As earlier reported the latest round of technical negotiations between the European Union and East Africa Community on the Economic Partnership Agreement (EPA) in Kigali Rwanda ended without an agreement. All other aspects of the Agreement are agreed upon by both parties, except export taxes, domestic and export subsidies and governance. On export taxes, EAC countries insist that they should be given policy space to tax raw materials being exported to the EU as a way to encourage value addition locally, while the EU insists that such taxes would need authorization by an EPA Council comprising of both EU and EAC before being implemented.
Resolution of the matters has been referred to ministerial level at both EU and EAC for final determination.
Below are the possible GSP rates to the EU, as reported in WTO or directly from EU market access website which are likely to be imposed on Kenya after October 1st 2014 unless a solution is found ahead of the date..
Possible EU MFN Tariff Rates for Kenyan Fresh Produce
|Product||Volume (MT)||Value (Ksh)||MFN Rates
||Possible Tariff Loss (ksh)||Notes|
|Fresh Vegetables||73,541,742||17,842,756,059||13.6||2,426,614,824||10.5 for beans and other veges; 9.9 for snow peas and sugar snaps|
|Fresh Fruits||45,638,285||4,093,256,565||5.2||212,849,341||avocadoes =4.4% pineapples=5.8%,|
|Processed vegetables||126,677,676||13,939,321,533||19.2||2,676,349,734||14.4 = frozen, canned 19.2|
Source: Export data (KNBS), Tariffs – WTO Tariff Data (Applied EU MFN Average of AV Duties 2013 and EU Market Access Statistics (roses and beans)
In brief, if Kenya is to pay GSP rates to the EU, horticulture would be losing about one billion ksh monthly, considering that 87% of our total horticulture exports go to the EU. The taxes would be applied on C&F values, not FOB.
The industry has intensified lobbying the Government to ensure non-disruption of business beyond September 31st 2014. We will keep you informed.