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Kenya in last-ditch efforts to woo its regional partners to sign EPA with EU
Ministers responsible for regional integration will hold talks this week in a last-ditch effort to get the East Africa Community to continue negotiating for an international treaty with the European Union.
Exports to the EU will from October 1 be subject to duty unless the five member states agree on the Economic Partnership Agreement, which Tanzania and Uganda have refused to sign in its current form.
Rwanda and Kenya are keen to sign the agreement, while Burundi has had reservations ever since the European Union imposed sanctions on it in the wake of President Pierre Nkurunziza’s controversial re-election for a third term last year.
The EU accounts for 31 per cent of Kenya’s export market, especially for cut flowers, tea, vegetables and coffee. Kenya’s total annual exports to the EU amount to about $1.2 billion.
Kenya, which stands to lose the most from a delayed EPA because it is ranked as a developing country – its partners are least developing countries – sees the meeting scheduled for Dar es Salaam from August 17 to 20 as an opportunity to lobby partners to join its corner.
“Kenya has been talking to its neighbours to reach an agreement that will ensure that everybody gets on board and signs the agreement,” said Betty Maina, Kenya’s Principal Secretary for EAC Affairs.
If the Council of Ministers reaches a consensus, an extra-ordinary heads of state meeting will be called to sign the EAC-EU EPA to give regional exports duty-free access to Europe.
Brexit
Ms Maina said that signing the agreement as a region would remove the administrative obstacles the traders face in manoeuvring various trade regimes.
The EU has kept its position on the matter closely guarded, only saying that it will abide by the decision of the EAC member states.
“We are working very closely with all EAC member states to address in the best possible way the outcome of their decisions. But their deliberations are not yet complete. We need first to let them reach their decision in order to respond to it for the mutual benefit of all, especially the millions of producers and exporters in the region,” said Stefano Dejak, the EU ambassador to Kenya.
Although the EPA was initialled in 2014 after nine years of talks, the exit of Britain from the European Union threw a spanner in the works, with Tanzania saying it did not see value in an agreement that excluded its major trading partner in Europe. Tanzania also had issues with the impact of the agreement on its industrialisation, especially with regard to the export of sensitive raw materials.
Uganda adopted a similar position, with President Yoweri Museveni saying that the heads of state had not been fully briefed on the agreement.
Even if a revised EPA is agreed upon at the meeting, it is unlikely to forestall exports from East Africa attracting duty of between 8.5 and 14.5 per cent in seven weeks’ time. A revised agreement would have to be initialled afresh and taken to the European Parliament for ratification before signing. An expedited process would take about four months.
“Kenyan exports to the EU market will start attracting duty unless the EU grants a tax waiver, which is unlikely, given our previous experience,” a government official who did not want to be quoted said.
GSP tariffs
Article 139 of the EPA Treaty provides for provisional application of the agreements based on the resolutions by the Council of Ministers pending ratification by member states’ parliaments.
The Kenya Flower Council estimates that the price of Kenya’s flower exports to the EU could rise by between five and eight per cent when exports are placed under the Generalised System of Preference (GSP) tariffs. This would cost the industry $13 million per month.
The duty would depend on the product, with roses and cut flowers attracting import duty of between five and 8.5 per cent, and roasted coffee 2.6 per cent. GSP, the fallback regime if the EPA is not concluded, is a preferential market access scheme for developing countries that the EU grants unilaterally.
Mr Dejak declined to comment on whether the EU would grant temporary duty waivers to imports from the EAC come October 1.
“After nine long years of very detailed negotiations by each of the five member states of the East African Community on every aspect of the Economic Partnership Agreement as well as the initialling by all EAC members of the text in 2014, the European Union will respect the decision that the EAC reaches,” he said.
Failure to conclude EPA negotiations would see EAC partner states operating under different trading regimes, undermining regional integration efforts.
The Council of Ministers meets twice a year, and its directives and decisions are binding on the partner states and all other organs and institutions of the EAC. The Dar es Salaam meeting is the second this year.
Failure to agree on the EPAs would see Kenya’s exports to the EU start attracting duty under the GSP granted to developing countries. Uganda, Tanzania Rwanda and Burundi will however continue enjoying duty-free and quota-free access to the EU market under the “Everything but Arms” arrangement for least developed countries.
Hardline positions
With less than two months to the deadline set by the EU Secretariat, Uganda and Tanzania are yet to soften their hardline positions. Last month, Tanzania said it would not sign a trade agreement with the EU, arguing that, in its current form, the EPA would not benefit local industries but would instead lead to their destruction, with developed countries controlling the market.
Uganda said it was not going to sign the agreement until the bloc had reached a common position on all issues.
Stakeholders in Kenya’s horticulture sector are concerned about the economic impact of not signing the trade agreement.
“Unfortunately, it is very difficult to predict what will happen in this meeting. We just want to tame our expectations,” said Jane Ngige, chief executive of Kenya Flower Council. The EU is the main export market for Kenya’s cut flowers
According to Ms Ngige, the floriculture sub-sector has experienced a steady growth in volume and value of cut flowers exported, with Kenya attaining lead supplier status to the EU.
