PUBLISHED ON September 29th, 2014

Will EAC Sign Epa for Kenya’s Sake?

Kenyan horticulture exporters are on their toes, anxiously waiting to see whether the East African Community (EAC) can initialize the proposed Economic Partnership Agreement (EPA) with Europe, after a four-day meeting that ended on Friday in Nairobi.

Between Tuesday and Friday, EAC permanent secretaries of Trade and other technocrats held what was tipped to be the ‘last round of negotiations’ with their European counterparts to finally have the EPA approved for signing.

This followed a development from the weekend before in Arusha, where an EAC Council of Ministers harmonised the region’s position on the EPA and it’s that stand that the technocrats are expected to have presented to the EU delegation in order to reach a consensus.

By Saturday morning, it was unclear whether consensus was reached but there was hope among participants before the meeting kicked-off.

In Kenya, John Konchella, Permanent Secretary of East African Affairs, Commerce and Tourism told the press that ‘if we manage to initialize this document on Friday, I think we can say we are in business with the European Union.’

In Kigali, Emmanuel Hategeka, the trade ministry PS expressed the same hope earlier in the week before he flew to Nairobi.

What’s at stake?

A lot is at stake especially for Kenyan exporters because of a looming deadline on October 1, whose passing without a deal in place would mean exports into Europe would be taxed to access the lucrative 28-member-state union.

The passing of October 1 will mean the expiry of the current arrangement under which the EAC currently enjoys preferential trade benefits from Europe under the Regulation 1528/2007.

Apart from Kenya which is regarded as a developing economy, other EAC partners would continue enjoying those benefits under the Everything but Arms (EBA) arrangement that Europe allows ‘least’ developed countries.

That’s most likely to hurt Kenya’s billion dollar horticulture economy where its flowers enjoy 38 percent market share in Europe.

According to sources in Nairobi, the price of Kenya’s flowers could rise by between 5-8 per cent once the exports are categorized under Generalized System of Preference (GSP) tariffs from October 1.

Kenya is the lead exporter of fresh rose flowers to the European Union (EU). It exported 124,858 tons of flowers in 2013 according to the Kenya National Bureau of Statistics.

If this week’s meetings are a success, the best they can achieve is conclusion of the negotiations but it’s practically impossible to have the agreement signed by end of September.

That technically means that the EAC is most likely to miss the October 1, deadline mainly because they chose to run a fine-tooth comb through the proposals before appending their signatures on a document with long lasting implications.

What happens after that depends on the EU to either grant an extension of the deadline or not until the EPA is in place.

Acid test:

It’s a trying moment for Kenyan exporters but one that also puts the EAC partner states’ commitment to the integration process on trial.

If it wasn’t for the EAC’s protocol that calls for joint negotiation of agreements, Kenya would have probably gone ahead to reach a bilateral agreement with Europe to salvage a market for its fresh roses and fruits.

Kenya Flower Council (KFC) Chief Executive Officer, Jane Ngige, told Chinese outlet Xinhua that her members will from October 1 start paying taxes on goods entering the EU, until the ratification of the EPA which, she added, could take up to six months to be completed.

“Kenyan exporters will pay duties until the EPA is ratified. It’s painful for them, they are asking for quickening of the process,” Ngige was quoted as saying.

The Chinese media are closely following the courtship between Europe and EAC with possible hopes that it collapses for China to pick up.

Earlier in the negotiations, China came into the discussion when the parties were discussing Article 16 regarding Most Favoured Nation (MFN), where Europe didn’t want the EAC to grant China and other rival economies outside EU MFN a status that could rival what they would get under EPA.

But MFN is a major World Trade Organisation (WTO) principle and it calls for countries not to discriminate their trading partners. China is a major EAC trading partner.

However, Hategeka said in an earlier interview that that particular article had since been settled adding that the EAC was keen on negotiating and signing an EPA that is in harmony with WTO principles.

Midweek, Ugandan press reported that one of the remaining sticky issues regards Article 15 of the EPA that deals with duties and taxes on exports. It’s alleged that the Europeans were suggesting that EAC governments shouldn’t charge taxes on raw materials outbound from the region.

The suggestion drew opposition from EAC partners who argued that given that most of what they export to Europe was in form of raw materials, not charging any tax would amount to a ‘a giveaway”.

All contentious matters however, are expected to have been settled during the Friday meeting.

However, there’s also speculation that it’s possible, given Kenya’s precarious situation with the EU, that the EAC could be dragged into giving in to EU demands for the sake of Kenya.

Source URL: The New Times

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.