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Aug 30, 2014
General
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The harsh reality of the collapse of talks between the East Africa Community and the European Union will hit Kenyan horticulture farmers next month when their produce becomes more expensive in EU markets.
The harsh reality of the collapse of talks between the East Africa Community and the European Union will hit Kenyan horticulture farmers next month when their produce becomes more expensive in EU markets.
The trade talks that have been underway for a number of years were expected to have concluded before the expiry of the current pact on September 30. That the talks failed to reach a successful conclusion means Kenyan farmers will lose their preferential treatment on exports to Europe.
The most affected products are vegetables that will be subject to up to 30 per cent of their export value in duty. The rates vary from 22 pc for pineapples, 20.5 pc for tuna, and between 6.9 and 8.5 pc for flowers. Other affected products are beans and peas (10.10 pc), other vegetables (6.9 pc), fresh fruits (such as avocados 1.6 pc), and processed fruits (2.1 pc). Coffee and tea will be exempt; roasted coffee will be charged at the rate of 2.60 per cent.
While Kenya - which is set to become the only East African country on whose exports EU duties will apply - could opt out of the joint negotiations for a single negotiated agreement would have to obtain approval from the EAC Council of Ministers.
And even if such a deal were reached in September, the lengthy ratification process by the EU parliament would see the exports subjected to tax during the interim. At issue is the EU’s desire to restrict the EAC from imposing duty and tax on its exports to the region while the EAC wants a deal on domestic support and export support for agricultural products in the EU.
According to Amina Mohammed, the CS for Foreign Affairs and International Trade, two EAC members, which she did not name, were yet to agree on a joint negotiated position on economic partnership agreements (EPAs) to allow the body to conclude an EPA for the entire five-nation bloc.
“We want to have an agreement that will be of benefit to all of us. We hope to come to the negotiating table once they (EU) are ready,” she said last Wednesday.
A recent EAC meeting in Kigali convened to resolve three outstanding issues on EPAs failed to reach a permanent trade pact by the July 1 deadline to allow for the interim ratification window by September 30.
Disagreements touched on economic and development co-operation, rules of origin, duties and the most-favoured nation clause. These sticking points are holding up negotiations between the EAC, which is seeking a common position for the bloc, and the EU.
Of the five EAC members Kenya is the only non-LDC (least-developed country) member state, meaning that even after the deadline expires, Tanzania, Uganda, Burundi and Rwanda will continue to export to EU markets duty and quota free.
INCREASED TARIFFS
Christophe de Vroey, EU Trade and Communication Counsellor in Kenya, said after October 1 Kenya will fall under the “normal” General System Preference status which foresees increases in tariffs for most of its exports.
“Assuming that we manage to conclude the EAC/EPA deal in September, there will, in any case, be a gap of a couple of months within which the EU will apply import taxes. This is because once initiated, the EU will have to produce an EU Commission Decision (delegated Act) that will have to be approved by the EU Council and EU Parliament; such EU legislative procedures take up to four months,” he said.
“This is why the EPAs with the other regional groupings were all signed before July 1 this year, precisely to meet the September 30 deadline. Once the European Parliament has agreed to the proposal to re-enlist Kenya in the list of beneficiary countries of the Market Access regulation, the EPA will be provisionally applied pending ratification in the six jurisdictions (EU + 5 EAC states) which may take many more months, if not years, to complete,” said Mr Vroey in an e-mail interview.
Agricultural producers say the expiry of the current interim pacts will hurt the industry unless the government comes up with plan to cushion them.
Richard Fox, chair of the Kenya Flower Council, the industry lobby for Kenyan large-scale exporters said the pending issues, though few, are not minor.
“The industry will be under severe stress and competition because of the new duties.”
The trade talks that have been underway for a number of years were expected to have concluded before the expiry of the current pact on September 30. That the talks failed to reach a successful conclusion means Kenyan farmers will lose their preferential treatment on exports to Europe.
The most affected products are vegetables that will be subject to up to 30 per cent of their export value in duty. The rates vary from 22 pc for pineapples, 20.5 pc for tuna, and between 6.9 and 8.5 pc for flowers. Other affected products are beans and peas (10.10 pc), other vegetables (6.9 pc), fresh fruits (such as avocados 1.6 pc), and processed fruits (2.1 pc). Coffee and tea will be exempt; roasted coffee will be charged at the rate of 2.60 per cent.
While Kenya - which is set to become the only East African country on whose exports EU duties will apply - could opt out of the joint negotiations for a single negotiated agreement would have to obtain approval from the EAC Council of Ministers.
And even if such a deal were reached in September, the lengthy ratification process by the EU parliament would see the exports subjected to tax during the interim. At issue is the EU’s desire to restrict the EAC from imposing duty and tax on its exports to the region while the EAC wants a deal on domestic support and export support for agricultural products in the EU.
According to Amina Mohammed, the CS for Foreign Affairs and International Trade, two EAC members, which she did not name, were yet to agree on a joint negotiated position on economic partnership agreements (EPAs) to allow the body to conclude an EPA for the entire five-nation bloc.
“We want to have an agreement that will be of benefit to all of us. We hope to come to the negotiating table once they (EU) are ready,” she said last Wednesday.
A recent EAC meeting in Kigali convened to resolve three outstanding issues on EPAs failed to reach a permanent trade pact by the July 1 deadline to allow for the interim ratification window by September 30.
Disagreements touched on economic and development co-operation, rules of origin, duties and the most-favoured nation clause. These sticking points are holding up negotiations between the EAC, which is seeking a common position for the bloc, and the EU.
Of the five EAC members Kenya is the only non-LDC (least-developed country) member state, meaning that even after the deadline expires, Tanzania, Uganda, Burundi and Rwanda will continue to export to EU markets duty and quota free.
INCREASED TARIFFS
Christophe de Vroey, EU Trade and Communication Counsellor in Kenya, said after October 1 Kenya will fall under the “normal” General System Preference status which foresees increases in tariffs for most of its exports.
“Assuming that we manage to conclude the EAC/EPA deal in September, there will, in any case, be a gap of a couple of months within which the EU will apply import taxes. This is because once initiated, the EU will have to produce an EU Commission Decision (delegated Act) that will have to be approved by the EU Council and EU Parliament; such EU legislative procedures take up to four months,” he said.
“This is why the EPAs with the other regional groupings were all signed before July 1 this year, precisely to meet the September 30 deadline. Once the European Parliament has agreed to the proposal to re-enlist Kenya in the list of beneficiary countries of the Market Access regulation, the EPA will be provisionally applied pending ratification in the six jurisdictions (EU + 5 EAC states) which may take many more months, if not years, to complete,” said Mr Vroey in an e-mail interview.
Agricultural producers say the expiry of the current interim pacts will hurt the industry unless the government comes up with plan to cushion them.
Richard Fox, chair of the Kenya Flower Council, the industry lobby for Kenyan large-scale exporters said the pending issues, though few, are not minor.
“The industry will be under severe stress and competition because of the new duties.”
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