Court to rule on whether the EAC EPA should be signed: What lessons for REC Integration Efforts?
Gerhard Erasmus, tralac Associate, comments on the lodgement of a civil suit by a Tanzanian national in the EAC Court of Justice opposing the signing of the EAC Economic Partnership Agreement
The East African Community (EAC) is frequently held as an example of a successful African Regional Economic Community (REC). In several respects this claim is valid; the EAC has made considerable progress in adopting legal instruments to promote integration and to implement its single customs territory and common market structures. As is often the case, in RECs, there is, apparently, still some work to be done with regard to consolidation of the customs union (CU) and the common market.
The announcement last week that the EAC Court of Justice will hear an urgent application by a private party to prevent the signing of the EAC Economic Partnership Agreement (EPA) with the EU serves as a reminder about what is required for effective and rules-based integration and the important role of CU disciplines and institutions. The fact that a particular individual is unhappy about the possibility of this agreement being concluded is not an indictment of the EAC. However, the Member States are deeply divided on this issue.
The EAC EPA history also reminds one that deep integration between partners with different needs and policies is no easy undertaking. One of the questions now arising is why the EAC Member States are so divided about their future trade relationship with the EU. Are the EAC’s political institutions incapable of dealing with the lack of unity among the Member States? Do they enjoy the necessary powers? Why are the Members still, after several years of negotiating with the EU, unable to agree on a solution and a way forward in trading with a very important external partner?
A CU is an advanced arrangement for trade in goods among the Member States. In terms of Article XXIV GATT the two essential aspects of a CU are the CET (regulating trade in goods with third parties) and the single customs territory; to ensure tariff free trade in goods within the CU. The ability to conclude trade deals with third parties through a common negotiating mechanism is a vital aspect of how a CU functions. The CU’s CET demands a single legal regime for goods imported from third parties into the CU market. This regime has to be negotiated for substantially all trade among the States participating in the new trade agreement. Individual CU Member States do not enjoy the policy space to control tariffs and to use the import tariff as an instrument for their exclusive industrial development. There should in fact be a shared industrial policy and a joint approach on trade and tariff policies.
These considerations apply to trade agreements with African nations too. Some of the difficulties faced by the Tripartite FTA (TFTA) negotiations stem from the same source and explain why SACU (a CU) has made limited initial tariff offers to negotiating partners. South Africa’s industrial policy is quite tariff sensitive. The Continental FTA negotiations start this week and will see similar challenges regarding trade in goods.
How has the present matter ended up before the East African Court of Justice and why? A Tanzanian citizen, Castro Pius Shirima, a law lecturer at Iringa University, has lodged a civil suit in the Court, seeking to stop the signing by EAC Member States of the EPA with the EU. Kenya and Rwanda signed the contentious deal in September. Mr Shirima argues that the remaining members of the EAC – Tanzania, Burundi, Uganda and South Sudan – should be prevented from signing the EPA because of the many risks it poses to the region’s economy. He argues that “signing such an agreement by the second and third respondents (Kenya and Rwanda) has violated the letter and spirit of the EAC Treaty. If (the signing of the EPA is) not stayed, any further signature will allow ratification and regional application of the agreement, which will most likely displace EAC products from the market thereby undermining industrialisation policy and tariff regimes,” he says in the papers filed on October 31.
Will the Court entertain his application? One can only speculate about how the Court will respond, whether it will indeed grant the necessary standing to the Applicant, and find that the issue is ripe for adjudication. Several technical issues arise. Can it be said that there has been a violation of a treaty obligation if the negotiations are not yet completed? The case commences barely one month before the region’s leadership meets again in Arusha at the start of next year to decide the fate of the EPA. It is obvious that the EAC Members are divided as to whether to conclude the EAC EPA at all.
Signature does not lead to a binding agreement. The EPAs need ratification by all Parties in order to enter into force. Sensitive “separation of powers” concerns are also at stake.
The EAC Court of Justice has jurisdiction to hear and determine disputes on the interpretation and application of the EAC Treaty, disputes between the Community and its employees, disputes between the Partner States, and disputes arising out of arbitration. Article 30(1) of the Treaty deals with reference by Legal and Natural Persons and provides as follows:
Subject to the provisions of Article 27 of this Treaty, any person who is resident in a Partner State may refer for determination by the Court, the legality of any Act, regulation, directive, decision or action of a Partner State or an institution of the Community on the grounds that such Act, regulation, directive, decision or action is unlawful or is an infringement of the provisions of this Treaty.
It cannot be unlawful for the EAC to conclude new trade agreements. The Applicant cannot contend as such, apart from the fact that “political questions” are not per se justiciable. What might be a more likely claim is that the EAC procedures for signing the EPA are invoked; to the extent that they may exist. The counter argument is that the EAC Members are signatories to this EPA in their own right; as is the case under the SADC EPA too. The newspaper report hints at Kenya having jumped the gun in order to meet an EU deadline for enjoying the EPA preferences; apparently on a provisional implementation basis. The EAC EPA guarantees EAC Member States quota-free duty-free access to the EU market.
The newspaper report on the matter refers to arguments that the EAC’s “industrialisation policy and tariff regimes” will be undermined by the EPA. These are typical CU issues. Such intra CU policies will indeed be affected; but this will happen in respect of all trade agreements with third parties to liberalize trade in goods. In each case the costs and benefits are to be calculated in advance and as part of the negotiations. What emerges here is that the Members cannot agree on the costs and the benefits. The different levels of development and industrialization between e.g. Kenya and Tanzania result in distinct national development and industrialization policies. Kenya is keen on increasing exports to the EU, and so is Rwanda. Kenya needs the EAC EPA in order to protect a third of its export market. The other EAC Member States fear the effect of EU imports on their local industries.
So what does this saga tell us about deeper regional integration in Africa? The external trade dimension is very important, it still accounts for the bulk of the overall trade in goods of most African nations. In configurations among states at different levels of economic development the benefits of a CU are not that apparent. A CU ideally requires supra-national institutions with the necessary powers to ensure that one collective voice is heard and presented at the negotiating table. However, African Governments are not keen on sacrificing their sovereign policy space; despite it being the acid test for a successful CU. The division in the EAC ranks confirms this basic fact.
Perhaps we should rethink the enthusiasm with which the RECs have been launched on a pathway of a top-down linear model of integration from FTAs, to CUs and then to common markets. They come at a high political price.
 The East African, Friday 18 November 2016. https://www.tralac.org/news/article/10847-tanzanian-sues-to-stop-kenya-from-concluding-trade-deal-with-europe.html
 The Court’s jurisdiction shall not include the application of any such interpretation to jurisdiction conferred by the Treaty on organs of Partner States.
 The implementation of the SADC EPA also started in the beginning of October but all SADC EPA Parties have ratified. The EU has accepted a provisional implementation obligation. See Article 113 of the EU-SADC EPA.