East African states want the signing of economic partnership deal with the European Union to be in step with regional integration in order to avoid upsetting the common market protocol and customs union.
Kenya is particularly under pressure to sign EPAs because it is in a different trade band from its counterparts in the trade bloc.
Kenya is categorised as Developing Country while other East African Community member states are categorised as Least Developed States.
Kenya’s current trade with EU is carried out under the Generalised System of Preferences agreements that has restricted a number of goods that have duty free status while the rest are under the Everything But Arms tier that enables them to export all that meets EU market standards.
“It is only Kenya that has issues because of its developing country status. Others are in the Least Developed Countries and have duty and quota free access to the EU market. If Kenya goes ahead and signs the EPAs, this has implications on the common market protocol and customs union with the EAC states,” said Ms Aileen Kwa of South Centre, an inter-governmental policy think tank of developing countries.
The new twist comes even as the EU makes fresh demands like governance in tax matters, environment and sustainable development that experts say could further delay the conclusion of negotiations.
“Signing of the EPAs should be sequenced on the regional integration to avoid disrupting trade,” said Prof Yash Tandou, a special advisor to the EAC on trade agreements.
On one side, Kenya could be slapped with a 16 per cent tax on products that enter EU if it does not sign EPAs with the Sh100 billion horticulture industry likely to be the worst hit.
Undermine industrial growth
Estimates, on the other hand, indicate that it will lose 5.5 per cent to 15 per cent of its revenue once the EPAs are concluded since the country still faces supply side constraints thus unable to take advantage of opportunities of the open market.
Some experts argue that entry of goods from the European market on equal terms with those produced locally will undermine industrial growth and entrench a consumer economy.
Proponents of EPAs say the signing will ensure continued free access of products from East African states to the EU market hence extending the frontiers of growth in these countries.
The pressure is more on Kenya due to its large export portfolio in horticulture, tea and coffee to the EU that form the bulk of its foreign exchange.
According to government statistics, EU market absorbs 24 per cent of total national exports, mostly horticulture — cut-flowers, fruits and vegetables. Fish products also end up in the EU market.
“There is a lot of competition from Latin America and the moment they put even 1 per cent tax on goods, not even 16 per cent and reduce the profit margins we will lose competitiveness,” said Mr Joseah Rotich, a technical expert in the Ministry of Trade.
Mr Rotich said the option for Kenya was to sign GSP+ agreement, but which he said was inferior to the opportunities that EPAs would provide. Under this arrangement, EU provides non-reciprocal preferential access in form of reduced tariffs for products entering that market.
This will, however, require the country to ratify 27 conventions, but experts say much ground was covered through the promulgation of the Constitution in August 2010, that adopted international law as part of the national law.