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PUBLISHED ON October 21st, 2014

Relief for Kenyan exporters as Dar signs EPA document

The process of reinstating Kenya on the list of countries whose products are allowed to enter the European market duty-free can now begin after Tanzania finally endorsed the Economic Partnership document agreed between the East African Community and the European Union.

There was concern among exporters, mainly from Kenya, after the Tanzanian team that participated in the negotiations, alongside their counterparts from Kenya, Uganda, Rwanda and Burundi, left Brussels without initialling the document following the conclusion of the talks in Brussels, Belgium, last Tuesday, October 14.

However, Kenyan exporters breathed a sigh of relief after Tanzania initialled the EAC-EPA document on the evening of Thursday, October 16, in Brussels.

“Tanzania initialled the EAC EPA yesterday evening in Brussels. Hopefully, it will now not take too long for Kenya to come back to a duty-free quota-free access to the EU market. The reinstatement could take between three and six months,” said Christophe De Vroey, the trade and communication counsellor at the EU Mission in Kenya.

Kenya’s Foreign Affairs Principal Secretary Karanja Kibicho and EU head of delegation to Kenya Lodewijk Briet had said on Thursday during a press conference that negotiators from Tanzania had asked for more time to consult on the final text.

“They wanted to first seek authorisation before signing the document. However, they later confirmed that they will sign the document soon,” said Mr Briet.

A highly placed source in Tanzania who attended the negotiations revealed that the country had declined to initial the agreement because consensus was not reached on Article 15, which touches on Duties and Taxes on Exports.

“Our main concern is the issue of the export subsidies on agricultural products that farmers in Europe benefit from. There was no way we could endorse the agreement if the issues of domestic support and export subsidies were not sorted out. We told them that we needed to consult with our government before we could initial the proposed agreement,” the source said.

The source, however cautioned that even after parties had initialled the agreement, countries still had a grace period before the final document is signed after which member states must start the ratification process.

“Tanzania still has a long way to go on the negotiations. Even if we signed, the deal has to be scrutinised by the Cabinet and then taken to parliament where it is likely to face hurdles. We want a deal that will help develop our industries and help them become competitive,” the official said.

Peter Kiguta, EAC director-general of Customs and Trade, said the final signing will take place after legal scrubbing to remove errors and omissions.

The EAC negotiated with the EU as a bloc, and not as individual states, hence the EU would not have started the process of reinstating Kenya until Tanzania initialled the text.

Critical agreement
The EPA is critical to Kenya, whose exports have been moved from the duty-free regime of the Market Access Regulation (MAR) to the Generalised System of Preferences (GSP) regime, which attracts taxes, following the failure by the EAC and EU to wrap up the agreement before the October 1 deadline.

Kenya is the only country that would suffer without an EPA agreement because it is categorised as a developing country, unlike its counterparts, which are classified as least developed countries. As a result, products from the other EAC member states can enter the EU market duty-free with or without an EPA in place.

Even if Tanzania were a developing country, it would have enjoyed unlimited access to the EU courtesy of its membership to the Southern Africa Development Community (Sadc), which has already signed an agreement with the EU.

Dr Kibicho said the agreements had to be concluded since fresh produce exporters to Europe were losing Ksh670 million ($7.7 million) per month, translating into Ksh76 billion ($873.6 million) per year.

Firms exporting to Europe have reduced production and temporarily laid off some workers. “Initialising the document will bring confidence to the horticultural sector that things are moving in the right direction,” Dr Kibicho added. It is estimated that 150,000 workers would lose their jobs should Kenyan produce become less competitive in the market because of the duties.

Kenya exports flowers to the EU worth Ksh46.3 billion ($537 million) and vegetables worth more than Ksh26.5 billion ($307 million) annually. The EU takes about 40 per cent of Kenya’s fresh produce exports. The taxes on Kenya’s exports are expected to range between five per cent and 12 per cent. The new agreement between EU and EAC also ensures that any trade deals between the two blocs are compatible with World Trade Organisation regulations.

It was also important to have a new arrangement to guard against any trade disruption when the Cotonou Agreement expires in 2020.
The deal agreed between the two trade blocs brought an end to EPA negotiations that had begun in 2007. The two blocs agreed on all contentious issues that had delayed the signing of EPA.

The issues in question were Taxes on Exports; Agriculture Subsidies administered by the EU; transparency and accountability in management of Taxes and inclusion of the sections of Cotonou Agreement in the EPA.

The last thorny issue was how to deal with Turkey, a non-EU member that had a joint declaration with EAC to enter into a Trade and Economic Partnership Agreement.

Source:: The East African

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.