Horticulture stares at Sh13bn loss

Kenya’s horticulture business could lose up to Sh12.9 billion in tariffs every year should the country fail to sign a trade agreement with the European Union on 1 October.

The EU expects Kenya to sign Economic Partnership Agreements (EPAs) to continue enjoying duty free access to the lucrative European market.

The Kenya Flower Council says the industry would be hit hard should tariffs be introduced as the country’s products would be priced out of the market.

Ethiopia and Colombia provide a stiff competition to Kenyan produce.

Kenya insists that the agreements should be signed within a framework of the East African Community. However, the other member States are in a different trading band that does not put pressure on them to sign EPAs. Furthermore, these countries are not major trading partners with Europe.

Slapped with tariffs

The EU has warned that the country would be slapped with tariffs for several months even if the deal is signed now because it takes time to process the agreement through the various institutions before it becomes binding.

“The EU regulations require that any trade agreement made will have to be discussed at the council of ministers level and ratified by the EU parliament before it is implemented — and that takes time,” said Mr Christophe De Vroey, a trade counsellor at the EU mission in Nairobi.

This could take at least four months.

The two blocs initiated trade negotiations in 2007 but progress has been slow, with each side taking a different position, prompting postponement of the deadline.

Avert disruption

Experts have called for the signing of the deal between Kenya and the EU to be in sync with the East African regional integration plan in order to avert disruption of business.

If Kenya, which is particularly under pressure to sign EPAs, goes it alone, it could upset regional Common Market Protocol and Customs Union, experts warn.

However, the challenge is that Kenya is in a different trade band from its neighbours as it is considered to be a developing country while the others are in least developed countries category.

Kenya’s current trade with the EU is carried out under generalised system of preferences agreements that restrict some items while the other countries operate under everything-but-arms tier that enables them to export all goods that meet EU market standards.

Value addition

The latest meeting held in July in Kigali failed to yield an agreement since EAC States demanded policy space to tax export of raw materials with a view of protecting their young industry and encourage value addition.

The EU, however, said these concessions required authorisation by the EPA council and was referred to the ministerial level for determination.

Basically, there are three vexing issues — taxes, domestic and export subsidies, and governance — that are yet to be agreed on before the deal is signed.