The East African Community (EAC) trade bloc and the European Union have set November as the new deadline for signing a trade deal, a top Kenyan official said on Wednesday.

The EAC and the European Union have been at loggerheads for months over the signing of new a Economic Partnership Agreement (EPA), which was meant to replace preferential trade deals the World Trade Organisation has rejected.

The five EAC members, Burundi, Kenya, Rwanda, Tanzania and Uganda, initialled the EPA deal in 2007 and secured continued EU market access for their products.

The countries have however failed to sign the agreement, meaning there are no legally binding pacts. The deal was meant to be signed last July, but the deadline passed due to disputes over trade and development issues.

"It was agreed that the deadline to conclude full EPA is November 2010," David Nalo, the permanent secretary at Kenya's East African Community Affairs ministry, told Reuters after a three-day meeting between negotiators from the European Union and the EAC in Dar es Salaam, Tanzania.

"The EAC and the European Union agreed to maintain status quo. Preferential access continues until full EPA is signed."

The European Union said in February it wanted a clear timetable for signing the deal, but Tanzania's trade minister said then that the EAC would not budge unless Brussels gave firm commitments on development assistance, especially for infrastructure.

Kenya to be greatest loser 

East Africa's largest economy, Kenya, stands to lose most if the EU deal is not signed as it is excluded from the classification of a Least Developed Country.

It would miss out on exporting goods to Europe tarriff-free under the Everything But Arms initiative, which other EAC members qualify for. Kenya would have to start paying duty of between 8.5 per cent and 15.7 per cent.

Estimates by Kenya's Trade ministry show that loss of tariff preferences would cost Kenya investments worth $700 million and thousands of jobs in its horticulture sector that currently stands as one of the leading foreign exchange earners.

Nevertheless, Kenya has stood by its EAC partners in pushing for all issues to be resolved despite the danger it faces should it fail to sign the deal.

The EAC has a gross domestic product of $73.3 billion and a population of close to 127 million. It has a customs union, and a common market is due to take effect in July.

Reuters