EAC ministers lobby for ‘softer landing’ for Kenyan exports to European Union

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Hopes for preferential treatment begin to fade as deadline for trade agreement between East African Community and the European Union lapses. GRAPHIC | ANTHONY SITTI |

Hopes for preferential treatment begin to fade as deadline for trade agreement between East African Community and the European Union lapses. GRAPHIC | ANTHONY SITTI |   NATION MEDIA GROUP

By JOINT REPORT The EastAfrican

Posted  Saturday, September 27   2014 at  17:42

In Summary

  • EAC hopes to convince the EU to prepare a legal instrument to enable a smooth transition of Kenya’s exports from the duty-free regime of the Market Access Regulation (MAR) to the  Generalised System of Preferences (GSP) regime.
  • Although Kenya’s exports to the EU will no longer enjoy duty-free, quota-free access to the EU market until the EPA is ratified by the two trade blocs, products under the EU-GSP tariff are subjected to lower taxation than those under the normal EU tariff. 
  • The EPAs are trade and development agreements negotiated between EU and African, Caribbean and Pacific regions, aimed at strengthening integration.

The change of trade regime will see Kenyan exporters lose millions of dollars in foreign exchange as their products, mainly flowers and fresh vegetables, will become more expensive than those of their competitors from Tanzania, Ethiopia and Colombia, among other countries.

Kenya exports flowers to the EU worth Ksh46.3 billion ($537 million) and vegetables worth more than Ksh26.5 billion ($307 million) annually. The EU takes about 40 per cent of Kenya’s fresh produce exports.

Negotiation for the EPA between EAC and EU started in 2007 with the initialling the framework on November 27, of that year. Unfortunately, the two blocs have failed to agree, prompting the postponement of the deadline several times.

Mr Kibicho said if the two teams had agreed on a document by May this year,  the EAC trade bloc would have met the September 30 deadline,  and continued enjoying duty-free quota-free access to the EU market.

The final document signed in Arusha, which stipulates the EAC’s common stand, proposed that  “EU to prepare a legal instrument for purposes of avoiding disruption to preferential market access.”

Dr Kibicho said this was important to enable exporters from Kenya to continue selling their products duty-free to the EU.

“If EAC fails to reach an agreement with the EU, Kenya will lose about Ksh12 billion ($140 million) per year. The figure could rise to Ksh18 billion ($209.3 million) if you factor in processed products entering the EU,” said Jane Ngige, the Kenya Flower Council chief executive.

Only Kenyan exports would be taxed because other EAC countries are categorised as least developed countries, meaning they will continue enjoying duty free access to the EU market, so long as they observe the rules of origin requirement.

Mr De Vroey said the EU was concerned about the lack of awareness by Kenyan producers and exporters of the change in the trading regime.

“The EU calls upon the Kenyan Government to notify appropriately its constituency of the new trade regime with the EU,” Mr De Vroey added.

He, however, said the EU remains confident that a deal is reachable and was looking forward to a continued constructive dialogue with the EAC.

Even as the EAC hurried to finalise the negotiations, the Executive, Head of Economic Transformation and Trade Programme, at the European Centre for Development Policy Management, San Bilal, urged member states not to sign the agreement in haste, lest they came to regret later.

In an e-mail message, Mr Bilal said EAC should preserve its unity and refrain from concluding a bad EPA “simply for the sake of preserving the free access to the EU market for Kenyan cut flowers and some vegetables.”

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