Kenya’s bid to build a shared customs with its neighbours in East Africa remains in limbo as Tanzania continues to show reluctance to sign a crucial pact with the European Union as deadline nears, a new report says.
The report by financial advisory firm Citi says Kenya’s quest to rally the bloc to ratify the economic partnership agreement (EPA) will likely hit a brick wall as Dar es Salaam sticks to its guns in shunning the pact.
“Tanzania’s relationship with the EAC (East African Community) often seems to have parallels with that of the UK to the EU: a somewhat reluctant member who is far from fully committed to greater integration which creates periodic tensions,” says the report.
“However, given the potential economic impact of this deal, notably to Kenya, it seems that this is more than a periodic tension, but a much more fundamental difference between members.”
Kenya and Rwanda signed the trade deal in September.
EAC at crossroads?
Failure to sign the deal as a bloc will result in a wave of taxes on produce entering the EU market from Kenya, the EAC’s only developing state.
The tariff will make cut flowers, tea, fresh vegetables and coffee costlier, making the exports uncompetitive in the EU market and putting at risk four million jobs.
The report says the EU could extend the deadline, after granting the EAC members a four-month window from last September to ink the agreement.
“But if the deadline is extended, it would seem a pointless exercise unless there is a concerted plan of action about how to convince the Tanzania government to sign the deal — both from other EAC members and the EU,” says the report, titled ‘Is the EAC Nearing a Crossroads?’
According to the economic partnership agreement, the East African nations will have to liberalise tariffs on 82.6 per cent of imports from the EU for products from East Africa to continue enjoying duty-free access in Europe.
“Not only are more than half of these imports already imported duty free, but crucially the remainder will only be progressively liberalised over 15 years from when the EPA becomes active and 2.9 per cent of imports will only be liberalised within 25 years,” says the report, adding the EU argues that the long implementation timeframe will avoid flooding of cheap imports.
It is feared that Kenya will lose the most without the deal signed, as other member states will continue getting duty- and quota-free access under EU’s Everything But Arms initiative since they are classified as Least Developed Countries.