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Kenya risks losing preferential access to the European Union markets next year, exposing exporters again to steep tariffs and logistical hurdles that hurt fresh produce earnings last year.
The EU Ambassador Lodewijk Briët said the bloc would remove Kenya from the preferential list again, if the East African Community fails to ratify the new Economic Partnership Agreements (EPAs) by October 2016.
The removal of Kenya from the list would hurt exporters of flowers, fish, fruits and vegetables, accessing the EU market under the less-generous Generalised System of Preferences (GSP) which attracts tariffs of up to 15 per cent.
“We are optimistic that the EAC will be able to sign the agreement by August this year so that there can be enough time to have it ratified before the October 1 deadline,” Mr Briët said on Tuesday during a tour of Naivasha flower farms.
Last year, in October, the EU removed Kenya from its list of duty-free exporters after the EAC failed to meet the EPAs deadlines, subjecting fresh produce levies of Sh100 million per week.
The industry also grappled with time-consuming process of product declaration and tax payment.
The EU only reinstated Kenya to list of beneficiaries of its market access regulation (MAR) on December 24 last year, after Burundi, Rwanda, Uganda and Tanzania finally signed the free trade roadmap.
The MAR is a transitory arrangement that offers market access preferences to EU partners in anticipation of EPA ratification.
“The private and public sectors need to complement the commitments made in the EPAs with serious reforms to reap the maximum benefits,” said Mr Briët.
In a statement read on his behalf, Foreign Affairs and International Trade Principal Secretary Karanja Kibicho noted that the EAC failed to meet the deadline because each party wanted to have all their interest taken into account during the negotiations.
“The EPA agreement is undergoing the legal process in Arusha which is expected to be finalised in August to allow for the signing soon after,” he said.
Speaking to the Business Daily, Kenya Flower Council chairman, Richard Fox said that the council is in talks with the government over the 9 million Euros loss that farmers incurred in the three months that their exports were exposed to tariffs.
‘‘We do not expect a complete refund, but some form of compensation whether in form of subsidies or tax reliefs,” he said.
– Business Daily