EAC Exports to be taxed by EU Due to Delay in EPA

The European Union has informed the East African Community (EAC) that the failure or delay in signing the Economic Partnership Agreement (EPA) would lead to taxes on the exports of the EAC-member states. In a recent release by the EU Delegation in Nairobi said that failure to finalise the EPA process could lead to putting non-Least Developed Countries such as Kenya on the Generalised System of Preferences list.

According to the statement, some of the key export products particularly from Kenya would attract re-introduction or increase in tariffs. The EPA was supposed to be concluded by July 31, 2009 - but missed the deadline due to lack of consensus on rules of origin - most favoured a clause on agriculture, trade in services and sustainable development.

The head of the union’s delegation to Nairobi Eric van der Linden said that he was looking forward to the success of the EPA soon. Likewise, the head of EPA unit at the trade directorate-general of the European Commission Jacques Wunenburger said that talk should now move from the “cost of EPA” to talk about the “cost of non-EPA.”

The Daily Nation reported that the Kenyan horticulture and floriculture exports currently enjoy no taxes to enter the EU markets. The Kenyan exports of fruits and vegetables to the European bloc are pegged at around 450,000 tonnes per annum.

A decision to tax EAC exports by the EU would be death knell to the future of cut flowers from Kenya as it is the largest exporter to the bloc. Besides, the country’s floriculture industry has been spending a lot of money to modernize its facilities for the past decade.

As on December 31, 2008, Horticulture remained Kenya’s leading foreign exchange earner, by recording an impressive performance of close to $1bn of the overall exports. Nonetheless, a report by the EU-ACP Impact Assessment on EPAs stated the absence of the duty-free and quota-free access to the EU market, the sector would collapse.

The EU has been negotiating an EPA with African, Caribbean and Pacific (ACP) countries since September 2002 with the aim of replacing non-reciprocal trade preferences granted under the Cotonou Agreement. However, the EAC, which comprises Kenya, Uganda, Tanzania, Burundi and Rwanda has been negotiating since then as a separate entity, and went on to sign an interim framework on the EPA with the EU in November 2007.

By Jose Roy