Kenya to lose Sh9.5b in EU trade agreement
Kenya to Lose Sh9.5b in EU Trade Agreement
The East African Standard (Nairobi)
October 29, 2005
By Benson Kathuri
Nairobi
Kenya and the European Union started negotiations for a new trade pact last week amid fears that the country could lose Sh9.5 billion.
An impact assessment study conducted by the Kenya Institute for Public Policy Research and Analysis (Kippra) reveals that the Government would lose Sh6.9 billion in revenue.
Another Sh2.5 billion would be lost as exporters lose their market share to the EU market to competitors. A further Sh35 million would be lost through trade creation.
Already, there are fears Egypt is eating into the EU horticultural market that Kenya had dominated for over a decade now.
The new trade pact that would replace the 2001 Cotonou agreement between the 79 African, Caribbean and Pacific countries (ACP) becomes effective in January 2008.
However, Trade and Industry permanent secretary David Nalo maintained that the Government is determined to negotiate the new pact.
"The options which Kenya has are either to negotiate an Economic Partnership Agreement (EPA) or shift to the EU Generalised Systems of Preferences for developing countries," said Nalo, who attended an EPA meeting in Lusaka.
"The latter platform will imply that Kenyan exports to the EU will face some tariffs, a development that would see local exports losing the EU market overnight," he said.
The PS says Kenya could not afford to lose the lucrative EU export market that comes second to the Common Market for East and Southern Africa (Comesa) by absorbing 26 per cent of the total exports.
The EU has initiated the negotiations after the Cotonou agreement that accorded exports from ACP countries duty free access to the world’s largest trading block was challenged at the World Trade Organisation (WTO).
"To address this inevitable threat, Kenya has opted to negotiate a new trade arrangement with the EU," Nalo said in Nairobi.
Despite the perceived threats to local manufacturers, Kippra findings that are to be released next week, say the economy would benefit from cheaper equipment and other raw materials imported from the EU.
Kenya imports 34 per cent of its consumer goods from EU, motor vehicles (17 per cent), machinery and Equipment (58 per cent) and intermediate goods (11 per cent).
However, the Kippra study recommends that the Government and other members in the ESA negotiating group should negotiate for programmes and projects that will improve on productivity and competitiveness.
Kenya Association of Manufacturers (KAM) chairman Arun Devani said the sector would be worst hit by the proposed pact.
He asked the manufacturers to take advantage of the negotiations to push their agenda and especially in areas that would enhance their efficiency and competitiveness.
"We in the industry should strive to improve before competition catch up with us," he said.
Devani was particularly concerned over the slow pace of Government-led reforms that would improve service provision.
