Kenya, EU Plan Bilateral Trade Deal Apart From Regional Pact

NAIROBI (Capital Markets in Africa) – The European Union said it may sign a bilateral trade deal with Kenya as other East African nations vacillate on a separate free-trade pact, in a move that will help East Africa’s biggest economy retain market access to the bloc.

While Rwanda and Kenya initialed the so-called Economic Partnership Agreement before an Oct. 1 deadline, the other four nations of the East African Community have yet to show similar commitment, making the deal that’s been under discussion since 2002 ineffective. The countries, including natural gas-producing Tanzania and Uganda, which is on the cusp of crude oil production, have been negotiating the reciprocal pact that will extend their duty- and quota-free access to the EU.

“If all the countries don’t sign the EPA, it is not impossible that EU will negotiate a bilateral agreement with Kenya,” Louis Michel, president of the European parliament, told reporters Monday in the Kenyan capital, Nairobi. “There is a precedent. Europe has a specific bilateral agreement with South Africa. This was because the difference between South Africa and other countries in the region was broad.”

Kenya, East Africa’s biggest economy, is the only nation that stands to lose access to Europe because it isn’t grouped among Least Developed Countries, or LDCs. The others can continue exporting to the bloc under a separate Everything But Arms treaty for LDCs.

Kenya, with a $69.2 billion economy, and Rwanda will get a deal that’s as close to the EPA as possible, Michel said.

‘Suspicious Countries’
Kenya has warned that more than 200 companies with investments worth in excess of 2 billion euros ($2.1 billion) exporting produce such as flowers, vegetables and fish to the EU could get locked out of the all-important market should the region continue stalling the process.

“The problem is that Kenya has achieved higher development than other countries in the region,” Michel said, adding that neighbors were concerned that the nation would reap most of the benefits arising from the pact. “This has made other countries to be suspicious. They are afraid.”

The EU will introduce asymmetric measures to help smaller economies achieve success similar to the bigger ones, Michel said. “The EPA will have positive effects for the region. I don’t understand why they are afraid,” he said.

Tanzania has said it would lose as much as 45 percent of its import tax income over the next 25 years by signing the EPA. Its lawmakers voted against the agreement in November, saying it was bad for the nation’s economic development.