PUBLISHED ON August 29th, 2014

Farmers face billions in losses over economic partnership delay

Kenya’s horticulture producers could incur losses of more than Sh1 billion every month as from October 1 this year following delays by the Government to conclude the controversial Economic Partnership Agreement (EPA) negotiations. Timely conclusion of the trade talks is key if local producers are to continue enjoying duty-free access to the European Union (EU) market. As from October 1, Kenya exports to EU will start attracting new taxes to the tune of eight per cent on average. It is estimated that flowers will start attracting a duty of 8.5 per cent, tuna fish 20.5 per cent, other fish 15.7 per cent, fresh avocado 1.6 per cent, fresh pineapple 2.1 per cent, processed pineapple 22 per cent, processed vegetable 30 per cent and roasted coffee 2.6 per cent. Kenya is among the African Caribbean and Pacific (ACP) countries supposed to sign the EPAs so that they can continue enjoying free market access into the EU.

Players in the local horticulture industry fear new duties that would be paid into the EU market would have a huge negative impact on the economy. For example, there will be job losses, foreign reserves erosion, revenue loss to the Government and mass exodus by companies to neighbouring countries enjoying duty free access to the EU market. Kenya Flower Council (KFC) Chairman Richard Fox said under the Generalised System of Preferences (GSP), the local horticulture industry would be losing more than Sh1 billion monthly, considering about 90 per cent of total horticulture exports go to the EU. The Council’s Chief Executive Officer Jane Ngige called on the Government to fast-track the ongoing negotiations to ensure operations of the industry are not disrupted.

Economic Sectors

“Horticulture employs more six million Kenyans as well supporting other related economic sectors, for example transport, logistics and service industry. Allowing disruption means the entire agriculture sector, a major contributor to the economy, will be interrupted,” said Ms Ngige. Trade Counsellor at the EU mission in Nairobi Christophe De Vroey said EPAs provide for reciprocal trade agreements, meaning that not only does the EU provide duty-free access to its markets for ACP exports but ACP countries also provide duty-free access to their own markets for EU exports. Mr Vroey, who spoke on the sidelines of the launch of BASF chemical company in Mlolongo, Machakos County noted that for Kenya to escape the new duties it ought to have concluded the EPAs negotiations by July 1 this year.

Kenya is negotiating the trade pact together with other East African Community (EAC) member states, though it is the only country classified as a developing country. Tanzania, Uganda, Burundi and Rwanda are categorised as Least Developed Countries (LDCs), which puts them in a better trading position compared to Kenya. Under the EU protocol, LDCs do not have to sign the EPAs since their preferences will continue under the Everything But Arms (EBA) trade arrangement. Further, Kenya is likely suffer more as her partners export very little into the EU market. This year, EAC countries had two meetings in March and July but did not agree on some contentious issues, namely export taxes, governance, export and domestic subsidies. “Even if the negotiations are concluded at this time, Kenya’s commodities to the EU will be slapped with the new taxes, a situation likely to have a huge impact on the local economy,” Vroey stated.

Vroey stated that once negotiations are concluded between now and end of September, it will take up to four months for Kenya to be included on the list of beneficiary countries of the new market access regulation. Even after this, it may take many more months, if not years, to complete as the regulation would still have to be fully ratified in the six jurisdictions, that is EU and the five EAC States. “The reason being that once concluded, the agreement will be legislated by various institutions, for example, the EU Council and EU Parliament, a legislative procedure that might takes up to four months,” said Mr Vroey. “That is why the EPAs with the other regional groupings were all concluded and signed before July 1, this year, precisely to meet the September 30 deadline.” According to Economic Survey 2014, Kenya’s exports to the EU accounted for 24.6 per cent of total value of exports. About 90 percent of the exports are agriculture products.

Source URL: Standard Digital

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