Continental free trade replaces partnership with EU as strategic goal

23Apr 2016
The Guardian Reporter
The Guardian
Continental free trade replaces partnership with EU as strategic goal

BUREAUCRATS at the European Commission in Brussels seem to have thrown in the towel as to any possible implementation of accords for an economic partnership between the European Union and African states.

Africa-EU Leaders at a past meeting in Brussels where they pledged to deepen ties in security, commerce and migration control.

The latter were being pushed to join EPAs with EC in order to continue qualifying for 'everything but arms' free exports to EU markets even for non-LDCs like Kenya. Despite that it was the latter what would have suffered without an EPA, canceling aid to Tanzania has shown how far such sanctions don't count.

Owing to ability to withstand aid cancellation in its annual budget estimates and even scoff at aid, Tanzania has shown that statistics apart, it isn't quite an LDC either, if this singularly means being spoon-fed for budget ends to meet.

Tanzania is definitely not in that situation, and becomes a partnership as it ostensibly is a development partnership, not a dependency as it used to be the case earlier. In 1998 for instance, total budget funds stood at 1.1trillion shillings, with local funds standing at 720bn, and about 400bn/- donor funds.

When therefore the EU-ACP (Africa. Caribbean and Pacific) countries shift of status in 2007 following the expiry of a World Trade Organisation (WTO) grace period to eliminate preferential trade between Africa and Europe, the dependency model crafted into the resulting EPA structure was strategic.

It was designed to enable the flow of substantial aid funds in exchange for vast diminution or cuts in tariffs. broadly envisaging cuts of up to 80 percent on taxation upon EU-originated goods. Otherwise ACP goods will be taxed too.

The first deadline set for 2004 (seven years from the WTO grace period end) came and went, at which EU bureaucrats, patiently, fixed another seven years to reach an accord, up to 2011 and failed again.

Three years later, November 2014 they brought EAC countries to sign a joint EPA pact as Kenya was on the verge of losing its EBA status in trade with EU. Cuts in EU exports taxes were to have started two years later, this Budget, and now it's but a dead letter.

A recent statement signed by EC chairman Jean-Claude Juncker and AU commission chairperson Nkosazana Dlamini-Zuma underlines this shifting perspective, that an economic partnership accord with Europe has failed.

Looking at the matter closely one finds that the core reason is psychological, tied up with a structural dimension, where the psychological reason; unlike in the Caribbean or the Pacific, in Africa it doesn't make sense to exempt goods from EU from import duties. It's part of a profound, innate anti-colonialism.

The structural reason or format of failure is that Tanzania and other EAC countries for that matter are still bound up with an economy centred on the main port. Revenue collection at this entry point is the mainstay of country's revenue projections, its main expression of sovereignty, not its manufacturing or agribusiness systems.

Little can change in how the port is administered, that is, changes in revenue collection at the port, unless vast changes have already taken place in agriculture and industry, to make up for lost revenues.

When the EU-ACP economic partnership accord was signed late 2014, one impression on how this change is made sustainable at the revenue and policy level was that an opening up would be necessary so that capital flows and heightened industrial output compensate for changes in revenue levels.

Now it would appear that it is such opening up, if it occurs on account partly of lessened aid levels and existence of partnerships with local industrialists, could in due course permit a partnership model. But that is a far off vision.

The statement by the commission chairpersons did not envisage such a shift later but settled for a more practical proposition, which isn't a poor substitute for EU-EAC partnership, namely continental free trade.

There are already moves in that direction by African states, where the customs union model that is applied in East Africa is extended, perhaps less as customs union than as tax free zone, which would unavoidably apply only to African states. In that context, European firms invest with partners and sell goods as local products.

That means economic change is operating at two levels, first the freedom that was extended to public servants and others to take over non-commanding heights of economy, expansion of local industrial base emerging while public firms were collapsing in the 1980s. They team up with European firms, now.

What the failure of the EU-ACP economic partnership accords implies is that efforts by European firms to act on their own in Africa, sell goods directly produced in Europe at favorable rates or proscribe goods from African taking on preferential mode of entry is that no reciprocity is possible.

The EU is thus free to accept EAC goods enter on the basis of EBA despite Kenya's higher standing and Tanzania's proximate middle income economy slighting aid cuts as irrelevant to budget plans.

The tag of least developed economies is by and large pointless, but since other Asian and South American countries which were in 2000 represented by the United States against EU trade preferences are now much richer, its threshold can be scaled up a little and apply to EAC.