JPM, Museveni blast European trade deal

26Feb 2017
Abela Msikula
Guardian On Sunday
JPM, Museveni blast European trade deal

PRESIDENT John Magufuli and his Ugandan counterpart, Yoweri Museveni, yesterday joined forces to publicly reject the proposed Economic Partnership Agreement (EPA) between the European Union and the East African Community,-

saying it would lead to the economic recolonisation of Africa.

The pact gives products from EAC member states duty- and quota-free access to the EU as long as they meet health and safety standards, but also requires East African countries to open their markets to a potential flood of European goods.

In an unusually strong rebuttal, the two leaders ripped up the EPA deal and urged fellow EAC partner states to unite and jointly turn down the deal.

"I have informed him (Museveni) my concerns that we, as Tanzanians, see EPA as being not beneficial to us ... it is another form of colonisation," Magufuli, who is also the current EAC chairman, said in a joint news briefing with Museveni at State House in Dar es Salaam yesterday.

President Museveni arrived in the country yesterday for a two-day state visit.

"You can not talk about industrialisation of the economy while at the same time you are competing with (European) nations that have advanced industries."

Tanzania and Uganda last year refused to sign the EPA deal between the EU and EAC countries, while Kenya and Rwanda signed the agreement.

However, the agreement can only take effect if all the original five EAC member states - Tanzania, Kenya, Uganda, Burundi and Rwanda - sign jointly as a regional economic bloc.

Tanzania and Uganda have rejected EPA partly due to concerns about the negative impact of the agreement on the region's industrial sector and Britain's exit from the EU (Brexit).

Speaking at the joint news conference with Magufuli yesterday, Museveni called for the unity of East African countries, saying they should speak with one voice instead of being divided.

"The biggest problem is that since independence, Africa has been taking insurance on motor vehicles and buildings, but has not taken out any insurance to ensure that Africa is never colonised and never marginalised again," said Museveni, adding:

"We need to make sure that as many of us as possible coalesce our thinking under one position. If we are divided on a small thing such as this EPA where some of us go right and others go left, then how shall we manage?"

'Walking in Nyerere's footprints'

Museveni said it was important for EAC partner states to adopt a united position on the proposed EPA pact with Europe.

"I had very long discussions with President Magufuli ... the relationship between our (East African) countries is more important than relating to Europeans."

Museveni praised Magufuli for his firm leadership, saying his Tanzanian counterpart was "following Mwalimu (Julius Kambarage) Nyerere's footprints."

"I was a student of Mwalimu, I was a disciple ... that is why I came to study in university in Tanzania to be close to Mwalimu," said Museveni, who studied at the University of Dar es Salaam in the late 1960s and early 1970s.

"Our biggest position as Africa is that we do not have a common position and do not stand united on important issues ... that's why Africa was conquered (by colonialists)."

The two leaders also discussed the importance of boosting Tanzania-Uganda trade and Magufuli announced plans to build a dry port in Mwanza, which will be linked by a standard gauge rail to the Dar es Salaam port and thereafter transport goods to Uganda by ships via Lake Victoria.

Magufuli also urged the French oil giant, Total, to speed up construction of the $4 billion Uganda-Tanga crude oil pipeline, but did not announce a date for the ground-breaking ceremony.

"If Total is a genuine investor, it should expedite this project and not look for excuses to delay it," said Magufuli.

He said his government had resolved all outstanding issues that had delayed implementation of the construction of the 1,422 kilometre pipeline, including value added tax (VAT) exemptions to the investor.

"Construction of this pipeline was supposed to begin yesterday," insisted Magufuli.

Why EPA is bad for East Africa

Former president Benjamin Mkapa, who is one of the fiercest critics of the trade deal, wrote in July, last year, that the high level of liberalisation required by EPA, which would reduce tariffs on 90 per cent of all industrial goods, "is likely to put our existing local industries in jeopardy and discourage the development of new industries."

"The EPA for Tanzania and the EAC never made sense. The maths just never added up. The costs for the country and the EAC region would have been higher than the benefits," the former president said.

As a least developed country (LDC), Tanzania already enjoys the Everything but Arms (EBA) preferential scheme provided by the European Union.

In other words, Tanzania can already export duty-free and quota-free to the EU market without providing the EU with similar market access terms.

"If we sign the EPA, we would still get the same duty-free access, but in return we would have to open up our markets for EU exports," he said.

The EPA is a free trade agreement. Under it, Tanzania would have to reduce to zero the tariffs on 90 per cent of all its industrial goods trade with the EU, according duty-free access for almost all the EU’s non-agricultural products into the country.

Such a high level of liberalisation vis-à-vis a very competitive partner was likely to put our existing local industries in jeopardy and discourage the development of new ones, said the ex-president.

Statistics show that for the EAC region, the African market is the primary market for its manufactured exports.

In contrast, 91 per cent of the EAC's current trade with the EU is made up of primary commodity exports (agricultural products such as coffee, tea, spices, fruit and vegetables, fish, tobacco, hides and skins).

Only a minuscule 6 per cent, or about $200,000 of EAC exports to the EU, is composed of manufactured goods. In contrast, of the total EAC exports to Africa, almost 50 per cent is made up of manufactured exports – about $2.5 billion.

Mkapa argued that EAC partner states would suffer a huge loss resulting from EPA in terms of tax revenue.

Conservative estimates (assuming import growth of 0.9 per cent year-on-year) show that for the EAC as a whole tariff revenue losses would amount to $251 million a year by the end of EPA’s implementation period. Cumulative tariff revenue losses would amount to $2.9 billion in the first 25 years of the EPA’s life.

For Tanzania, the losses based on 2013–2014 import figures are about $71 million a year. Cumulatively, just for Tanzania, they add up to $700 million over the first 25 years.

"The only area where the EPA is supposed to serve the interest of the EAC is by providing duty-free access to Kenya. As a non-LDC, Kenya does not have duty-free access via the EU’s EBA. Kenya’s main export item to the EU is flowers – total sales are worth just over $500,000 a year," he said, adding:

"Without EPA, Kenyan’s flowers would be charged a 10 per cent customs duty. Nevertheless, all in all, Kenyan exports to the EU market (including the UK) amount to about $1.5 billion. If no EPA is signed, the extra duties charged to Kenyan exports amount to about $100 million a year. Is this worth signing an EPA for? The avoidance of duties of $100 million?"