Kenyan exporters to the European Union countries will, from Wednesday, be slapped with a duty of between four and 24 per cent.
This follows the expiry of a 30-year trade agreement between the country and the union, and failure by Kenya, and other East Africa Community countries, to conclude new trade pacts. Experts fear that this will make some of the products uncompetitive, leading to market loss.
“It is a very punitive effect to the industry,” Ms Jane Ngige, the chief executive of the Kenya Flower Council, said in a telephone interview yesterday.
Kenya failed to beat the Economic Partnership Agreement negotiations deadline which would have accorded its horticulture products duty-free access to European markets.
It means trade between the EU and Kenya now enters a higher tax bracket than the previous one where developing countries are granted preferential market access for their goods with duty zero-rated.
Sixty seven per cent of Kenyan exports to Europe will be affected, thus threatening competitiveness of local products to the market.
The flower council yesterday said it would start evaluating what effects the new regime would have to the Sh7 billion a year industry.
Cut flowers will be subjected to tariffs of 8.5 per cent, fish six per cent import duty, pineapple and other fruit juices 11.7 per cent.
Processed vegetables and fruits will attract more than 15 per cent and conservative estimates project competitiveness of Kenyan goods to European markets to be eroded by up to 20 per cent.
Last week, head of communication at the EU delegation in Kenya Christophe De Vroey said the lengthy process required before ratifying a deal at the East Africa Community level and later handing it to the EU for scrutiny and approval, means there was no escaping higher taxes.
“If exports continue at the same pace, duties to be paid would amount to some Sh100 million a week,” Mr Vroey said last week. Negotiations to sign the EPAs started in 2004 and were expected to have been ratified in 2007 to safeguard the horticulture sector.
Kenya has, however, been pushing EAC member states to include a provision for special export taxes to protect certain sectors that it considers sensitive to discourage sale of raw materials to Europe.
“The main concerns being that signing EPAs will hurt domestic industrialisation and turn us into a dumping ground for cheap goods,” Kenya Association of Manufacturers chief executive officer Betty Maina said.
The association estimates the cost of the new duty to be around Sh7.64 billion annually in taxes or about Sh637 million per month. “The reality of the delay in signing of EPAs is here to bite industries,” Ms Maina said.
The country’s position is, however, said to be more risky since the other EAC states are classified as least developed countries, and will continue to enjoy duty-free and quota-free exports to Europe even without EPAs.
Hope is now pinned on the joint EAC/EU meeting scheduled for October 15 to finalise the negotiation.
“If both parties agree, the process takes between three to six months but there is consensus to fast-track the procedure,” said Ms Ngige.