EAC EU EPA UPDATE:

A Response to a motion sponsored by the Hon. (Dr.) Laboso Joyce, MP Deputy Speaker and Member for Sotik in Parliament, urging the Government to take time before signing the Economic Partnership Agreement (EPA) with the European Union.

Amongst other items, it mentions two very key issues that need to be explained in more detail to the stakeholders keen on the debate:

i)             “…imminent amendment of the European Union Market Access Regulation and

ii)            Kenya products will, from 2016, cease to access the EU markets duty free…”

The Market Access Regulation (MAR), was introduced in 2007 to allow those ACP countries that had signed an interim EPA to continue to benefit a duty-free, quota-free (DFQF) access to the EU pending the finalization of a full agreement.

The MAR will cease to exist on 01.10.2014. This is the outcome of a legislative procedure by the European institutions earlier this year – proposal by the European Commission, endorsed by the Council and positive vote by overwhelming majority in the European Parliament. This is a set date; the MAR has been amended and will cease to have effect as from 01.10.2014.

As from that date the unilateral system of preferences, known as EU Generalised System of Preferences (GSP) will be applicable to all ACP countries which will not have signed and ratified an EPA. There is no alternative, no middle-way.

The EU GSP-system contains three different subdivisions:

– The “Everything But Arms” (EBA) scheme, which is only applicable for Least Developed Countries (LDC). All products (except arms and ammunition) from these countries enter the EU market DFQF.

– The “GSP+” scheme, which is applicable only to countries who apply for such scheme and who comply with a series of pre-conditions (such as adherence to a series of international conventions on labour rights, environmental protection,).

– The normal “GSP” scheme, which is applicable to all the remaining developing countries – such as Kenya.

The tariffs applied under EU GSP-system are more advantageous than the Most Favoured Nation (MFN-tariffs) applicable to all developed trading partners with whom the EU did not conclude a Free Trade Agreement (FTA). The EPA is also a kind of FTA, an exception to the unilateral tariffs in place.

The EAC-EU EPA will guarantee a continued DFQF access to the EU market for Kenyan exports after 01.10.2014. But time is of the essence, Kenya and the EAC region must make choices now having the 01.10.2014 time-line in mind, the agreement should be signed and ratified by then. The GSP will replace the MAR as from that date unless EPA is concluded. Of course, the region may wish to continue to negotiate an EPA even after that date, but GSP tariffs will be applicable pending the finalisation of the negotiations.

It is noteworthy that the EU is Kenya and EAC’s main trading partner (in terms of exports and imports combined). One quarter of Kenyan exports are absorbed by the EU market. This represents over 100 billion KES a year, of which approximately 40 billion KES (70% of Kenya’s production) of fresh flower exports, 30 billion KES coffee, tea and 20 billion KES vegetables.

Under the GSP, fresh flowers and carnations are subjected to an EU import tax of 8.5%, French beans 6.9%, peas 4.5%, Nile perch 5.5%, roasted coffee 2.6%. Under EPA, all goods enter at 0%.

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