The East African Business Council (EABC) has called on EAC Partner States to negotiate trade agreements with third parties collectively as a bloc instead of each Partner State separately concluding bilateral or multilateral trade agreements. Mr. Adrian Raphael Njau, Acting Executive Director of the EABC, emphasized that an EAC unified approach will enhance trust among Partner States, improve negotiation leverage, and uphold a common policy in the field of external trade for the region.
The EAC Customs Union Protocol (CUP) requires the Community to coordinate its trade relations with foreign countries so as to facilitate the implementation of common policy in the field of external trade. The main purpose is to ensure that the EAC Common External Tariff (CET) is uniformly implemented by all EAC Partner States. The CET as key instrument of EAC Customs Union ensures there is a common duty for goods entering the EAC Customs Territory from Rest of the World.
Recently there has been steadily increase of a number of bilateral agreements between individual EAC Partner States and third parties. There is fear among the EAC private sector that these separate individual trade agreements are being concluded without following the procedures and principles set out by EAC CUP which may subsequently create mistrust among EAC Partner States as well as distorting the EAC CET – ‘the EAC tariff wall for the region’. “Individual country having separate tariff concession with third parties which is different from the existing EAC CET may compel other Partner States to restrict free circulation of goods to mitigate trade deflection” Mr. Njau said.
Given that EAC Partner States may negotiate and enter into trade agreements independently with third parties, Article 37(4) of the East African Community (EAC) Customs Union Protocol (CUP) permits Partner States to do so, provided that the terms of such agreements do not conflict with the provisions of the EAC CUP. Article 37 of the EAC CUP outlines the procedures that Partner States must follow to conclude or amend trade agreements with third parties.
Currently the EAC Partner States as the bloc are implementing two reciprocal trade agreements with third parties which were collectively negotiated and concluded between EAC Partner States and other African countries. These agreements are the African Continental Free Trade Area (AfCFTA) and the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA). Under these two agreements the five EAC Partner States (Burundi, Kenya, Rwanda, Uganda and Tanzania) have agreed to liberalise their tariffs with other African countries through a joint tariff offers based on EAC CET.
However, the EAC Partner States have found it difficult to collectively negotiate and finally concluded reciprocal trade agreements as the bloc with third parties outside Africa. A notable example is the EAC-EU Economic Partnership Agreement (EPA) and the EAC-UK Economic Partnership Agreement (EPA). It took EAC and EU seven years from 2007 to 2014 to conclude the negotiations of the EAC-EU EPA but while the EU went ahead and signed the Agreement in June 2016; Its only Kenya and Rwanda which decided to sign the EPA in September 2016 before Kenya went ahead and ratified the Agreement in the same month. However, Kenya could not implement the Agreement until the EAC Heads of State Summit directed that Partner States who wish to implement the Agreement should go ahead and do so under the principle of variable geometry. This compelled Kenya and the EU to renegotiate a bilateral Kenya-EU EPA that was signed in December 2023 and came into force in April 2024. The Kenya-EU EPA mirrored the EAC-EU EPA with minimal adjustments including provisions for other EAC Partner States to accede when ready.
During the exit of UK from the EU under BREXIT, the UK approached the EAC in August 2020 to enter a continuity trade agreement with the EAC as bloc by 31st December 2022 when the UK would formally exit the EU. BREXIT was expected to hold back EAC’s market access to the UK composing of 15 per cent of EU population. The UK market offered access routes for EAC products to the EU. In response to the UK’s request, all East African Community (EAC) Partner States, except Kenya, argued that the proposed timeframe was insufficient for negotiations and proposed a transition period until December 2021 and requested that the UK provide Kenya, a lower middle-income country, with a transitional mechanism to retain preferential tariff treatment in the UK post-Brexit. However, on 30 September 2020, the UK communicated its intention to proceed with bilateral Economic Partnership Agreement (EPA) negotiations with Kenya. The Kenya-UK EPA was signed on 8 December 2020 and ratified by both parties in March 2021.
Among the reasons that compelled Kenya to negotiate a separate trade agreement with the UK and proceed with implementing the Kenya-UK Economic Partnership Agreement (EPA) was the dual categorization of EAC Partner States, with Kenya classified as a non-Least Developed Country (non-LDC) and the others as Least Developed Countries (LDCs). Through the Generalized Scheme of Preferences (GSP), LDCs enjoy Duty-Free, Quota-Free (DFQF) access to the EU and UK markets under the “Everything But Arms” (EBA) pillar of the GSP. Kenya, as a non-LDC, through the “standard” GSP, is offered lower-than-Most-Favoured-Nation (MFN) import tariffs on approximately 66 percent of tariff lines applied by the EU. To ensure continuity and certainty in trade relations between Kenya and the UK, both parties negotiated a reciprocal Kenya-UK EPA, which was primarily based on the EAC-EU EPA.
Mr. Njau stressed that third-party agreements must align with EAC objectives while being sensitive to the development disparities among EAC Partner States. “Dual classification of development of EAC Partners should be use as strength not weakness when negotiating trade agreements with third parties” he said. He advocated for a comprehensive and inclusive approach that goes beyond market access to address supply side constraints.
Under KE-UK EPA and KE-EU EPA, Kenya have committed to reciprocate duty-free access to UK and EU, respectively by progressive eliminating tariffs on all but exclusion products which are considered sensitive products. Currently while Kenya is implementing the reciprocal EPAs with EU and UK, the other EAC Partner States are using non-reciprocal GSP schemes to access the EU and UK markets.
Though the EU and UK GSP schemes provides the EAC with non-reciprocal trade engagement with UK and EU that seems favorable to EAC Partner States their utilization has been very low due to various factors including stringent rules of origin. The nature of clustering countries to specific groups has split up the EAC Partner region along LDC and non-LDC lines which seems unfavorable to Kenya, which is considered advanced relative to her regional counterparts. Also given the GSP is unilateral scheme offered by one party (EU & UK) there is always the continuous risk of losing the preference treatment through the Withdrawal Mechanism (as defined in Article 19 of the GSP Regulation).
EU and UK products access the Kenyan market using Kenya’s tariff concessions, which are based on the East African Community (EAC) Common External Tariff (CET) 2017 version, while EAC Partner States are implementing the EAC CET 2022 version following a comprehensive review. The EAC CET 2017 version was structured under three bands: 25 percent for finished goods, 10 percent for intermediate goods, and 0 percent for raw materials, essential, and capital goods. It also included a limited number of products on a sensitive list that attracted rates above the maximum 25 percent, ranging between 35 percent and 100 percent. The EAC CET 2022 version is structured under four bands: 0 percent for raw materials, essential, and capital goods; 10 percent for intermediate goods; 25 percent for finished goods not sufficiently available in the EAC; and 35 percent for finished goods sufficiently available in the region. The tariff structure also includes a sensitive list, which attracts higher tariffs ranging between 50 percent and 100 percent. The primary difference between the two versions of the EAC CET is the introduction of a fourth band in the 2022 version, comprising 496 tariff lines that attract a 35 percent import duty.
As EAC Partner States face challenges in navigating current regional and bilateral Economic Partnership Agreements (EPAs), the region has other multiple agreements to address. These include the EAC-US Trade and Investment Framework Agreement (TIFA) and the Kenya-United Arab Emirates Comprehensive Economic Partnership Agreement (CEPA). Moreover, the EAC Secretariat has received Free Trade Area (FTA) negotiation requests from several global trading partners, including the Gulf Cooperation Council (GCC), Turkey, China, Singapore, Pakistan, and Indonesia, demonstrating the strong interest of global partners in securing long-term trade agreements with EAC Partner States as a bloc.
In light of the above arguments and the current uncertainty in global trade due to the protectionist tendencies of major global trade players, the East African Business Council (EABC) recommends the following:
EAC Partner States analyze the implications of existing EPAs in the region for EAC commitments and the African Continental Free Trade Area (AfCFTA).
To uphold EAC commitments to implement a common external trade policy and progress made in the Customs Union and Common Market, EAC Partner States, as a bloc, should explore options for collectively reviewing EPAs with the EU and UK.
EAC Partner States, as a bloc, should collectively initiate negotiations for trade agreements with global trading partners who have expressed interest in negotiating FTAs with the EAC.
EAC Partner States should ensure active involvement of the private sector throughout the negotiation of trade agreements with third parties to guarantee inclusive and implementable agreements that reflect the interests of both the public and private sectors
