An analysis prepared by the European Commission’s Directorate-General for Trade

On 3 April 2014, Heads of State and Governments of Africa and of the European Union gathered at the Fourth EU Africa Summit declared: “Our economies remain closely linked, and we will work to ensure that the growth of the one will help the other. We are also convinced that trade and investment and closer economic integration on each of our continents will accelerate that growth.” While acknowledging the “valuable role” of development assistance, they called for “a fundamental shift from aid to trade and investment as agents of growth, jobs and poverty reduction.”

That priority is reflected in the Economic Partnership Agreements (EPAs) between the EU and African, Caribbean and Pacific (ACP) countries, which are the main pillar of ACP-EU trade cooperation, and aim at creating the right conditions for trade and investment. Highlighting the positive outcomes of the conclusions of three regional agreements in 2014 (West Africa, SADC EPA group and EAC), the Trade for All Communication of October 20152 considered that those agreements “established a new dynamic partnership between the two continents and paved the way to closer cooperation in the future.” In this context, the EU-EAC EPA establishes a long-term and stable trade relationship between both parties, in compliance with international trade rules.

The East African Community (EAC) and the EU share strong trade links. The EU is the EAC’s first trade partner for exports (25.3% of EAC exports go to the EU) and third partner for imports (12.5% of EAC imports). All in all, trade between both regions amounts to €6.8 bn. and has increased steadily in the last ten years (by more than 75%) both for exports and imports. EAC countries experimented steady growth rates in recent years, above 6% annually, sustained in particular by foreign direct investment in the region. A large share of the EAC's foreign direct investment stock comes from the EU.

The present report is part of the “Economic analyses of negotiated outcome” undertaken by DG TRADE at the end of negotiations. Contrary to earlier reports, it does not rely on hypothetical scenarios but on the actual outcome of the negotiation between the parties, with a view to provide information to all stakeholders involved in the adoption process of the agreement, as well as to the wider public.

The rationale and content of the EAC-EU EPA

The EU’s trade relations with the ACP countries were historically framed by a series of conventions, which granted unilateral preferences to the ACP countries on the EU market. By the end of the 1990s, it was found that these conventions did not promote trade competitiveness, diversification and growth as intended. They were also found to be in breach of the World Trade Organisation’s (WTO) principles, as they established unfair discrimination between developing countries. A change was therefore required. EPAs were the response defined jointly by the ACP countries and the EU in the Cotonou Agreement. EPAs build a new bilateral reciprocal partnership for trade and development, asymmetric in favour of ACP countries.

In keeping with the objectives set out in the Cotonou Agreement, sustainable development is a key objective of the EPA, which is explicitly based on the “essential and fundamental” elements set out in the Cotonou Agreement (human rights, democratic principles, the rule of law, and good governance). The joint EPA institutions are tasked with the function of monitoring and assessing the impact of the implementation of EPAs on the sustainable development of the parties, also carving out a clear role for civil society.

In view of these objectives, the EPA differs from most Free Trade Agreements (FTAs) currently in place or negotiated by the EU with other trading partners: while it remains a reciprocal agreement (as a factor favouring trade and investment, and as a condition for its compatibility with WTO principles), it weighs in favour of the EAC through specific provisions:

• trade rules that constitute a key contribution to the reform agenda and better business environment in the EAC Partner States,

• an "asymmetry" in the commitments to take into account the different level of development, which covers market access, rules of origin and the use of safeguard measures by the EAC,

• the development assistance which revolves around the needs for the partner countries to respond to the first two pillars.

The institutional provisions of the EPA set up a specific forum for the East African Community and the EU to discuss and resolve trade issues: in that manner, the EPA creates a genuine bi-regional partnership, which is also extended to civil society through a consultative committee.

The conclusion of the EPA negotiations should also be seen in the context of the EAC's efforts to improve regional integration. The EAC established a Customs Union in 2005 and ratified a more far-reaching common market protocol in 2010. The EPA would contribute to foster those efforts, especially through the flexible rules of origin provisions that are part of the agreement and the development assistance channelled in the EPA context for instance to support regulatory convergence and trade facilitation within the region.