Kenya’s Foreign Affairs Cabinet Secretary Amina Mohamed has called for the urgent conclusion of the Economic Partnership Agreement (EPA) as the European Union started taxing Kenyan horticultural exports.

Ms Mohamed met the European Union managing director for Africa, Nick Westcott, at the UN Headquarters in New York, on the sidelines of the 69th UN General Assembly, that brought together heads of state and government representatives.

“A meeting of senior officials should be held as soon as possible, preferably next week, to finalise negotiations on outstanding issues,” Ms Mohamed said in a statement e-mailed to newsrooms by the Ministry of Foreign Affairs, dated September 28.

At the meeting, the Cabinet Secretary and Mr Westcott agreed that the next round of negotiations should be based on the understanding and text that was reached during discussions held in Brussels on September 15.

The East African Community and the European Union failed to agree on the EPA before the September 30 deadline, paving the way for taxation of Kenya’s horticultural exports which, it is feared, could depress sales and leave 150,000 workers in the fresh produce sector jobless.

READ: East Africa's bid to save Kenyan exporters from EU tax

“We know of companies that have already scaled down operations because new orders are not forthcoming,” said Stephen Mbithi, the CEO of the Fresh Produce Exporters Association of Kenya.

Kenya, being the only developing country in the EAC, was removed from the duty-free regime of the Market Access Regulation and placed in the Generalised System of Preferences regime, which allows the EU to impose taxes on imports.

Other EAC member states are categorised as least developed countries, hence will continue enjoying duty free access to the EU market.

Kenya’s exports will now be subjected to duties ranging between five per cent and 12 per cent. The country exports flowers to the EU worth Ksh46.3 billion ($537 million) and vegetables worth more than Ksh26.5 billion ($307 million) annually. The EU buys about 40 per cent of Kenya’s fresh produce exports.

Huge losses

In a past interview the Kenya Flower Council CEO Jane Ngige told The EastAfrican that Kenya is set to lose about Ksh12 billion ($140 million) per year, with the figure rising to Ksh18 billion ($209.3 million) if processed products entering the EU were also factored in.

Kenya’s Foreign Principal Secretary Karanja Kibicho is one of the EAC officials who flew to Brussels for talks with the EU officials after the EAC technical team came up with a new text on the contentious issues last month, ahead of the EAC Council of Ministers meeting held in Arusha on September 20th.

The contentious issues, whose phrasing were changed, were taxes on exports, transparency and accountability in management of taxes and inclusion of the sections of Cotonou Agreement in EPA.

At the Arusha meeting, the EAC Council of Ministers approved the following positions;

a) Duties and taxes on export — such taxes should be enforced on a limited number of products for a limited period of time and shall be reviewed by the EPA Council with a view to renew after 48 months.

b) Cotonou Agreement — nothing in the agreement shall be construed so as to prevent the adoption by the European Commission Party or the EAC Partner States of any appropriate trade related measures consistent with the Agreement and pursuant to the Cotonou Agreement.

c) Governance in the tax area — the parties recognise the importance of co-operation on the principles of good governance in the area of taxation through the relevant authorities in line with their respective national laws and regulations.

The Ministry of Foreign Affairs statement said both Ms Mohamed and Mr Westcott had agreed that there was a need to finalise negotiations before the September 30 deadline. However, a meeting between EAC and EU to discuss the new text was not held before the deadline as was anticipated.

“There has been no progress in the negotiations so far but the EU and EAC could meet again following the request by the EAC secretariat,” said Christophe De Vroey, the trade and communication counsellor at the EU Mission in Kenya.

The arrangement between EU and EAC that elapsed on September 30 was against World Trade Organisation (WTO) regulations and the new EPA agreement was intended to make trade relations between EU and the EAC WTO compliant.