Tanzania, Burundi risk losing European Union aid over EPAs

Tanzania and Burundi risk losing development aid from the European Union for refusing to append their signatures to the trade agreement between the region and the European economic bloc.

Dar es Salaam and Bujumbura have declined to sign the Economic Partnership Agreement of the EAC with the EU. Being a single Customs territory, all EAC members need to sign the pact before it is enforced.

However, Tanzania argues that signing the trade deal in its current form will have negative implications for its industrialisation strategy.

Speaking during the 32nd Conference of African Caribbean and Pacific Group of States (ACP) and the European Union (EU) in Nairobi, Patrick Gomes, the secretary-general of ACP, said that aid to the countries must be tied to trade agreements for the mutual benefit of both economic blocs.

“We need to understand that EPAs come not only with trade opportunities with Europe, but development aid as well. As it is, Tanzania, Uganda and Burundi, which have been dragging their feet in signing the trade pact, could end up losing important development aid from the EU,” Mr Gomes said.

The ACP is composed of 79 African, Caribbean and Pacific states that are signatories to the Cotonou Agreement, which binds them to the EU.

Tanzania is a significant beneficiary of EU development co-operation, mainly financed by the European Development Fund. The current six-year cycle ends in 2020, amounting to $651.7 million to be channelled towards energy, security, agriculture, education and health programmes. In the previous cycle, Tanzania received $630.9 million in development aid from the EU, with a focus on infrastructure, communications and transport, trade promotion and regional integration.

Burundi’s development aid from the EU was suspended following the political crisis over President Pierre Nkurunziza’s third term.

The president of the European Parliament Louis Michel now says that Nairobi could sign a bilateral trade agreement with the EU, fashioned around a similar one that South Africa — which is a member of the Southern Africa Development Corporation — signed with the EU.

“Looking at the economic benefits Kenya stands to lose, we would urge the EU to be flexible and allow it to sign an independent agreement to safeguard its products, if regional blocs frustrate the collective approval,” Mr Gomes said.

Tanzania argues that it wants access to the EU market under the least developed countries group, in order to increase its market share, a category that Uganda, Rwanda and Burundi can use to access the market under the “everything but arms option.”

Kenya is in the group of developing countries, exposing its exports to higher taxes if the EPA is not ratified.

Under the bilateral trade agreement, EAC members enjoy quota-free and tax-free privileges to the EU market. They are required to reciprocate through a phased structure, a move the opposing countries argue makes their products uncompetitive.

Currently, only Rwanda and Kenya have signed the deal with the EU — in August in Brussels — in a bid to beat the October 1 deadline that would have seen Kenya’s exports to EU attract duty.

READ: Kenya, Rwanda sign EPA deal with Europe

The EU parliament has since extended the signing deadline to February. If the EPA is not ratified by the February 2, 2017 deadline set by the EU, Kenyan exports to the economic bloc will be subject to duty.

READ: Sigh of relief as Europe gives East Africa four months to sign EPA

Last week, Tanzania said that it would conduct market research and hold discussions with the private sector before making its final decision on the EPA impasse.

“We are going to take the views of the private sector in deliberation of our position. We would like to have real time facts and statistics in reaching a position over these protracted negotiations with our neighbours over the trade deal with the EU,” said Charles Mwijage, the Industry, Trade and Investments Minister.