to EU are agricultural, agro-processed and manufactured products.

“As Kenya suffered, other EAC countries continued accessing the EU market under Everything But Arms (EBA) initiative since they are categorised as least developing countries,” the source said. This was reversed in December 2014, three months after it was enforced.

The agreement was to be signed on July 18 on the sidelines of the UNCTAD conference