STATE OF PLAY OF THE EAC-EU EPA NEGOTIATIONS Presented by: Marie Angelique Umulisa – EAC Secretariat

1. STATE OF PLAY OF THE EAC-EU EPA NEGOTIATIONSPresented by: Marie Angelique Umulisa – EAC Secretariat AU COORDINATION MEETING ON THE EPA NEGOTIATIONS17 – 18 MAY 2012, ARUSHA – TANZANIA

2. EAC-EU EPA Overview • FEPA initialed in November 2007 • Trade in Goods • Fisheries • Development Clause • Rendezvous clause • FEPA not signed in June 2010 because of contentious issues (MFN clause, Export Taxes and Development) • Negotiations ongoing towards the conclusion of a comprehensive EPA

3. COVERAGE OF THE EAC-EU EPA Agreed Scope: • General Provisions • Trade Regime for Goods: • Free Circulation of Goods • Non-Tariff Measures • Customs and Trade Facilitation • Sanitary and Phytosanitary Measures • Standards, Technical Regulations and Conformity Assessment • Trade Defence Measures • Fisheries • Agriculture

4. Cont’d… COVERAGE • Economic and Development Cooperation • Dispute Avoidance and Settlement, Institutional Arrangements, General and Final Provisions • Annex I: Customs duties on products originating from the EAC Partner States • Annex II: Customs duties on products originating in the EU Party Annexes II(a), II(b), II(c) and II(d) • Protocol and Annexes on Rules of Origin

5. Cont’d… COVERAGE • Areas for future negotiations (TIS + TRI) New issues introduced by EU but not agreed as part of the scope: • Governance in the Tax Area • Obligations/Consequences from Customs Union Agreements concluded with EU

6. STATUS ON THE NEGOTIATIONS • Standstill Clause: (Right to review tariffs for products scheduled for progressive liberalization in the interest of regional integration) – additional paragraph as follows: “In order to preserve the prospect for the wider African regional integration processes, the Parties may decide in the EAC EC EPA Council to modify the level of customs duties stipulated in Annexes II(a), II(b) and II(c), which may be applied to a product originating in the EC Party upon its importation into the EAC Partner States. The Parties shall ensure that any such modification does not result in an incompatibility of this Agreement with the requirements of Article XXIV of GATT 1994”.

7. STATUS… • Article 15 on Export Taxes: While the FEPA allows EAC to continue to levying existing export-related taxes, the introduction of new export-related taxes in order to foster the development of domestic industry (i.e. value addition) or for foreign exchange stability has to be authorized by the EPA Council. Additional formulation not agreed upon – has been scaled up to the political level. Notwithstanding paragraphs 1 and 2, in exceptional circumstances where an EAC Partner State [EAC: has] [EC: can justify] special needs with regard to revenue, food security, or environmental protection, and where the EPA Council is not scheduled to meet within one month, the EAC Party may impose a temporary duty or a tax in connection with the exportation of goods after [EAC: notifying ] [EC: consultations with] the EU Party.

8. STATUS… • Article 16 – MFN: • EAC’s current offer to the EU: Proposes to insert a paragraph after Art. 16(2) to require and/or place the onus on the EU Party to demonstrate that it has been given less favourable treatment than that offered by the EAC Party to any other major trading economy and that the Parties to enter into consultations on how best to implement the provisions of paragraph 2 on a case by case basis. • EU has proposed the MFN text agreed with ESA in Nov. 2011

9. STATUS… Trade Facilitation aspects of the EPA – to discipline NTBs that take away advantages of preferential Market Access. • Negotiations finalized on the Titles on Customs and Trade Facilitation; SPS; and TBT.

10. STATUS… • Trade Defence Measures under the EAC-EU EPA Amendments: • Anti Dumping and Countervailing Measures • WTO’s Dispute Settlement rules to apply. • Multilateral Safeguards • WTO rules to apply to provisions of para 1. • Bilateral Safeguards • Period can be extended by EPA Council for maximum 5 years.

11. Economic & Development Cooperation • Support regional integration and development strategies. • Based on Economic and Development Cooperation Chapter and EAC EPA Development Matrix. • Cooperation to be measured against development baseline benchmarks, indicators and targets. • Monitoring framework to be jointly developed and agreed by both Parties. • Cooperation shall be in the form of Financial and non financial support to the EAC region.

12. E&DC… • the Parties commit to jointly and individually mobilise resources • The EAC Party shall:  • Commit resources from its financing mechanisms on a timely and predictable basis to support regional integration and the EPA related development strategies and projects as contained in the EAC EPA Development Matrix. • Develop their development strategies with due regard for the right of the EAC Partner States to determine the direction and the sequence of their development strategies and priorities. • Establish an EPA fund to channel EPA related resources.

13. E&DC… • The EU Party shall commit the following resources on a timely and predictable basis:  • The European Development Fund (facilities- national and regional) • EU Budget • Any other instrument that will be used to implement EU’s Official Development Assistance. • Both Parties shall jointly commit to work towards mobilizing the following resources:   • funds of other donors (multilateral donors) • grants, concessional loans, public-private partnerships, and specialized facilities • Any other ODA resources available from development partners

14. E&DC… • The Parties agree that the scope of economic and development cooperation shall be in the following areas: (i) Infrastructure (ii) Agriculture and livestock (iii) Private Sector Development (iv) Fisheries (v) Water and Environment (vii) Market Access Issues (SPS, TBT, C&TF) (viii) EPA Adjustment Measures (ix) Mobilization of Resources

15. E&DC… • Text largely agreed – 2 brackets remain on the core issues: • Annexing of the EAC EPA Development Matrix (EAC: to annex; EU: separate document) • When to develop the benchmarks, indicators and targets (EAC: before signature; EU: after entry into force of the EPA) • Draft MONITORING Framework developed by the EAC - on the first mover advantage.

16. EAC EPA Development Matrix • Format agreed upon (project, geographical coverage, estimated costs, contribution by the EU +MS, other donors and funding gaps) • Includes prioritized projects and programs in the following areas: • Infrastructure (Transport) • ICT & Telecommunication • Capacity building • Energy • Agriculture and trade facilitation • Water, Environment and Climate change • Lake Victoria development •  Matrix to be reviewed every 5 years

17. AGRICULTURE 3 Outstanding Issues remain: • Export Subsidies • Domestic support - Substantially reduce trade distorting domestic support provided to farmers, especially on products of export interest to EAC region. • EU’s argument - "Domestic support" can only be addressed in the multilateral framework, and is under discussion in the DDA and hence should not be addressed in any event in the context of current bilateral negotiations

18. AGRICULTURE EU have proposed a text on Transparency on domestic support. • EU making the discussions on the Agriculture text conditional upon not discussing domestic support 3) Geographical Indications – cooperation on Capacity Building – EAC still consulting

19. RULES OF ORIGIN • The EAC-EU EPA Rules of Origin are contained in Protocol No. 1 with all its annexes, which include Annex II that spells out specific rules to apply for products manufactured using non originating raw material. • The ongoing negotiations of the EAC-EC EPA Rules of Origin are guided by the following objectives: • Improving and increasing the market access for EAC exports into the EU market • Promoting the establishment and growth of the industrial and agricultural base of EAC Partner States • Facilitating the diversification of the EAC export base • Deepening EAC regional integration through cumulation across EAC as well with COMESA and SADC countries • Widen EAC Partner States base for sourcing raw material for production of goods targeting the EU market by allowing for extended cumulation that covers all ACP countries, countries that the EU has concluded an FTA with and cumulation with goods that enter the EU market at an MFN duty rate of 0%

20. RoO… • The corner stone of the EPA Rules of Origin is the principle of asymmetry that reflects the differential level of development between the EAC and the EU. • EAC has held consultations with ESA and SADC to try and harmonize to the extent possible positions on the EPA RoO negotiations.

21. INSTITUTIONAL ARRANGEMENTS, DISPUTE SETTLEMENT & FINAL PROVISIONS • Negotiations ongoing on the text. • Key divergent issues: • Scope of Dispute Settlement: EAC does not agree with the proposal by EU to not include disputes pertaining to financing for development co-operation under the EPA i.e. to be held under Article 98 of the Cotonou Agreement. • Article on Relations with the Cotonou Agreement – cross-referencing on Human rights, democracy principles, rule of law, anti-corruption...

22. TRADE IN SERVICES & TRADE RELATED ISSUES • Trade in Services • Trade Related Issues: • Competition Policy • Investment and Private Sector Development • Intellectual Property Rights • Transparency in Public Procurement Both Parties agreed to negotiate the above issues at a later stage – included in the Rendez-vous clause

23. Cont’d … Trade Related Issues • Trade, Environment and Sustainable Development: • Disagreement on whether to include this in the Rendez-vous clause. EAC’s position is that this should be negotiated at a later stage along with the other Trade Related Issues.

24. New Issues Presented by EU 1) Good Governance in Tax Area • To address tax fraud, evasion and avoidance; • Principles: Transparency, effective exchange of information, and Fair tax competition 2) Obligations arising from Customs Union Agreements concluded with the EU. THESE ISSUES NOT AGREED UPON FOR NEGOTIATIONS

25. Conclusion • Remaining task – TO ENSURE A QUALITY EPA for the EAC • Negotiations are still progressing in this regard. • need to sign an EPA as EAC

26. Thank you for your attention umulisa@eachq.org