Business : China Seeks Free Trade Pact With EAC, But EABC Warns - Wazalendo 25 Blog


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16 Jun 2016

Business : China Seeks Free Trade Pact With EAC, But EABC Warns

EABC CEO, Ms Lilian Awinja stresses a point in a past event

China is seeking a free trade agreement with the East African trading bloc, becoming a third global super economy in a row after European Union and America.
EAC has already inked the cooperation agreement on trade facilitation, sanitary and phytosanitary measures and technical barriers to trade as well as Economic Partnership Agreement (EPA) with United States and European Union (EU) respectively.

 This implies that an expanding EAC is becoming more attractive to the superpower economies, seeking market for their goods, and exploitation of natural resources for their hungry-industries.

 Recently China wrote to the EAC Secretary General proposing to negotiate with the EAC Partner States a comprehensive Free Trade Agreement (EAC-China FTA).

 China also requested to undertake a joint feasibility study with the EAC on the proposed FTA, the EAC immediate former Secretary General, Dr Richard Sezibera informed the Council of Ministers meeting recently in Arusha.

 After deliberations, the EAC Council of Ministers meeting noted that there was need for EAC to undertake a comprehensive cost-benefit analysis on negotiating FTAs with other third parties.

 The Council directed secretariat to mobilise resources to undertake a comprehensive cost-benefit analysis on the implications of negotiating FTA with third parties, before negotiations.

EAC spokeperson, Richard Owora says; “We are working on the directive of the Council in regard to undertaking a comprehensive cost-benefit analysis on negotiating FTAs with other third parties including China”.

Mr Owora said that they expect to conclude the work on the Council directive before the end of this Financial Year (30thJune).

However, the East African Business Council (EABC) Chief Executive Officer, Ms Lilian Awinja cautioned the EAC over the issue, arguing that free trade with China would hinder EAC industrialisation.

 “EAC shouldn’t rush to negotiate FTA with China. We need to study, consult a wide range of stakeholders and establish the impact of such a deal on EAC industrialization blueprint” Ms Awinja said.

 She was of the view that EAC needs to protect its investors in manufacturing industry, rather than expose them to unfair competition.

Ms Awinja argues that currently China floods the EAC market with their products, what if the region inks the FTA with Sino.

Analysts also warn the EAC, saying if need be, it should allow China to bring some few products, but not FTA as China proposes.

“China is the world of its kind, it has capacity to flood the whole world with their products, forget about EAC market.  If we are to protect our industries, lets choose few products from China” says Tumaini University development studies lecturer, Dr. Gasper Mpehongwa.

The EAC has become one of largest free trading bloc in Africa, offering crucial opportunities for business and investments, thanks to admission of South Sudan.

 The World Bank data show South Sudan would add 11 million plus people and Gross Domestic Product of $13.28 billion to the EAC market that has 140 million populations and combined GDP of $110.3 billion.

 Now, the 17-year-old EAC with six partner states of South Sudan, Kenya, Uganda, Burundi, Rwanda and Tanzania, offers one of Africa’s largest integrated market and combined GDP of $123.58 billion.

 China plans to develop free trade areas with African countries - to upsurge the continent’s exports to the far-east nation and offset the huge trade imbalance.

Prof Hu Hailiang, the Vice-Chairman of the Social Sciences of the Ministry of Education in China, who was in Dar es Salaam recently that the envisaged free trade area falls under its new five-year development plan slated to begin this year.

The free trade area agreement is expected to increase exports of goods from Africa to offset huge trade imbalance between the continent and China, he said.

“China will negotiate with individual African countries and regional blocks to develop free trade area agreement to promote exchange of goods and services and investments,” said Prof. Hailiang.

China’s policymakers are compiling the 13th Five-Year Plan (2016-2020), whose proposal was adopted at the Fifth Session of the 18th Communist Party of China (CPC) Central Committee in October 2015.

The new five-year national socio-economic development will charter an explicit blueprint for the country’s development over the next five years - and provide more opportunities for the development of other countries.

There is no doubt that U.S and China are competing ferociously on the global scene for economic dominance. 

 China has made some pretty good encroachment in the global share of American market place.

 For instance China has surpassed United States as the largest African trading partner.

 Five years ago China surpassed the United States as Africa’s largest trading partner, with Beijing’s trade quantifying at the excess of $200 billion.

There are an estimated 800 Chinese corporations doing business in Africa, most of which are private companies investing in the infrastructure, energy and banking sectors.

Unconditional and low-rate credit lines rates at 1.5 percent over 15 years to 20 years have taken the place of the more restricted and conditional Western loans.

 Since 2000, more than $10bn in debt owed by African nations to the China has been canceled.

 No nation has been more aggressive in Africa than China. Its direct investment in sub-­Saharan Africa has jumped from virtually nothing in 2002 to $18.2 billion in 2012.

 China is hungry for oil, coal and other resources and eager to develop the roads, bridges and ports needed to pull them out of Africa.

Africans tend to favor doing business with China in part because it’s less likely than Western nations to demand economic and political reforms to accompany trade and development deals.

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