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Africa nations risk losing tax-free access to Europe, says EU official

posted 25 Mar 2012, 14:34 by Mpelembe   [ updated 25 Mar 2012, 14:35 ]

Some African countries could lose tax-free access for exports to the European Union if they fail to sign a deal by next year to replace preferential agreements that the World Trade Organisation has rejected.

A delegation from the European Union said African nations could loose tax-free access to exports to the EU if they do not sign an Economic Partnership Agreement (EPA) deal to replace those rejected by the Word Trade Organisation by next year.
The European Union and African, Caribbean and Pacific (ACP) countries had until the end of 2007 to sign the EPA agreements to replace existing unilateral trade preferences, or risk having their European trade severely disrupted.

African countries have already missed two deadlines, the last one in November 2010. The negotiations resumed in 2011 and Vital Moreira, the chairman of the EU Parliament's International Trade Committee, insist that this is Africa's last chance.

"We do feel this situation cannot go on as it is. The status quo is not an option and the only alternative is EPA. Of course you can discuss the content, the position, the scope, we can address the sticking points but the principle of EPA should not be considered as [just] an option, as an alternative. It is the only alternative," he told journalists at the news conference in Nairobi.

The new deadline has been set for December 31, 2013.

The European commission is under pressure from WTO, which insists that preferential trade agreements are illegal, as well as its European lobbyists who fear that the availability of more African products would hurt Europe's farming and manufacturing sectors.

After the new deadline, unless the deal is not signed countries like Ivory Coast, Ghana, Nigeria and Kenya - who do not enjoy the LDC (Least Developed Countries) status - will have to start paying duty of between 8.5 and 15.7 percent on their exports to Europe.

Kenya, with its booming flower exports, stands to lose most if the deal is not signed. As a country not classified as an LDC it will not enjoy the benefits of EU's unilateral Everything But Arms (EBA) trade preference initiative.

Kenya is the world's third-biggest flower producer, growing mainly red roses. Flower exports account for nearly half of the country's horticulture export earnings - the east African country's second biggest source of foreign exchange.

Kenya's main concern during the negotiations was the opposition to EPA coming from the LDC-status East African countries, such as Tanzania, Uganda, and Rwanda.

According to Moreira, Kenya's government and trade representatives are keen to sign the deal but he confirmed that they face opposition from the East African Community's other members who would still enjoy preferential access to European markets even without the deal.

"Of course there is the problem of the LDC who might not be that interested in engaging in EPA because they have an alternative, which would be the EBA scheme of trade preferences but in my opinion it is a wrong assessment on their side," Moreira said.

Moreira encouraged African countries to sign, arguing that they should not count on preferential treatment which could be withdrawn at any time.

"EBA is a unilateral regime granted by the European Union. You cannot take it for granted forever. So the European Union could decide, unilaterally, to remove, the EBA scheme. Secondly, you are not supposed to remain as an LDC forever - on the contrary," he said.

Kenyan economics experts share the fear that other members of the region might be trying to take advantage of Kenya's vulnerable position as EU's largest regional trading partner.

According to Aly Khan Satchu, a Kenyan economic analyst and a CEO of RICH management, an investment advisory company, it will be a "tough sell" but Kenya needs to do more to convince its EAC partners that it is also in their regional interest to sign the deal. He believes the European Union is determined to see the deal through this time regardless of regional differences.

"I think the EU is grandstanding a little bit, it is being a little bit aggressive in its negotiations. There are real concerns here about the implementation of EU proposals but ultimately I think the EU has the firepower to railroad this trough if they so desire and looking at what was said this week I suspect they might do," he said.

The EU insists that one of the main purposes of EPA is further regional integration of Kenya and its neighbours along the European lines. So far however, the negotiations serve more to divide than to integrate.