Industry

Zambia intensifies trade spat with Kenya in fresh milk ban

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Dairy products at a local supermarket. Zambia has extended the ban it imposed on the entry of Kenyan milk into its domestic market in a move that is expected to inflame a long simmering trade dispute with East Africa’s largest economy that is before a top Comesa organ. File

Zambia has extended the ban it imposed on the entry of Kenyan milk into its domestic market in a move that is expected to inflame a long simmering trade dispute with East Africa’s largest economy that is before a top Comesa organ.

Bradford Machila, Zambia’s Livestock and Fisheries Development minister, said the southern African state that hosts the headquarters of the Common Market for Eastern and Southern Africa (Comesa) had decided to take the matter head-on in the interest of local dairy farmers.

“We will not allow any milk imports from Kenya because it will negatively affect the growth of our dairy industry,” Mr Machila told the Times of Zambia last Thursday as Comesa moved closer to delivering its verdict on the five-year dispute.

Lusaka’s latest move should add impetus to the long standing market access feud for key commodities, including palm-oil based cooking fats that have continued to cast a dark cloud over the Sh8 billion-a-year trade ties between Kenya and Zambia.

The dispute over the terms of entry for Kenya’s milk exports to Zambia is the subject of an ongoing arbitration by the Comesa Council of Ministers that began in 2008.

The Council of Ministers in September ordered the Comesa Secretariat to expeditiously verify facts behind Kenya’s dispute with Zambia over shipments of long life milk and report back to the Intergovernmental Committee by December 2010. Lusaka’s salvo came in the middle of a fact finding mission to Kenya by a team of Zambian officials charged with regulation of standards. The team is expected to visit Kenya’s top dairy processing firms that export to the Comesa market. Zambia is one the top export markets for Kenya’s milk.

The Kenya Dairy Board cautiously responded to Zambia’s action saying it will await the findings of the verification mission and the decision of the Council of Ministers.

“We anticipate the findings of the of the verification mission to be table at the forthcoming Comesa Council of Ministers’ meeting in December before a verdict is issued,” Kenya Dairy Board managing director Machira Gichohi said.

“Our industry standards are quite high and we are confident it will reflect in the report,” he said. Such a report should pave the way for the lifting of Zambia’s import ban within 60 days.

Lusaka slapped a ban on Kenyan milk exports five years ago following a petition by the Zambian Dairy Processors Association (ZDPA), which claimed that Kenya’s standards for raw milk were lower than those accepted in the southern African state.

It used the World Trade Organisation’s sanitary and phytosanitary standards (SPS) to reject Kenyan exports a move that the East African nation has vigorously opposed.

Zambia is also embroiled in a spat with Kenya over palm oil based cooking oil exports that the southern African state insists does not meet the 35 per cent value-added threshold for raw materials under Comesa’s rules of origin since Kenya does not produce palm oil. Lusaka has consequently been charging Kenyan exporters a security deposit of 25 per cent on imports of palm-oil based cooking fats pending verification that the products passed the rules of origin test.

Industrialist Vimal Shah, whose company Bidco Oils is the largest producer of cooking oils in Eastern Africa, says lack of clarity on Zambian demands remains the biggest obstacle to trade between the two nations.

“Zambian authorities have remained shadowy with regards to the palm oil-based products and we don’t understand what they exactly want,” he said. “We have had several missions come around to verify whether such products are done locally but they never produce any confirmation reports.” Zambia is however known to prefer local production of cooking oils to help generate employment and tax benefits.

Though Kenya has not reciprocated any of Zambia’s numerous sanctions, a recent escalation in similar rows among Comesa member is now being seen as the greatest obstacle to Eastern Africa’s regional integration initiatives. Trade between Kenya and Zambia has grown steadily since the 2001 establishment of Comesa’s free trade area.

Trade between the two nations was valued at Sh7.3 billion in 2008 with Kenya holding the bigger share of Sh5.5 billion. Imports from Zambia stood at Sh1.853 billion during the same period.

Modest gains

Kenya’s exports edible oils, margarines, iron sheets, steel pipes and products, detergents, baking powder, kitchen and table wares, spices, blankets, beauty products, toiletries, irrigation pumps, tyres, and textiles and crafts to Zambia.

Imports from Zambia comprises copper and copper products, maize seed, electrical conductors, tobacco, corrugated sheets of asbestos and precious stones. Kenya’s Trade permanent secretary Abdulrazaq Ali last Thursday hit out at countries he claimed were frustrating ongoing integration efforts by imposing non-trade-barriers (NTBs). “While it is true that there may be justifiable reasons for seeking short term protection due to revenue, health, environment and other reasons, our respective treaties have clearly outlined how such time bound protection measures can be justified and made available to our member state,” he said in a statement.

The East African Community (EAC), the Southern Africa Development Community (Sadc) and Comesa agreed in 2008 to form a free trade area (FTA) covering more than 527 million people.

The three regional trading blocs have even produced a draft agreement that paves the way for the setting up of the planned $624 billion FTA, the continent’s largest.

The draft includes 14 annexes that deal with rules of origin, intellectual property rights and dispute settlement, among other provisions. It also contains proposals on common rules that will govern the trade regimes and converge into a seamless platform.

Reluctance by member countries to fully open their markets under the arrangement however remains controversial amidst concern that some of them were imposing NTBs.

“Of greater concern is the fact that in instances where trade has occurred and is expanding, NTBs have surfaced to take away the modest gains,” Mr Ali said. “For this purpose, we need to look beyond the short term gains which are obtained through protectionism by imposition of NTBs.”

Mr Ali said though a foundation and framework has been well established for the sustained treatment of NTBs, negotiating countries continued to face two major challenges including the fact that regional economic communities (RECs) have adopted different strategies in respect to NTBs elimination.

“While this may not have been a problem, the fact that we have several countries belonging to two or more regional groups, has ensured that there are conflicts and duplication in the implementation of the different approaches,” he said.

Give verdict

During the 28th meeting of Comesa council of ministers, Sudan announced it had settled a dispute with Kenya and now allows the importation of galvanised steel pipes from the country using the applicable criteria.

The ministers also ruled that Malawi’s imposition of excise duty on cooking oils and soaps was applicable on all regional imports as opposed to being target on Kenya’s exports only; hence a complaint earlier raised by Kenya was null and void.

A complaint by Kenya and other countries over Egypt’s continued application of a 45 per cent value addition criteria on imports coming from other Comesa nations is however still pending. The council of ministers appealed to Egypt to consider moving to the 35 per threshold for conferring origin on intra-Comesa under the Free Trade Area (FTA). However, Egypt declined the request and the council is expected to give a verdict on the matter in December.

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