Impasse on trade talks threatens Kenya’s quota-free market status

Kenya’s delegation to the recent talks in Brussels to craft a trade deal to retain the duty-and quota-free market access with the key European Union trade area met a sudden deadlock that blocked the signing of the bilateral Economic Partnership Agreements (EPAs).

The delayed conclusion of an EPA stalled following disagreements touching on economic and development co-operation, rules of origin, export taxes and the most-favoured nation clause. These sticking points are contested by the East African Community, which is negotiating for a common position for the region.

Trade ministers from the East African Community held talks with the European Commissioner for Trade at the end of January. Kenya’s delegation was led by East African Affairs secretary Phyllis Kandie, who also chairs of the Council of Ministers. The EU delegation was led by Trade commissioner Karel De Gucht at the talks meant to have been concluded seven years ago, but which are running into their tenth year.

Should Kenya not sign the Economic Partnership Agreements, its trade with Europe would revert to the less-generous terms of the General System of Preferences where some of its products, which have been enjoying zero duty, would attract attracting charges of between 8.5 to 15.7 per cent. These products include cut flowers, fresh fruit and vegetables, fish and fish products, textiles and apparel, nuts, hides and skins.

The EPAs are expected to replace the General System of Preferences (GSP), preferential trade deals that the World Trade Organisation has rejected but which would apply in case of failure to establish a comprehensive EPA trade agreement.

The United Nations Conference on Trade and Development Secretary General Mukhisa Kituyi, Kenya’s minister of Trade and Industry from 2002 to 2007, was the lead negotiator for Eastern and Southern Africa ministers at the European Union-ACP EPA talks.

He chaired the Council of Ministers for the Common Market for Eastern and Southern Africa and the African Trade Ministers Council. He also served as chairman of the Council of Ministers of the ACP Group of States, and was convenor of the agriculture negotiations carried out at the WTO in 2005.

Ten years on, and with Kenya under pressure to sign the protocol or risk massive disruptions to the economy, fingers are being pointed at the negotiating skills of the delegation in which the majority of the negotiators are new, coming in with the new government in 2013. This has prompted the hiring of the Kenya Institute for Public Policy Research and Analysis, a public policy think tank, to strengthen the government’s negotiating position.

“We are doing a paper for the Ministry of Foreign Affairs and International Trade on the implications of EPAs on Kenya. We are trying to back up the government,” said a top Kippra official, who did not want to be named.

“The negotiators did not push hard enough for a common position for the region,” added the official. Because of slow progress towards a deal, it will require a year or so to take the EPAs through ratification procedures.

“While EAC won’t budge on export taxes, the EU has a red line on existing customs union with other trade blocs. We think government officials should spend more time resolving the pending issues,” said Jane Ngige, chief executive officer of the Kenya Flower Council.

“We urge government officials to push harder,” said Stephen Mbithi, CEO of the Fresh Produce and Exporters Association of Kenya (FPEAK) who, along with Ms Ngige, was part of the team of trade and foreign affairs officials.

Some 15 specific rules of origin are among the outstanding issues that need a lot of time to be resolved. Another sticking point are the divergent views among EAC member states in negotiations leading to the delayed conclusion of the EPA. But other EAC members could still find a lifeline under the Everything But Arms initiative, which covers least-developed countries, a category to which Kenya no longer belongs.

THREATENED TO TERMINATE OFFICER

Technocrats in East Africa claim Europe is partly to blame for the delay in concluding the talks after it introduced issues like good governance in tax matters. The EU is also concerned about other trading blocs with which the EAC has free trade quotas including the US Agoa initiative and the Tripartite Agreement that brings together Comesa, SADC and the EAC blocs.

But the EU denies these claims and has threatened to terminate the interim offer signed in 2007 that would deny preferential market access terms to countries that have not signed full EPAs with it by October this year. “EAC won’t budge on export taxes, but the EU will be careful not to have coffee and tea reverting to the GSP,” said an official not authorised to speak to the media. Recently, EU delegation chief in Kenya Lodewijk Briët warned that Kenya risks being left out of the agreement.

“Although negotiations are at an advanced stage, only a few issues to do with the pact have been finalised,” he said.