The Star (Nairobi)

4 September 2014

Kenya to Lose At Least Sh400 Million Monthly in Exports to EU

Kenya's export earnings from the 28-member European Union will decline by between Sh400 million and Sh1 billion from October after the EAC failed to strike a deal with the bloc.

Negotiations for fresh Economic Partnership Agreement between the East African Community and the EU have dragged long and failed to beat the September 30 deadline.

This will expose Kenyan exports to import duties in the EU which is the largest market for horticultural produce.

The EU said yesterday there was no chance that the trade talks would be ratified before the end of the month "even if they were to be concluded today".

It would take at least three months to enforce the agreement, EU's trade and communications counsellor Christophe De Vroey said, meaning exporters are sure to pay duties for the remainder of this year.

Vroey however said that the EU bloc is keen on fast-tracking the Kenyan case since it would be the only African country to be subjected to the duties.

The EU and UK account for about 90 per cent of cut flower exports, according to Kenya Flower Council chief executive Jane Ngigi.

Income from flower exports last year was Sh55.96 billion, the Horticultural Crops Development Authority data show, with Sh46 billion attributable to large scale exporters.

Ngigi said EU duties could wipe out seven per cent of the monthly inflows.

In the year to July, income from flower exports amounted to Sh38.63 billion, averaging Sh5.52 billion a month. This means the EU duties are likely to slash that by Sh386.3 million a month going by the KFC estimation.

Vroey however dismissed the estimates of Sh1 billion monthly loss in total export value to the EU as "an exaggeration", lowering the number to between Sh400 and Sh500 million.

The EAC council of ministers is set to meet on September 15 and it is presumed the EAC-EU trade talks will top the main agenda.

"Obviously as an industry we would have liked Kenya to go it alone in these negotiations but the taxes touch on all exports and we are happy they are now proceeding well at EAC level," Ngigi said on phone.

As a developing country, Kenya can only be shielded from the EU import duties through EPAs unlike other EAC states - Tanzania, Uganda, Rwanda and Burundi - whose produce will continue accessing the market duty-free and quota-free under the 'Everything But Arms' trade agreement for Least Developed Countries.

"It's difficult to agree as a region.... The negotiations have been complicated but they will be concluded soon," Vroey said.

"We are stuck on very few issue and some of us need to show flexibilities and listen to each other's sensitivities."

The contentious clauses touch on export taxes, governance and domestic subsidies.

Flower exports will attract levies of 6.9-8.5 per cent, vegetables a 30 per cent duty and pineapples be taxed 22 per cent.

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