Richard North, 29/06/2014  
 

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It is a feature of the narrowness of the British media agenda that, although the EU-Ukraine "trade" agreement has received some prominence (along with Moldova and Georgia), there has been nothing at all (that I can see) reported of another set of trade negotiations which, in their own way, are probably just important.

These are the Africa Caribbean Pacific (ACP) European Union Economic Partnership Agreement (EPA) negotiations, with the five-nation East African Community (EAC), comprising Kenya, Tanzania, Uganda, Rwanda and Burundi. The latest round has just been concluded at the 39th session of the ACP-EU Council of Ministers in Nairobi, Kenya (above). 

Not least, the fate of the talks provide a stark reminder for those who believe the UK can reach a speedy agreement with the EU in trade talks under the aegis of Article 50, should we chose not to adopt an "off-the-shelf" option and go for a bespoke solution.

These talks were launched in 2002 under the Cotonou Partnership Agreement (CPA) where parties agreed to conclude WTO compatible trading arrangements, progressively removing barriers to trade between them and enhancing cooperation in all areas relevant to the CPA.

Early agreement proved elusive, leading to the two trading blocs signing an interim EPA in 2007, running to 487 pages. That at least ensured duty-free, quota-free access for products exported to the EU but, after 12 years of negotiations, the remaining contentious issues are still unresolved.

Now, the EU has imposed a deadline of 1 October of this year, with the threat that countries that have not signed or ratified EPAs by that date will be removed from the list of beneficiaries of the duty-free, quota-free market access.

This, to countries such as Kenya, who have agreed to meet on 21 July to finalise the unresolved issues, could be a vital blow. Kenya has built a significant trade with the EU, especially in the flower market, becoming by 2001 the EU's biggest source of flower imports, having overtaken Israel as market leader. In the absence of a pact, Kenya's flower exports could be subjected to a 16 percent duty to enter the EU.

The implications for the UK and other EU member states are obvious, in that we either promote trade with African countries, thereby reducing pull factors, or we end taking their immigrants. Sadly, despite the obvious correlation, we see nothing of this theme in an amazingly superficial piece in the Daily Mail, which had Dominic Sandbrook last Saturday warning that the "human tide" of migration from Africa "will be the crisis of the century".

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The role of Kenya in the broader context of African migration is well known. In some great measure, it acts as a "hub", attracting inwards migration from its own border regions and from neighbouring countries.

And, while the country has graduated to a level above that of Less Developed Country (LDC), it lacks the breadth and economic depth to absorb large numbers of migrants, and integrate them. Thus, if it is to contain an African problem in Africa, without it spilling over into Europe, the country needs all the help it can get.

Sadly, when it comes to the EU, that help is not forthcoming. Even back in July 2006, we were writing about EU barriers to the Kenya flow of trade. But not only were there serious problems with non-tariff barriers, the Economic Partnership Agreement with the EU was then supposed to be concluded by January 2008.

History records that the deadline was not met, and it has since been extended four years. The flower and vegetable growing industries have since had to weather the arbitrary banning by the EU of a popular and effective pesticide, which was reckoned to have cost growers up to €170 million or 20 percent in export earnings – a totally unnecessary loss had the transition to new pesticides been managed better.

The country has also had to put up with EU reservations last year over South Africa and EU trade talks, because of its economic partnership with Kenya – indicative of growing EU interference in African affairs.

It was then that experts were getting worried about fresh demands from the EU over issues such as governance in tax matters, environment and sustainable development, all of which were expected to further delay the conclusion of negotiations.

With the country obliged to open its markets to EU member states, they were estimating that Kenya could lose between 5.5 per cent and 15 per cent of its revenue once the EPAs were concluded, having also to face is own "supply-side constraints" which prevented it taking advantage of opportunities of the open market.

This is classic of the EU, which cannot seem to focus solely on trade issues. Treating trade as an extension of its own foreign policy, it is constantly seeking to use the "leverage" of access to European markets to demand internal changes to the governance of the states with which it is negotiating. 

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Despite all this, in July last year EU Trade Commissioner Karel De Gucht (pictured above) was glibly predicting that a comprehensive trade agreement was "close to conclusion" with the EAC.

However, this didn't come to pass, with little happening until the this year when a deal was agreed with the Economic Community of West African States (ECOWAS) states, while talks with East African states remained "mired in fine print".

Former Tanzanian president Benjamin queried whether a deal with the EU would help local economies, increase food security, or support regional transition from exporting raw materials to producing sophisticated products. "If we sign the EPA and other sub-regions do so too, we would be giving up the better option we had before us, which allows for real industrialization", he said.

This pointed up the crucial need for the EAC states. They need to develop more extensive manufacturing bases, in order to move on from economic reliance on low-value commodity exports. And, to give their nascent industries a chance to grow, they need to protect their home markets with tariff walls, keeping out selected ranges of cut-price goods from developed economies.

With the EU insisting on a new deal that would require a progressive reduction of all barriers to EU imports, it was completely unsurprising that, on 30 January, ministers from the EAC states had flown to Brussels to meet Karel De Gucht, for three days of negotiations, only to return empty-handed. Thus did Allafrica remark that they would have to try once more in March.

It recalled a statement from the EAC secretariat in Dae es Salaam that the negotiations hadn't yielded much. The parties had failed to agree on the most important matters, covering duties and taxes on exports, and most favoured nation status (MFN). They also failed to reach an agreement on rules of origin and agriculture.

Both parties thus agreed to more meetings in March, but with little confidence that a final agreement would be reached. The complexities are such that, after the 2008 deadline, another had been set for June 2010 and then another for 31 July, 2012. That too wasn't met and had to be postponed.

There is now a strong feeling among experts in East Africa that by insisting on the inclusion of the MFN, the EU was holding the region at gun point, forcing it to accept a clause that would legally tie their hands over the nations they regarded as their trading partners, besides Europe.

What the EAC wanted was a bespoke deal, but if it was forced to give the EU most favoured nation status, under WTO rules that would mean that if the EAC reached a separate agreement with another trading partner, such as China, any benefits in such an arrangement given to China would also be claimable by Europe, a tricky situation for the region to pledge. In other words, the EU wanted to dictate the external trade policy of the bloc.

Michael Baingana, a consultant hired by the East African Business Council (EABC) to study provisions of the agreement, made it clear that the EAC should resist being forced into signing anything that they would regret at later stages.

The irony is, as ACP member countries under the current deal, the Most Favoured Nation rule was not applied. Thus, Kenya and its allies were allowed to trade with anyone outside the EU under whatever terms can be agreed. Yet, under the EAC negotiations, the EU is demanding stringent measures to limit the region's trade partners, a move many regard as selfish.

With the EAC thus facing a worse deal than it already had, what was then becoming evident was the bullying tone from Karel De Gucht. With no concession to the concerns of the EAC, he bluntly told the Africans that there would be "no new bridging measure enforced by the EU". The October 2014 deadline was to be the end of the line.

This, of course, was pure blackmail. Failure to conclude an agreement, however, would lead to the imposition of significant EU import duties on Kenya's flower industry, while competitors such as "Colombia, Tanzania, Uganda, Rwanda, Burundi and Ethiopia [would] continue to enjoy their duty free-status". The Kenya Flower Council noted that this would be likely to undermine the industry's competitiveness and market share. 

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The flower trade has developed substantially, much of it greenhouse-based, producing blooms for the supermarket trade. With 40 percent of the trade going to the EU, mainly by air freight, flower exports – worth over £300 million annually - were a crucial economic activity for the country. It could stand to lose roughly 500,000 jobs directly and indirectly if the agreement was not concluded. It was estimated that around 2.2 million jobs could also be at stake.

In this, though, nothing remains static. After a decade or more of "bullying" for the EU, the Africans are seeing the writing on the wall. They are looking elsewhere for their trade, and have recently launched a scheduled airline service between Kenya and South Korea in 2013. These flights are "expected to give flower farmers direct access to the East Asia market", with South Korea and Japan expected to account for between five and ten percent of the flower exports.

Jane Ngige, managing director of the Kenya Flower Council, affirmed that the EU remained the most important market. "But", she said, "it also means that over the years we have been exploring other markets. We have, for instance, become quite significant exporters into Japan and into Eastern Europe. Now we're looking to building a good portfolio in the American market". There was also growing interest in Kenya's flowers from other African countries. 

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Still, though, a vital sector of Kenya's economy remain at risk, so there were attempts last May, to settle some of the issues. Trying to pour oil on troubled waters, on 19 June, Kenyan President Uhuru Kenyatta then said his government was willing to conclude talks with the EU. Yet, to date, nothing has yet been finalised and the problems are just as intractable.

That leaves Sylvester Bagooro, a Programme Officer at Third World Network Africa, to write for Aljazeera, commenting on the EU trade deal with West Africa, which is the model for the EAC deal to come.

Bagooro makes precisely the point that cheaper EU products threaten to harm local production in West Africa, with the EPA having forced a number of concessions that "can deal a severe blow not only to the agricultural sector but also to manufacturing", and thus the entire development agenda of the West African states.

With limited tax gathering capabilities, these countries actually need tariffs as a relatively easy and predictable tax to collect, and they are also used as a tool for industrial development. Tariffs or import duties are used by countries to create a wedge between domestic and foreign products in order to create advantage for locally produced goods.

This, says Bagoor, helps to sustain local businesses that are at an early stage of development. Most West African countries' bound tariff rates for agricultural products at the World Trade Organisation (WTO) are about 99 percent.

For instance Ghana's bound tariff on poultry products is 99 percent while its applied tariff is currently 20 percent. With the advent of the EPA, Ghana loses its right to protect local poultry farmers using tariff as a tool because no new duty can be imposed and the current rate cannot be raised.

The second provision that deprives West Africa member states of the needed space for development is the use of export taxes. Export taxes are used by countries to make a particular raw material available for local use. 

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For instance Ghana used to have an export tax on scrap metal with the aim of making the material available for the local manufacturing sector. Again, a country like Kenya has an export tax on raw leather that makes the product available for local value addition in the Kenyan economy. And, there should be nothing exceptional in this. In the early stages of its development, Bagooro notes, even the UK imposed exports taxes on raw wool and hides, to assist its industrial development.

The problems for the African states, however, do not stop there. The EU is practicing its own brand of imperialism, demanding that before its African "partners" grant any favourable trade concessions to a third party with a share of global trade in excess of 1.5 percent, the they must to consult the EU.

This gravelly undermines national sovereignty and South-South cooperation. As pointed out by the African Union and UN Economic Commission for Africa, this provision is controversial for a number of reasons. Involving the use of the Most Favoured Nation (MFN) clause, it goes against the principles of the Enabling Clause of the WTO. This expressly permits preferential agreements among developing countries.

Furthermore, there is no WTO rule that requires the inclusion of the MFN clause in free trade areas such as the EPAs. The EU's own experience proves this point. In the EU-Mexico free trade agreement signed in 2001, there is no MFN clause.

The list of grievances go on, pointing up the fact that the EU is doing the African states no favours. But the worst of it is that the EPAs are set to extend to every other aspect of economic activity and policy decision-making. With the West Africans caught out by this, the East Africans are not that keen to follow suit.

Effectively, if the EPA goes through, the EU will demand consultation on decisions relating to financial services and financial policy in areas such as current account and capital account management. All other service sectors also get caught in the net: technology policy and intellectual property, including traditional knowledge and genetic resources; personal data protection and use; competition and investment and government procurement.

The EPA, concludes Bagoor, is fundamentally an attack on national sovereignty. And, with Kenya over a barrel, desperately needing to protect its valuable flower trade, it is being progressively forced to a showdown. Most likely, it will be driven to sign on the dotted line by the end of September, as indeed were the West Africans last February.

The only constant in all this is that the drama of modern-day EU imperialism will be totally ignored by our legacy media, leaving the likes of Dominic Sandbrook to wail about the arrival on the shores of Europe of still more boats packed with migrants, without having the first idea why this is happening.

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