Kenyan exporters call on EU, EAC to hasten trade deal
Faced with loss of duty-free access of its goods to Europe, Kenya has had to accede to a raft of tough conditions set by the European Union to maintain its privileged, lucrative status. PHOTO | FILE | NATION MEDIA GROUP
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The disadvantage for Kenya is that having a relatively strong industrial/manufacturing base, it does not fall in the Least Developed Countries category, that allows tariff-free exports to the EU for everything but arms in any circumstances.
Kenya's fresh produce exporters on Wednesday called on the East Africa Community (EAC) and the European Union negotiators to speed up ratification of the new Economic Partnership Agreements (EPAs).
Kenya Flower Council chief executive officer Jane Ngige said that she hopes negotiating parties will speed up the ratification of the EPA to save Kenyan exports from incurring taxes. Ngige also confirmed that the exporters will from October 1 start paying taxes on goods entering the EU, until the ratification of the EPA which, she said, could take less than six months to complete.
"Kenyan exporters will pay duties until the EPA is ratified. It's painful for them, they are asking for quickening of the process to make it shortest possible," Ms Ngige said. "Exporters will incur cost of the duties, it's not expected the situation will last more than six months; therefore the prices will not be adjusted for markets sustainability," she added.
Ngige, however, said fast tracking the ratification of the EPA will help mitigate the danger of Kenyan exporters losing a considerable share in EU markets to its main competitors such as Columbia and Ethiopia. "But, should the situation drag for longer, inevitably the cost will be pushed to the buyers, with a likelihood other countries will take over our market if our flowers are more expensive," she added.
EPAs are free trade agreements, which the 28-member EU is negotiating with countries in Africa to steadily do away with tariffs on almost all European imports into Africa. The sticking point for most African governments is that domestic industries will find it hard to compete with European companies.
The disadvantage for Kenya is that having a relatively strong industrial/manufacturing base, it does not fall in the Least Developed Countries category, that allows tariff-free exports to the EU for everything but arms in any circumstances. Least developed country status means other member states will continue benefiting from tax exemptions, even if the signing of the EPA is delayed.
Ngige said the price of Kenya's flower exports to the EU could rise by between 5 to 8 per cent once the exports are categorized under Generalized System of Preference (GSP) tariffs from Oct. 1.
"We are waiting to see a positive outcome out of the negotiations. For now, since EAC and EU are fast tracking ratification, nothing can be done, and exporters are willing to hang on, endure the pain temporarily," she said.
Under the regime, Kenyan goods will be charged between duty depended on type of products. Fresh roses and cut flower will attract import duty of between 5 and 8.5 per cent while roasted coffee 2.6 per cent.
The GSP is a preferential market access scheme for developing country granted unilaterally by the EU under certain conditions. The EU set up the GSP to help developing countries and does not expect them to cut their tariffs in return.
EU Trade Counsellor Christopher De Vroey said the EU regulations require that any trade agreement made will have to be discussed at the Council of Ministers level and ratified by the EU parliament before it is implemented -- and that takes time. Vroey would not say exactly how long it would take for the agreement between the EU and the EAC to be ratified, but noted the process normally takes three or more months.
"It is the ratification that will allow Kenyan products to be added to the list of goods that are tax exempt," he said.
He said that since January 2008, Kenyan exports to the EU have enjoyed duty free and quota free access. "However as of October 1, the duty free access free will be reserved for countries that have taken necessary steps towards ratifying the EPA with the EU," he said, adding that negotiations for an EPA between the EU and the EAC are ongoing and are close to conclusion.
Negotiations for the EPAs between the EAC and the EU started in 2007 with the initialling of the Framework EPA happening on November 27, 2007. However, the two blocs have failed to agree on a number of issues, causing the deadline to be postponed several times.
With an EPA, exporters from Kenya will continue selling produce to the EU duty free, instead of being at a price disadvantage against rivals like Ethiopia and Colombia, which have signed the agreements.
