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European MPs back deadline extension of EPA trade deal with EAC

Friday July 22 2016
Flowers px

A worker packs flowers for export at Finlays in Naivasha, Nakuru County, on February 10, 2015. European MPs have proposed extending a deadline for signing a trade deal with East African countries. FILE PHOTO | NATION MEDIA GROUP

By EDWIN OKOTH

Members of the European Parliament have said they support extending the October deadline for signing a tariff agreement between East African Community (EAC) and the EU.

The MPs said the move is meant to help Kenya after Tanzania and Burundi stood in the way of realising the deal aimed at giving relief from heavy taxes for the country's exports to the European Union (EU).

Tanzania has refused to sign the agreement while Burundi is facing sanctions by the EU in response to political instability in the country.

EU official Bernd Lange, attending the 14th United Nations Conference on Trade and Development in Nairobi, said Kenya would be the biggest casualty if the comprehensive Economic Partnership Agreement (EPA) is not signed.

"Our first proposal is to have the October 1 deadline extended to allow for more time and see whether Tanzania will agree to sign or if Burundi will improve her democratic situation and evade sanction from the European Union.

“If none of these happen, then I expect that Kenya will apply for the GSP [Generalised System of Preferences] Plus and when it is received then we can begin the market access regulations and save Kenya," Mr Lange said.

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The GSP Plus status will allow Kenya to continue exporting at the current terms even if Tanzania an Burundi fail to sort out their issues that are standing between the region and a lucrative agreement allowing access to the world's largest market.

Kenya is now left with a huge headache of dealing with political squabbles inside one neighbour as well as seeking to convince another to sign an agreement it is not interested in.

'LEAST DEVELOPED COUNTY' STATUS

Kenya is the only country among its East African partners that is not considered a Least Developed Country (LDC) and hence has to depend on the agreement or risk being dropped from preferential treatment in the lucrative EU market.

European parliament member Marie Arena said EAC countries need to agree on having a structured agreement that doesn't leave any of them out.

"The question now is not even the details of the agreement but the timeliness, and the countries really need to do that this August because as the EU parliament, we have no control on sanctions [against] Burundi or convincing Tanzania to sign the agreement.

“Kenya and other members can do that better so that we have a smooth signing sail in this agreement," Ms Arena said.

Under the trade deal, the EU would be granted unlimited market access to Kenya for the next two and half decades.

Kenya will also enjoy exemption from the taxes of between eight and 12 per cent on goods sold to the EU market.

UNCOMPETITIVE PRODUCTS

Should the deal flop, these taxes will hurt Kenyan exports by making them uncompetitive, forcing exporters to offer up to Sh600 million every month in cumulative discounts to buyers to be at par with the other sellers.

A failure will also hurt one of Kenya's engines of economic growth – agriculture.

Close to 90 per cent of the country’s exports to the EU are agricultural, agro-processed products and manufactured goods.

The scenario might also spell doom for more than 600,000 workers, mainly in the flower farms and fresh-food producers.

It is not the first time Tanzania has been a hurdle in the signing of the EPA. In 2014, Kenya suffered a setback after Dar es Salaam refused to sign the pact that East African delegates negotiated in Brussels.

Tanzania now says it is resisting the pact because of strict EU market-access conditions.

Such non-tariff measures have been cited by a report released by UNCTAD as costing developing countries up to Sh230 billion per year. The amounts equal 10 per cent of their exports to the G20 countries.

The South Africa Development Community signed a similar pact but included in the negotiations that the signing can be done even if one member opts out.

The European Union in 2013 granted the GSP Plus status to Pakistan, giving the country duty-free access to the European market.

The GSP Plus status only allowed 20 per cent of Pakistani exports to enter the EU market at zero tariffs and 70 per cent at preferential rates, meaning Kenya may not enjoy full zero taxes in the GSP deal if it chooses to go it alone.

Trade and Industrialisation Cabinet Secretary Adan Mohamed said Tanzania risks falling in the same trap Kenya is in when it attains middle-income status in the next two years.

(Edited by Basillioh Mutahi and Henry Gekonde)

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