Secure your EU market share, Kenya told

Kenya has been urged to secure its market share in the European Union even after the withdrawal of the United Kingdom (UK) from the Union.

Dr. Patrick Njoroge, Kenya Central Bank Governor told the media that, “It will be terrible for the country to lose its market share.”

“It will be difficult to recover,” he added.

Njoroge said it was prudent for Kenya to do that as talks scheduled for August in an attempt to convince the other members of East African Community (EAC) to sign the Economic Partnership Agreement (EPA) deal with Europe ahead of the October 1 deadline set by the EU secretariat.

Within the EAC, Tanzania has refused to sign agreement and according to the Permanent Secretary in the Ministry of Foreign Affairs, Dr Aziz Mlima as quoted in Daily News Tanzania, “Our experts have analysed the pact and established that it will not be to our local industry’s benefit. Signing this pact at the moment would expose young EAC countries to harsh economic conditions in post-Brexit Europe.”

The CBK Governor in his opinion said, “The EPA trade signing might not happen in the near future. And the immediate impact is that Kenya will export her goods under a high tariff regime.”

“We expect less negative potential impact for the Brexit development,” He added.

Read:  Medium Term Effect of Brexit on Kenyan Economy –Central Bank

Njoroge proposes that those involved in the negotiations, for a long term approach, Kenya needs to settle in their competitive areas and do a comparative advantage of their products.

However, if the deal is not signed, “We are in a fast effect. It will lead to reduced profit margins depending on the product and the current tariffs are between 5-20 percent.”

“A loss in competitiveness and other players will take the opportunity to fit into the market share. Reduced income in the specific trade sub-sectors, loss of jobs,” he says terming it a ‘dark picture’.

Kenya exports to European Union are at 22 percent, 25 percent within the EAC, 40 percent to COMESA members.

The EU and the East African Community (EAC) finalised their Economic Partnership Agreement (EPA) on October 16, 2014.  To comply with the rules of the World Trade Organisation, the EAC countries committed to increase the share of their duty-free imports to 80% over the coming 15 years.

Beyond the elimination of customs duties, the agreement covers important issues, such as free movement of goods, cooperation on customs and taxation, and trade defence instruments, which mirror the effort of the EAC to strengthen its customs union and to set up an effective internal market.

Currently, Kenya’s exports to the EU are categorised under the latter’s Generalised System of Preferences (GSP), which implies tariffs on Kenyan exports and thereby is less favourable than the Duty-free, quota-free (DFQF) scheme.

The EU in June entered a deal with Southern African Development Community (SADC).