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EAC Says EPA Negotiation 'On Course' With EU

by Lorys Charalambous, Tax-News.com, Cyprus

29 May 2012


Richard Sezibera, the Secretary General of the East Africa Community (EAC) - comprising Kenya, Uganda, Tanzania, Rwanda and Burundi - has reaffirmed that negotiations for the EAC-European Union (EU) Economic Partnership Agreement (EPA) are on course.

Responding to questions after the presentation of the EAC 2012-13 budget estimates, he hailed the talks as “the first time in history that the EAC Partner States were negotiating terms of (a) reciprocal trade arrangement with Europe as a bloc,” unlike the previous arrangements under the Lome and the Cotonou agreements, which were unilateral arrangements whose terms and conditions were decided by the EU.

Sezibera reiterated the importance of the proposed EPA in that it has the potential to consolidate the EU market for EAC's exports, as that market was still one of the significant export destinations for the region's agricultural products since it offers the option to access a high price market that is considerably protected.

The Secretary General noted that the EU market access offer, whose implementation began on the January 1, 2008, consists of the duty free and quota free access for all EAC exports to the EU, except for arms and ammunition. EAC products that have attracted tariffs into the EU under the Cotonou Partnership Agreement would now be zero-rated.

On the other hand, the EAC market access offer consists of the liberalization of 82.6% of imports from the EU over a 25-year transition period. The EAC is the only African region in which all signatories have identical schedules, based on reductions from the EAC Common External Tariff (CET).

EAC import liberalization should occur in three phases, with the first phase from 2010 involving only products with a current CET of zero. The raw materials and capital goods covered in this phase do not attract any import taxes under the EAC Customs Union and constitute 65.4% of EAC’s current imports from the EU.

The second phase would be between 2015 and 2023, where EAC partner states would liberalize a further 14.6% of intermediate inputs, presently attracting a 10% duty. He said that such intermediate products are critical for the EAC industrialization strategy.

The third phase, between 2020 and 2033, would liberalize a further 2.6% of its imports from the EU. This phase includes finished products whose availability at a lower cost is deemed to have a positive effect on consumer welfare, without a potentially negative impact on EAC economies.

It is important, he added, to take note that approximately one-fifth (17.4%) of EAC imports from the EU are excluded from liberalization commitments under the EPA. These products constitute the EAC exclusion list (including the list of sensitive products under the CET) – including products contributing to rural development, employment, livelihood sustainability, promotion of food security, fostering infant industries, and government revenues.

The EAC has also negotiated policy flexibility for the revision of the tariff lines liberalized under the EPA, with the parties agreeing to review it after every five years.

On tariffs, Sezibera also pointed out that, with the advent of the EAC Customs Union, EAC’s dependence on customs duties as a source of revenue has declined, and the countries’ focus is shifting to domestic sources of revenue, such as sales taxes. In any case, under the EPA, the envisaged revenue loss from the liberalization of intermediate and finished products has been mitigated by a negotiated phase-in period from 2015 to 2033, giving countries time to adjust.

The EPA also contains provisions on trade defence that would give the EAC the opportunity to impose measures in cases where EU imports were to increase in such quantities that they would threaten domestic producers and industry. These include bilateral and multilateral safeguards (including pre-emptive safeguards where, in exceptional circumstances, immediate action is required, such as for food security); infant industry protection measures, where the EAC can impose non-tariff measures or re-introduce most favoured nation tariffs; and antidumping and countervailing measures.

Other market access areas, such as customs and trade facilitation, technical barriers to trade, and sanitary and phytosanitary measures, have also been agreed upon and finalized.

Finally, the Economic and Development Cooperation provisions are also an integral part of the EPA in recognition of the fact that changes to the trade regime will entail significant costs for the EAC. The EAC partner states want to ensure that additional resources are made available to assist them to address supply side constraints so that they can take advantage of opportunities stemming from eventual implementation of the EPA.

TAGS: tax | law | tariffs | trade treaty | food | agreements | Kenya | Rwanda | Uganda | trade | Burundi | Tanzania | Europe

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