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The EPA with Europe is bad news for the entire region, even Kenya

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By Benjamin Mkapa

Posted  Saturday, July 30   2016 at  20:58

In Summary

  • The EPA for Tanzania and the EAC never made sense. The maths just never added up.

The EPA issue once again emerged when, in early July, Tanzania informed EAC member states and the European Union that it would not sign the Economic Partnership Agreement (EPA) between EU and the six EAC member states.

The European Commission had reportedly proposed the signing of the EPA in Nairobi, on the sidelines of the 14th session of the UN Conference on Trade and Development (Unctad XIV).

This is a major quadrennial event where all UN member states negotiate guidance for Unctad. For the European Commission, it would have been a propitious place for a signature ceremony as it would have projected the EPA as a “trade and development” agreement to the benefit of EAC.

Nevertheless, the agreement is antithetical to Tanzania’s as well as the region’s trade and development prospects.

The EPA for Tanzania and the EAC never made sense. The maths just never added up. The costs for the country and the EAC region would have been higher than the benefits.

As a least developed country (LDC), Tanzania already enjoys the Everything but Arms (EBA) preference scheme provided by the European Union.

In other words, we can already export duty-free and quota-free to the EU market without providing the EU with similar market access terms. If we sign the EPA, we would still get the same duty-free access, but in return, we would have to open up our markets for EU exports.

Threats to domestic producers and industries

The EPA is a free trade agreement. Under it, Tanzania would have to reduce to zero the tariffs on 90 per cent of all its industrial goods trade with the EU, according duty-free access for almost all the EU’s non-agricultural products into the country.

Such a high level of liberalisation vis-à-vis a very competitive partner is likely to put our existing local industries in jeopardy and discourage the development of new industries.

Research using trade data shows that Tanzania currently produces and exports on 983 tariff lines (at the HS 6 digit level.

The EU produces and exports on over 5,000 tariff lines). If the EPA were implemented, 335 of the 983 products we currently produce would be protected in the EPA’s “sensitive list,” but 648 tariff lines would be made duty-free.

So the existing industries on these 648 tariff lines would have to compete with EU’s imports without the protection of tariffs. Will these sectors survive the competition?

These 648 tariff lines include agricultural products (maize products, cotton seed oil cake); chemical products (urea, fertilisers); vehicle industry parts (tyres); medicaments; intermediate industrial products ( plastic packing material, steel, iron and aluminium articles, wires and cables); parts of machines and final industrial products (weighing machines, metal rolling mills, drilling machines, transformers, generating sets, prefabricated buildings etc); parts of machines (parts of gas turbines, parts of cranes, work-trucks, shovels, and other construction machinery, parts of machines for industrial preparation/ manufacturing of food, aircraft parts etc).

Threatening regional industrialisation and trade

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