Dar Es Salaam, 13 August 2012/ DN: Regional markets for Tanzania's export-based agro-products, which earns the country considerable earnings, are likely to fail following continued pressure from the European Union (EU) to liberalise trade through the Economic Partnership Agreements (EPAs).

Statistics portray nearly 80 per cent of the households still relying on agriculture as primary economic activity although it now accounts for only 24 per cent of the Gross Domestic Product (GDP), a sign that the sector remains underdeveloped.

While EU is putting pressure for the signing of EPA that would ultimately turn down EAC efforts to enhance the agricultural sector's contribution to the growth of the economy to alleviate poverty, the initiators of the free trade agreement have refused to abolish subsidies to their own farmers.

Moving the 2012/13 budget estimates in Dodoma on Friday, the Minister for East Africa Cooperation, Mr Samwel Sitta, said Tanzania was handling the EU's free trade agreement cautiously to ensure its development plans were not shattered.

"There are still contentious issues which need to be settled before signing the EPA to ensure the country is not turned into source of raw materials and markets for European goods," he said. If Tanzania signs the agreement it would impact on more than half of the country's domestic production for exports.

The country exports on about 983 tariff lines to Africa and the rest of the world. Out of these, the EPA will require liberalisation of 648 tariff lines. The agreement would imply that, half of Tanzania's domestic production for exports could be put at risk due to EU competitiveness and the EPA requirement to eliminate tariffs on these lines.

Some of the agricultural products like residues of starch manufacture, maize bran, cotton seed oil cake and shelled groundnuts will be at risk of being eliminated in the market. Non-agriculture products like plastic articles for conveyance or packing of goods, limestone and calcareous stone for lime or cement, rubberized textile knitted or crocheted fabrics, hot rolled steel and coils, iron bars and rods, casings, tubes and pipes will also be driven out of the market.

In his remarks to mark the Private Sector Day held in Dar es Salaam last week, the Minister of Industry, Trade and Marketing, Dr Abdallah Kigoda, said the government was still continuing with the negotiations with the EU to ensure that all controversial areas are deleted to create win win situation.

"There is an increased pressure from the EU for the EAC countries to sign the agreement which could ultimately jeopardise regional integration," he said adding that, "Tanzania will not sign the agreement for the sake of integration but only when all the contentious issues are resolved."

Dr Kigoda added that EPA could be the best developmental instrument for Tanzania only if all the questionable parts are deleted. The next round of negotiations will be held on October 12, this year. Studies show that the need for raw materials and markets for European goods is posing a serious threat to regional integration to accomplish its plan to become one of the strongest blocs in Africa.

The 2005 study by the UN Economic Commission for Africa (UNECA) estimated that Tanzania would lose up to 32.5 million US dollars annually due to tariff elimination. As imports have increased sharply, tariff losses could be up to 62.4 million US dollars when EPA is fully implemented.

Former president, Mr Benjamin Mkapa likened the EU EPAs as a poisoned chalice and the second scramble for Africa that ought to be rejected. With the European Commission's 2008 document entitled 'The Raw Materials Initiative – Meeting our Critical Need for Growth and Jobs in Europe', Mr Mkapa observed that a clearer glimpse of the real impetus for EPA could be noticed.

In his remarks during the Private Sector Day, Mr Mkapa said with EPAs, Africa is in trouble, its future is once again on the table and it is Europe that holds the ace. EPAs are a scheme to create a free trade area (FTA) between the European Union and the African, Caribbean and Pacific Group of States (ACP).

They are a response to continuing criticism that the non-reciprocal and discriminating preferential trade agreements offered by the EU are incompatible with WTO rules. The EPAs are a key element of the Cotonou Agreement, the latest agreement in the history of ACP-EU Development Cooperation and were supposed to take effect as of 2008, but as of March 2012 the negotiations were not yet completed.

Mr Mkapa said that by dropping the EPAs the Least Developing Countries (LCDs), Tanzania included, have nothing to lose because they would continue trading with Europe under the Everything But Arms (EBA) scheme containing duty and quota free access.

Initiated in 2007, the EPAs between EU and East African Community (EAC) was still overwhelmed by contentious issues which are thorn to would be members, but beneficial to initiators of the instrument.

The dangers that EPAs pose to Tanzania and the EAC, according to the former president, included high levels of liberalisation that will see duties charged on EU products eliminated for two thirds of the value of imports from Europe and impact on domestic production and revenues as well as regional trade.

"Accordingly, the interim EPA's market opening commitments which EAC initiated in 2007, if signed and implemented, would see the region collectively liberalising 82.6 per cent of the value of imports from the EU," remarked Mr Mkapa before hundred of members of the Tanzania Private Sector Foundation (TPSF).

For Tanzania alone, he said, the figure is higher at about 90 per cent of the value of imports from EU to be committed to duty free. Of the 90 per cent facing tariff elimination, 23 per cent of the value of imports from the EU already enters the country duty free.

Consequently, more than half of the domestic production of export destined goods from agriculture, chemical, intermediate industrial products, parts of machines, vehicle parts will be put at risk by the EPAs.

"The EPA will bind at zero duties 3,102 tariff lines on six digit level in the "World Custom's Organisations Harmonised Commodity Description and Coding system," of the total of 5,052 where Tanzania currently does not have production, thus making it difficult for the country to sail in the same lines in the future," he noted.

Regionally, Mr Mkapa said EPA will jeopardise the flow of trade because locally produced goods are to be liberalised. It makes EAC countries less attractive for prospective free trade agreement (FTA) partners because they will have to compete with Europe in the regional market.

By Sebastian Mrindoko, Tanzania Daily News