agritrade

Concerns grow in Kenya as EAC–EU EPA negotiations continue

05 March 2014

Press reports indicate that the January 2014 EAC–EU EPA negotiating session in Brussels “failed to agree on contentious issues of duties and taxes on exports and on Most Favoured Nations (MFN)” (Articles 15 and 16 respectively). The EAC reports that rules of origin also required further discussion. However, progress was made on issues related to institutional arrangements and dispute settlement. A ministerial-level meeting is scheduled for March 2014.

Press reports highlight how Kenya, as a non-LDC country, stands to lose out if no agreement is concluded. Kenya currently supplies around 38% of the fresh flower imports into the EU. The Kenya Flower Council (KFC) said in a statement in February 2014 that failure to conclude an agreement would lead to the imposition of significant EU import duties on Kenya’s floriculture exports, while competitors such as “Colombia, Tanzania, Uganda, Rwanda, Burundi and Ethiopia [would] continue to enjoy their duty free-status.” KFC noted that this would be likely to undermine Kenya’s competitiveness and market share.

KFC commented that there is a “need to speed up the process of the negotiations”, given the “grave risks that are facing the flower industry… if the agreement is not signed by October 2014”. KFC noted EU Trade Commissioner Karel De Gucht’s recent reiteration that “there will be no new bridging measure enforced by the EU” if the EPA process is not concluded by October 2014.

Analysts at ECDPM have noted that “there will be tensions among partners” within the EAC if no agreement is concluded before October 2014, with the Kenyan government facing the question: “do they do a deal with the EU on their own or stay with the region even though a lot of their flower businesses are suffering?”

In the medium term, new opportunities are opening up for Kenyan flower exports to Asia, following the launch of a scheduled airline service between Kenya and South Korea in 2013. Kenya’s HortiNews website reported in August 2013 that the flights were “expected to give flower farmers direct access to the East Asia market, by-passing the European and Dubai flower auctions (which have limited the penetration to East Asia) and boosting the sector with increased flower sales”. According to the managing director of the Kenyan Horticultural Crops Development Authority, “the new markets in South Korea and Japan are expected to account for between five and ten percent of the flower exports.”

Editorial comment

The EAC–EU Interim EPA has tariff reduction commitments that involve the largest degree of ‘backloading’ (i.e. implementing the tariff reductions at the end of the agreed tariff phase-down period) of any of the interim agreements concluded. According to a 2008 ECDPM/ODI study, the EAC countries will only start removing positive tariffs on a significant proportion of imports during the second phase (2015–23), while the process of tariff removal for the EAC will only be completed over the period 2020 to 2033.

In contrast, in the case of Mauritius, “the first tranche of liberalisation is to be completed in 2008, involving one quarter of imports from the EU in 2004–06, while the great bulk of imports from the EU (71% in total) will be liberalised between 2013 and 2022.”

It is not therefore in relation to tariff elimination commitments that problems have arisen, but rather to a range of commitments required under the EPA that would limit domestic policy space. This needs to be seen against the background of the absence of any clearly identified additional benefits that an EPA would bring to LDCs, which already enjoy full duty-free, quota-free access under the ‘Everything But Arms’ trade arrangement.

Given the very different interests of Kenya and other EAC member states, there would appear to be a need for greater flexibility on non-tariff issues to accommodate the concerns of the LDCs in the EAC. The gap between the EU and EAC negotiators would appear relatively small, while the scope for intra-regional tensions within the EAC, as highlighted by ECDPM, would appear to be considerable.




http://agritrade.cta.int/


Copyright 2017, CTA. Technical Centre for Agricultural and Rural Cooperation (ACP-EU)