Negotiators from the EAC and the EU will meet in Kigali later this month, hoping to finalise contentious issues that have delayed the signing of a long-term trade treaty between the two blocs.

Failure to sign an Economic Partnership Agreement (EPA) by October 1 will see goods from Kenya subjected to a 12 per cent duty for entering the EU. The EU and the Kenyan government briefed stakeholders last Tuesday on the progress of the talks.

“There is nothing in place. Both parties are working on the contentious issues that we do not see as deal breakers,” Kenya Flower Council chief executive officer Jane Ngige said.

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.

A report by the EAC Sectoral Council on Trade, Industry, Finance and Investment shows that senior officials had by the end of May reached an agreement on the rules of origin text as well as the most favoured nation (MFN) clause.

The MFN clause would bar EAC members from entering into bilateral preferential trade arrangements with countries that have no similar arrangements with the EU.

However, duties and taxes on export, domestic support and export subsidies, relations with the ACP/EU agreement, good governance in tax administration and third party obligations are yet to be agreed upon.

The EAC maintains that non-trade issues carried over from the Cotonou Agreement and good governance in taxation should not be included in the EPAs because they are addressed by the national laws of member countries.

“The EU has a declaration signed on how to deal with good governance on tax matters, which the EAC rejected because it is a new issue,” said Nelson Ndirangu, Director of Economic Affairs and International Trade in the Ministry of Foreign Affairs and International Trade.

The final issue, according to the report, is the EU’s demand that the EAC extend EPA terms to other countries and regions that have Customs treaties with the EU.

“The EAC does not agree to this issue because it implies committing to negotiate free trade agreements with countries that the EU has a Customs Union with,” the council’s report said.
If the issues are not agreed on in Kigali, Kenya’s flower farmers face the risk of their products becoming less competitive in the EU where they have 38 per cent of market share.

Unlike goods from its EAC partners that are ranked as least developed countries, products from Kenya, a developing country, will not access the EU duty free under the everything but arms treaty if the EPA is not signed.

Rwanda and Uganda, which could be removed from the least developed countries list in the medium term, would also suffer restricted access.

“Kenya’s flower exports will have to face import duties of between 8 and 12 per cent if the EPAs are not sorted out by the set deadline,” said Christophe De Vroey, EU trade and communications counsellor.

Source: The East African

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