It is certainly a sigh of relief for the flower industry and other exporters to the EU following successful completion of the East African Community and European Union Economic Partnership Agreement (EAC – EU EPA) Negotiations. This comes after the two parties finally reached an agreement following a joint Technical and Senior Officials meetings that take place on 13th and 14th October 2014, in Brussels Belgium.
Both Parties have initialed the text of the EPA paving way to the process reinstating Kenya on the duty-free status for all its exports to the EU market under the EU Market Access Regulation (MAR), a process that could take 3 to 6 Months pending final signature and ratification.
In a press conference, the Ministry of Foreign Affairs and International Trade (MFAIT) PS Eng. Karanja Kibicho said EAC and EU agreed on all the outstanding issues namely; export taxes, agriculture (domestic and export subsidies), and reference to cotonou Partnership agreement; good governance in tax area and trade agreements with other countries. He added that the initialed text will go through legal scrubbing before signing and ratification by parties a process that could go up to one year.
“This has affected up to 87% of Kenya’s exports to the EU mainly agricultural, manufactured and agro-processed products incurring a loss of about Kshs 600 million a month.” added Eng. Kibicho.
Meanwhile, Kenya will continue to export under the GSP tariff regime until the reinstatement process is over. The other EAC partner states are trading under ‘everything but Arms’ regime which allows for duty free quota free access to the EU market as they are least developed Countries (LDCs). The Kenyan flower exporters started using the ‘GSP form A’ which is an outright requirement for imports from Kenya to benefit from EU GSP duties which ranges from 5 to 8.5%. For flowers, only carnations are benefiting from a 0% tariff-line.
Failure to have the GSP form A, the imports attracts full Most Favoured Nation (MFN) duties at customs-clearance into the EU. The immediate impact of the GSP tariff on Kenyan exports to the EU was to increase the price that the EU consumers are paying on Kenyan exports by the margin of the applicable tariff. Exports from Kenya to the EU will suffer import duties of approximately Kshs about 600 million a month under the regime.
The Kenya Flower Council is urging the concerned parties to fast track the process of reinstatement to shorten the period during which GSP duties will have to be paid on the products exported from Kenya into the EU.
“We are happy to recognize The Government’s investment and support to the success of the whole process and also in promoting the flower industry abroad, one of the most noteworthy milestones for the industry and exporters at large. The Ministry of Foreign Affairs and International Trade, through its economic diplomacy portfolio, is aggressively engaged in facilitating promotions in Europe, Eastern Europe, Japan, Asia and the USA which have been very successful. For this initiative and many others in the pipeline, the industry would like to sincerely thank the Government of Kenya, under the leadership of HE the President of Kenya Hon. Uhuru Kenyatta CGH, along with the Deputy President HE William Ruto. We cannot forget the relentless efforts made by all our partners to push for the finalization of EPA” said Jane Ngige, KFC Chief Executive.
The Ministry will be holding consultations with the stakeholders to assess the situation and agree on a common approach to minimize the adverse effect of Kenyan exports to Europe.
The EU on the other hand said it’s next to impossible for the exporters to be refunded the duties they are paying under GSP regime.