How far is it practical to resurrect EAC-EPA trade pact vision?

04Nov 2018
Ani Jozen
Dar es Salaam
Guardian On Sunday
How far is it practical to resurrect EAC-EPA trade pact vision?

WITH strong protectionist winds engulfing much of the global North and global South, recent remarks by German envoy to Tanzania, Dr. Detlef Wachter were rather counter current, inviting Tanzania to rethink its position on the proposed economic partnership agreement with the European Union.

retired president Benjamin Mkapa

The envoy reminded the audience (via a flagship economic weekly) that the trade position with the EU was easy at the moment since Tanzania has not attained middle income status at global level, expected to be reached by 2025.

At that moment it would lose access to ‘everything but arms’ entering the EU market without duties, becoming uncompetitive.
As a matter of fact other East African Community member states have traditionally seen the vital importance of acceding to the EU-EAC enhanced trade association or comprehensive non-tariff framework, but for Tanzania, with Burundi and South Sudan being negligible quantities in EAC negotiations in the past few years.

Yet the need for consensus in EAC and primacy of its staying put as a single entity overrode the ‘coalition of the willing’ since Uganda has usually been ready to switch positions, having a unique blend of radicalism and economic realism since it took up reforms in 1986. Kenya and Rwanda have consistent pro-market positions, with a few strictures.

The Tanzanian position was expressed early in 2007 by then retired president Benjamin Mkapa under whose watch the negotiations were conducted, following a ruling by the World Trade Organisation (WTO) in favor of the United States, representing the South American block, that EU favoring of African economies contravened WTO rules.

In that case a regime of entry of ‘everything but arms’ for economies below middle income level globally came up, and it is within this context that the Tanzanian position is formulated. It also advances an ingenious argument that totally appeals at the local level, that EPA leads to de-industrializing the country.

There is a sense in which Mkapa’s view on EAC-EU trade pact, given precisely during 40 years commemoration of the Arusha Declaration (at least in spirit, for those who still guard the flame) was but a continuation of the spirit of the declaration.

Nyerere explained the viewpoint in an essay around August 1967 where he said, inter alia, that ‘acceptance of the Arusha Declaration is an acceptance of the fact that we are Tanzanians, and wish to remain Tanzanian as we develop.’ It means that we are a rural country, and seek to build rural self reliance and resilience as growth.

What the Mkapa position that still dominates official views of EPA and most academic platforms is asserting is that Tanzania is okay with EBA, and that the sort of industrialization process we have at present (it has not changed since 2007) is alright as well.

This is where the remarks by Dr. Wachter come into view, that the fifth phase program of industrialization actually erodes the rationality of the Mkapa matrix, as the issue isn’t to protect existing industries but building many new industries. And only on that score, obtaining EU capital for industries, could it materialize.

The current official and academic viewpoints have embraced the Mkapa position on EPA on the basis of expectations of industrialization by local harnessing of resources, which is increasingly losing its persuasive power.

Industries require long term financing that is based on equity, that a company purchases an asset to vehicle a brand, obtaining the local goodwill of that asset as a firm with strong local connections, and property that forms the basis for local credit requirements now lacking. Cottage industries budding here and there often lack assets, create no new markets.

It means that the German envoy’s position is a reiteration of the viewpoint of the ‘coalition of the willing’ that was shelved on account of Tanzanian objections and inability of the others to wreck the EAC and take up EPA.

There are also interests in each of those countries that are similarly satisfied with a non-EPA position, though unlike Tanzania, they could more easily adopt a wider vision, that EBA is a low income vision that is unsustainable in the long run. Yet Tanzania has a profound policy consensus anchored in the Mkapa view, and unlikely to pick up EU sirens soon.

The only problem with the remarks by Dr Wachter, and that has always been the difficulty with bilateral and multilateral position taking, is that it singularly avoids the structural dimension to focus singularly on trade.

It is too shy to even project that capital will be moving into the country and build industries (as local radicals and officialdom can’t entertain the idea that it purchases assets), and at any rate the whole problem of financing industrialization in an efficient manner has not yet come up as a policy issue. At that time the envoy’s view may start being appreciated.

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