East African Community member states Tuesday reached an agreement with the European Union which effectively shields the region’s exports to Europe from heavy taxation.
The deal means that Kenya’s horticultural products can compete favourably in the European market, as a result of which over 150,000 jobs that were at risk will now be saved. It also means that Kenyan companies will not suffer losses in earnings running into over Sh1 billion a month, which was under threat if the deal had collapsed.
Last evening, the Ministry of Foreign Affairs said the two sides signed an agreement following two days of negotiations over three key issues of taxes, subsidies and previous agreements affecting trade between the two blocs.
“The three areas that remained outstanding namely: Export taxes, export subsidies and relationship between Cotonou Agreement and EPAs were all agreed upon in favour of Kenya,” said a statement from the ministry.
“The successful conclusion of the negotiations will enable Kenya to continue enjoying duty free/quota free access to the European market.”
The deal means that Kenya can start enjoying duty-free exports of fresh vegetables and flowers to the EU markets if it implements the agreement in the next two months.
But having been signed beyond the deadline date of October 1, it also means that flower exporters will continue pay duty on their exports to the EU until the deal is ratified.
FREEDOM TO TAX
The two sides had failed to agree on what language to use in the agreement known as the Economic Partnership Agreement (EPAs). They had also failed to agree on whether the EAC members had the freedom to introduce taxes on imports from the EU when they deem fit to do so.
Another bone of contention was about the fate of the Cotonou Agreement. This treaty was an arrangement between the European Union and the African, Caribbean and Pacific Group of States (ACP).
Some ACP countries had argued that the agreement was unilaterally enforced by the EU who also demand “good governance” and fight against impunity as a condition for giving aid.
EAC negotiators argued that the agreement should be allowed to run to its end in 2020 and should not be included in the EPAs.
The European Union’s Trade and Communication Counsellor, Mr Christophe De Vroey, confirmed to the Nation, that the two blocs had indeed signed an agreement but said there will be a press conference tomorrow to give further details.
“Yes, deal is sealed,” he said.
Since October 1, Kenyan exports to the EU fell under a category called the Generalised System of Preferences (GSP) away from the Market Access Regulations (MAR) which had been in existence since January 2008.
Under MAR, Kenya enjoyed duty-free quota-free access to EU markets. The change of regime to GSP meant that this privilege was reserved for countries that had ratified the EPAs.
Most Kenyan agricultural goods will now be subject to various EU GSP tariffs until the agreement is fully implemented, perhaps in 60 days or so. These products include vegetables, beans, sweet corn and processed juices among others.
Source:: Daily Nation
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