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Economy

Kenya set to join trade talks with EU after oil find

Jared Nyataya | NATION An oil rig at Ngamia 1 where Tullow Oil Company has discovered oil. Kenya is set to close ranks with her East African neighbours in concluding a trade pact with Europe as the recent discovery of oil in Turkana promises to change national priorities.
Jared Nyataya | NATION An oil rig at Ngamia 1 where Tullow Oil Company has discovered oil. Kenya is set to close ranks with her East African neighbours in concluding a trade pact with Europe as the recent discovery of oil in Turkana promises to change national priorities. 

Kenya is set to close ranks with her East African neighbours in concluding a trade pact with Europe as the recent discovery of oil in Turkana promises to change national priorities.

The prospect of becoming an oil producer signifies future changes in Kenya’s export mix and a possibility that Energy ministry officials may be co-opted in the remaining rounds of economic partnership agreements (EPAs) negotiations.

Energy ministry officials contacted said they would go for “a fair deal” with the European Union (EU).

“It’s just a matter of time before our representatives are asked to join the government side in EPAs negotiations because it is only the experts from this ministry that can help the country to secure a fair deal,” an official said.

While all the five East African countries are now negotiating EPAs jointly as a bloc, each country has nominated representatives from sectors that will be affected directly by the free trade with the EU.

Kenya’s interest in the talks has perviously been because of horticulture industry, external market access, economic co-operation and development, tourism, investments, competition and government procurement, fish exports and intellectual property rights.

In the long running EPAs talks, Kenya, which exported goods worth Sh109 billion and imported Sh203 billion from Europe in 2010, has been the only EAC country pushing for urgency in concluding the talks.

Other EAC members, which are classified as least developed countries (LDCs) have rejected most of the clauses in the EPAs, which require them to remove export taxes on raw commodities and open their markets for EU goods.

The LDCs enjoy export arrangement with developed countries under the “Everything-But-Arms” which accord their goods tax-free entry into these markets without having to reciprocate.

When they met in Arusha last month, EAC member states resolved to push for Kenya’s inclusion in the LDCs list to be able to bargain from the same stand point.

With the prospect of becoming an oil exporter in future, Kenya’s negotiators are likely to start rallying behind the LDCs to head off assault on commodity export taxes.

Under the revised EPAs text, taxes on most of primary commodities such as crude oil and minerals will be scrapped as a way of boosting their exports to EU.

African, Caribbean and Pacific (ACPs) countries, which have no capacity for exploration and processing of their natural resources, have opposed this clause arguing that export taxes allow them increase earnings from natural resources.

Just like most ACPs, Kenya’s exports to EU are not safeguarded by a legally binding instrument since the World Trade Organisation scrapped non-reciprocal trade arrangements such as the one it had with Europe up to December 2007.

After a decade of negotiations without striking a deal, the EU parliament has sought to introduce taxes of between 8 and 18 per cent on goods from ACP countries that fail to sign EPAs by December next year. The proposal is contained in a Bill that has been drawn by European Commission, the EU’s executive organ which has been negotiating with ACPs since 2000.

“Every country that needs to trade with EU needs EPAs. This includes LDCs because their status is temporary, they’ll soon outgrow that classification,” Prof Vital Moreira, the International Trade Committee chairman said.

Apart from EU, data produced by United States Trade International Trade Commission indicates that oil exporters dominate trade with US. Among the top five exporters to US and AGOA, only South Africa is a non-oil producing country.

Last year, Nigeria topped the list of exporters to US with $33.8 million, followed by Angola’s $13.7 million and South Africa’s $9.4 Million.

Data for United Nations Conference on Trade and Development also indicates that countries, which are either rich in oil or minerals remain top recipients for new investment capital each year.

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