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29.11.2007 Business & Finance

Eastern African States Sign EU Trade Deal

The five countries that make up the East African Community have agreed a plan that will gradually open their markets to the European Union (EU). Kenya, Uganda, Tanzania, Burundi, Rwanda are covered by the EU deal.

The new agreement will replace preferential trade obligations, which are due to expire in December and have proved controversial in recent years.

A number of other nations in Western Africa, and some Pacific nations, have yet to accept the new arrangements.

The East African Community (EAC) trading bloc has agreed to "gradually open their markets to goods from the EU over a period of 25 years", an EU official said.

Despite giving European firms more access to their markets, some industries will still be protected from competition to prevent local businesses from going bankrupt.

Under the terms of the new deal, about a fifth of EAC trade would still be exempt from the requirement to lower customs duties.

Industrial products and agriculture are among the sectors that are to be given extra protection. The EU said that negotiations would continue next year in an effort to have a more comprehensive Economic Partnership Agreement in place by 2009.

The new deals will replace earlier preferential trade obligations that linked the EU and many of its trading partners but which have been heavily criticised by other nations, particularly those in Latin America.

The deals have been ruled illegal by the World Trade Organisation (WTO) and the 27 members of the trade bloc have until the end of this year to establish new arrangements with partners.

But it is not thought that all 80 nations in Europe's former African, Caribbean and Pacific colonies will have signed up to the EPAs by January 1 because there is still a lot of opposition to the deals.

Critics argue that the EPAs could damage developing economies by cutting their customs revenue and making it harder for local businesses to compete with larger foreign rivals.

Meanwhile the aid charity, Oxfam, has warned that a European Commission-East Africa interim trade deal may spur revenue losses and unemployment.

The accord initialled last Tuesday is to replace preferential tariff agreements due to expire at the end of the year because the World Trade Organisation (WTO) has ruled they are illegal.

Oxfam International's EU Officer, Luis Morago lamented that the five east African nations signed the accord under pressure, opening up 80 per cent of their market to European products in 15 years.

"This agreement will oblige the East African region to remove 80 per cent of its tariffs on EU goods over 15 years, possibly more quickly, which could lead to unemployment and loss of vital government revenue that might otherwise be spent on health and education," Morago explained.

The deal will in particular aid Kenya's cut flowers industry, Tanzania's fisheries and the coffee and tea trade in all five nations.

"Despite concerns raised by many, including the IMF (International Monetary Fund), African civil society, trade unions, and academics, the commission has ignored possible alternatives and insisted on the deadline," Morago added.

The EU is pushing economic partnership agreements (EPA) with 78 nations in the African, Caribbean and Pacific group in a bid to clinch deals that replace the preferential accords.

The new deal is designed to help EAC countries develop while diversifying their economies and meeting WTO requirements that they allow some access to European goods and services, regional officials say.

— Credit: AFB/BBC