Kenya: Door closes on duty free exports to EU
This duty free entry was made possible under trade arrangements extended to Kenya in the context of the preferential trade arrangement that the EU extended to the African Caribbean Countries (ACP) first under four successive Lome Conventions (Lome I to IV - 1975 to 1999) and lastly under the Cotonou Agreement trade regime (2000 - 2007). Kenya, along with other EAC countries secured continuation of duty free market access to the European Union (EU) after initialling the Framework for Establishment of Economic Partnership Agreement (FEPA) on November 26, 2007.
Kenya was included in the EU Market Access Regulation (MAR) 1528/2007 among other ACP countries that signed or initialled the interim Economic Partnership Agreements (EPAs). This new arrangement was premised on the understanding that the ongoing negotiations of the EPAs will be concluded as envisaged in the FEPA. The reality of the delay in signing of EPAs is here to bite industries.
Kenyan products to the European Union will begin to attract General System of Preference (GSP) tariff rates. With effect from today, products to the EU market will start attracting export duty of between 4-24 percent. A total of 67 percent of the exports to Europe from Kenya are affected. Goods to Europe will now be subject to customs duties of approximately Sh7.64 billion annually in taxes or about Sh637 million per month.
Currently thousands of jobs are under threat mainly in the horticulture and floriculture industry.
By March this year all outstanding issues were resolved with exception of five issues; Export taxes, Relations with the Cotonou Agreement, Agriculture Export Subsidies, Good Governance in the Tax Area and Consequences from Customs Agreements concluded with the EU. Hopes are now pinned on the joint EAC/EU meeting proposed to take place in October 2014 to finalize the negotiation.
While EPAs may appear to be an issue that solely concerns cut flowers, 24 per cent of all our exports are at stake because they are destined for European markets. 95 percent of Kenya's horticultural exports go to the same market. Cut flowers will suddenly be subjected to tariffs of 8.5 percent, fish will attract 6 percent import tariffs, pineapple juice and other fruit juices from Kenya will cost 11.7 percent more for European clients.
Processed vegetables and fruits will attract more than 15 percent duty. In a nutshell, the competitiveness of our goods in European markets will be eroded by around 5 percent to 20 percent. As will tobacco products from Kenya as well as textile products. Last year exports to Europe under this preference regime earned the country more than Sh67 billion.
In the meantime the Kenya Government is called upon to provide the necessary cushions to safeguard continued market opening. It would be particularly critical for Government to absorb the duties levied on our products estimated at Sh637 million per month. In addition as this sector is in a VAT Refund position since September 2013, Treasury should immediately release all pending VAT refunds and expeditiously for the next few month. Other partners in the private sector such as airlines and logistics providers. Banks are also urged to exercise utmost flexibility to ensure that as a country we minimise losses.
Source: allafrica.com