Kenya may lose Sh4b monthly if EU trade deal is not signed

The horticulture sector stands to lose about Sh4 billion monthly if a key trade deal with the European Union is not signed by October 1.

Regional countries that make up the East African Community (EAC) are supposed to sign the Economic Partnership Agreement (EPA) jointly. The agreement gives the region’s products duty-free export access to European markets. For the EPAs to be valid, the entire region needed to agree to them, but special concessions would remain in place for least developing countries.

Kenya, therefore, stands to lose the most if export subsidies are withdrawn. However, Tanzania and Uganda have been dragging their feet in reaching the deal.

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Kenya Flower Council (KFC) Chairman Richard Fox said failure by Kenya to sign the EPA will subject it to export duty of between 8 per cent and 12 per cent, which will amount to 3 million pounds per month (Sh4 billion).

Kenya is the only country in the EAC considered a developing country, while its neighbours are still ranked as least developed countries (LDC), thus allowing them duty free market access. The LDC countries are not required to sign EPAs since their preferences will continue under the Everything But Arms (EBA) scheme.

Under EBA, poor nations are granted duty free access to the EU for all products, except arms and ammunition and 41 tariff lines concerning rice and sugar, on which duty free quotas are established until full liberalisation.

KFC Chief Executive Officer Jane Ngige said failure to sign the pact will put Kenya in an awkward position as the country needs to continue accessing the European market. “Failure to pass the deal would mean exports into Europe would be taxed to access the lucrative 28-member-State union,” said Mrs Ngige. “Should Kenya miss out on signing the EPAs, trade between it and Europe would be reverted to the less generous market access terms under the General System of Preference (GSP).”

However, the Government has assured that the country will sign EAC-EU Economic Partnership Agreement deal by August 1. Principal Secretary State Department of Trade at the Ministry of Industry, Trade and Cooperatives Dr Chris Kiptoo said negotiations are ongoing to ensure the pact is signed before the deadline. Kiptoo was speaking last week during the Kenya Flowers Council 20th year anniversary dinner in a Nairobi hotel.

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“We want to assure you that we are working day and night to ensure that we sign the EPA by August 1, 2016 then implement it so that we meet the official deadline of September 30 and enjoy the benefits that comes with it,” said Dr Kiptoo. The signing of the EPA pact would play significantly in enabling Kenya compete more ably with her regional peers.

The talks have been going on for more than a decade, and if they continue to drag on, the county’s flower industry could begin to suffer even more losses. The floriculture sub sector in Kenya is a major foreign exchange earner and employs over 500,000 people directly and more than 6 million people indirectly.

“The sub sector has also recorded the highest growth rate of between 10 per cent and 20 per cent annually over the last 15 years. In Africa, Kenya is among the leading flower growers and exporters,” said Dr Richard Lesiyambe, Principal Secretary, State Department of Agriculture during the official opening of the International Flower Trade Expo (IFTEX) 2016, that was held from Wednesday June 8 to 10, 2016 at the Visa Oshwal Centre, Nairobi.

He added: “Indeed, in the year 2015, Kenya exported flowers worth $630 million (Sh63.66 billion) as compared to $550 million (Sh55.58 billion) in 2014 which is about 69 per cent of the total horticulture export earnings of over $910 million (Sh91.96 billion) in the same year.”

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EUEast African CommunityEconomic Partnership Agreement