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Kenya flowers at crossroads

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Flowers from Kenya could face taxes of between eight and 12% if the EPA is not signed and ratified in three months’ time

East Africa Businessweek | Sunday, July 13, 2014

Kenya flowers at crossroads

ARUSHA, Tanzania — Kenya’s horticulture industry could suffer massive losses due to high import duties on flower exports to the European Union (EU) effective October unless the country signs the controversial Economic Partnership Agreement (EPA) .

Players fear that the more than 120,000 tonnes of fresh cut flowers exported to EU from Kenya every year could face taxes of between eight and 12% if the EPA is not signed and ratified in three months’ time.

EPAs between the EU and African, Caribbean and Pacific (ACP) regions are aimed at promoting trade between the two groupings – and through trade development, sustainable growth and poverty reduction.

However the sticking point for most developing countries is that preferential treatment for traded goods must be on a mutual basis. Goods from the EU must compete on the same level as those made domestically.

Developing countries say this will eventually kill off local industries which cannot compete with their European counterparts.

Speaking during a Kenya Flower Council (KFC) and European Floriculture Forum meeting held at a Nakuru Hotel last week, KFC chief executive officer Jane Ngige said unless an agreement was arrived at in talks slated for later this month, Kenya’s horticulture exports will attract the taxes from October.

Kenya heavily relies on its horticulture industry which is the country’s main foreign exchange earner followed by tourism.

She said that East African Community and EU negotiators had in March this year disagreed on how to levy export taxes on goods destined for Europe and on a clause that seeks to bar the East Africa nations from entering into bilateral talks with trade partners in areas where the EU does not enjoy preferential treatment.

“The government needs to speedily resolve outstanding issues on the EPAs so as to evade imposition of significant import duties on our floriculture imports and to safeguard our competitiveness in the EU market,” she said.

EU trade and communication officer Christophe De Vroey told the meeting that even if the EAC and EU negotiators reached an agreement by July 23, it was unlikely that they would meet the October 1 deadline as the process of ratification in all the individual member states parliaments was expected to be long and time consuming.

“This means that as from October, all flower, vegetable and fruit exports will have to pay the tax. Coffee and tea will however be exempted,” he said.

He said that the annual worth of cut flower exports from Kenya to the EU stands at about $540 million which accounts for 1.6 per cent of national GDP while vegetables exports were worth more than $311 million annually.

The flower industry in Kenya employs thousands of people and any downturn could affect millions of livelihoods.

By Humphrey Liloba, Sunday, July 13th, 2014

 source: Business Week