Kenya’s quest for free access to EU market suffers setback

Kenya has suffered a setback in its quest to rejoin states that can export goods to the European Union without paying duty after Tanzania refused to sign the pact that East African delegates negotiated this week in Brussels.

UPDATE: Relief for Kenya as Tanzania signs EU trade deal.

East Africa’s second-largest economy has asked for more time “to consult before they agree to the initial text of the Economic Partnership Agreements (EPAs)”.

Tanzanian officials did not say how much time they need.  All members of the East African Community must sign for the deal to be valid and even then, it could be up to half a year before it is put into effect.

The delay could prove costly for Kenya, which is estimated to be losing between Sh400 million and Sh1 billion a month under a harsher trade regime that kicked in when the deal was not concluded on time.

The EU began to impose taxes on Kenyan goods from October 1 after the EAC states breached EPAs deadlines, ending 30 years of preferential trade.

On Thursday, EU officials said reinstating Kenya to the quota-and-duty-free regime under Market Access Regulation (MAR) is only possible if Tanzania endorses the pact that Kenya, Rwanda, Burundi and Uganda signed on Tuesday.

“We await Tanzania to initial the EPA before we can start internal EU procedures to reinstate Kenya into the list of beneficiaries of the MAR,” EU Delegation to Kenya’s trade counsellor Christophe De Vroey told the Business Daily.

He added: “Once this procedure is started, it will take between three and six months for Kenya to benefit again from duty-and-quota-free access.”

The failure by Tanzania to append its signature to the Brussels deal becomes the latest speed bump in the long search for give-and-take pact that has eluded the two blocs since 2007.

READ: Relief for exporters as Kenya signs new trade deal with EU

The stance taken by Tanzania means up to 87 per cent of Kenya’s exports to EU – equivalent to Sh98 billion according to last year’s trade figures – will continue to attract tariffs ranging from five to 22 per cent to enter Europe.

The Kenya Association of Manufacturers estimates that two million jobs depend on Kenya’s preferential export terms with Europe.

Among the key exports, cut flowers attract tariffs of 8.5 percent, fish six per cent while fruit juices from Kenya will cost 11.7 per cent more on the European shelves.

Processed vegetables and fruits will attract more than 15 per cent duty.  At least 95 per cent of Kenya’s horticultural exports go to the EU where they have increasingly faced competition from products shipped from Eastern Europe and South America.

Tanzania has long opposed the EPAs text, saying it will open the EAC market to influx of cheaper industrial and agricultural products from EU to the detriment of the region’s industrialisation.

Unlike Kenya, Tanzania and the other EAC states are classified as Least Developed Nations and can still export to EU duty-free even if they fail to sign the deal. Signing the EPAs, however, commits all the states to open up to 82 per cent of their market to EU products.

“We have information that many Kenyan firms have slowed down their operations to wait for right signals from the talks,” Foreign Affairs and International trade PS Karanja Kibicho said at joint Press conference held in Nairobi with EU officials on Thursday.

Under the deal that Kenya and its three landlocked neighbours Africa signed on Tuesday, EU side committed to phase out agricultural subsidies that EAC states have long opposed.

“They will provide a work plan for that later but in the meantime, we have agreed that none of the subsidised agricultural products will be allowed into East Africa,” Dr Kibicho said.