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PUBLISHED ON September 5th, 2016

Kenya goods to attract higher taxes if EU deal is not reached

Parliament might be recalled from recess to ratify a trade pact with European Union (EU) after Kenya was given 30 days on Wednesday to approve the signed deal as a condition for accessing the duty free market in Europe.
The move implies that the fate of Kenya in enjoying duty free market access lies with MPs.
Parliament broke for recess on Thursday and is expected to resume on October 3 after a one month break.
After ratification by the Kenyan Parliament, the EU will make a decision that might see the country’s horticultural produce continue to enjoy duty free access to Europe for a period that the EU has not specified.
This is as Kenya works to convince other states in the region to sign the pact, if they would not have endorsed it by then.
Trade Principal Secretary Chris Kiptoo showed theSunday Nation a letter that he has written to Parliament requesting them to sign and ratify the Economic Partnership Agreement (EPA) before the end of the 30 day deadline.
“I have talked to speakers of both houses on the matter and we are still waiting for the response,” said Dr Kiptoo.
Kenya’s duty free market access to Europe comes to an end on September 30 and the government has been exploring a number of options not to be locked out after some members of the East African Community (EAC) showed reluctance in signing the deal, which is a prerequisite.
For a deal to be reached, all the EAC member states have to sign the agreement as a bloc.
Tanzania and Burundi have indicated that they are not ready to sign it at the moment.
Kenya is banking on the heads of state summit that will be taking place from September 8 in Tanzania to push for member states to sign the agreement in order to protect its duty free market ahead of the deadline.
PARLIAMENT’S ROLE
In Brussels, Kenya convinced Rwanda into signing the deal, putting an impetus on the country’s quest in protecting its lucrative market.
Uganda has also indicated its willingness to sign the EPA agreement before next month.
“The signing of the EPA sends strong signals to the EU on the EAC partner states commitment to the EPA,” he said.
Kenya’s spirited fight has seen the EU Parliament delay the decision to remove it from the list of the Least Developed Countries (LDCs) that would see the country pay high taxes on its export produce when the EPA window collapses.
Dr Kiptoo says they pleaded with the EU Parliament not to punish Kenya for the delay that has been occasioned by other member states in signing the pact ahead of the deadline.
“We were supposed to be removed from the list this month but we managed to convince the EU Parliament on our commitment to convincing other countries to join us in signing the agreement,” said Dr Kiptoo.
In an interview with the Sunday Nation, Dr Kiptoo said that it is now upon Parliament to meet urgently and ratify the deal ahead of the deadline.
Kenya’s top exports to Europe include tea and horticulture, which rode on the free market access terms to generate nearly Sh300 billion in hard currency last year.
The country’s exports are expected to attract more than Sh100 million in taxes every week if it fails to secure the duty and quota-free status by end of the month.
The rest of the members have alternative access to EU as they are all classified as LDC’s — a status that allows them to export everything apart from arms to Europe on tariff- and quota-free terms.
Kenya is estimated to have investments worth billions in more than 200 companies that are exporting to Europe.
Nearly four million people, most of whom are women and youth in rural areas, currently derive their livelihoods directly or indirectly from enterprises that are exporting to the EU.
The investments are mainly in floriculture, horticulture, agro-processing and fisheries.
Higher taxes will make Kenyan goods more expensive to EU citizens, negatively impacting sale volumes and in turn reducing foreign exchange inflows to the country.
Kenyan exports have since January 1, 2008 enjoyed preferential, duty-free access to European markets.

Source: Daily Nation

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.

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