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Kenya Risks Paying Sh2.6bn in Duty to UK for Agricultural Exports if EPA is Not Ratified – KFC

NAIROBI, Kenya, Mar 9 – Kenya risks paying Sh2.6 billion to the United Kingdom in duty for its agricultural exports this year if the Economic Partnership Agreement between the two countries is not ratified in time. 

In a statement to newsrooms, the Council says it, therefore, supports the immediate ratification of the Kenya-UK trade deal.

It says the country’s exports of cut-flowers ornamentals to the United Kingdom could be subject to additional tariffs by the end of this year if the Economic Partnership Agreement is not ratified.

Signed on December 8th, 2020, the trade deal provides Kenyan businesses duty-free access to the UK market, while Kenya will start phasing out duty and quota barriers on a set number of UK products 12 years after the Economic Partnership Agreement has come into force.

The trade agreement ensures that all cut-flower and ornamentals companies in Kenya, can continue to benefit from quota and duty-free access to the UK market.

According to the Council, the deal will therefore support jobs and economic development in Kenya, as well as avoid possible disruption to UK businesses.

“This agreement, therefore, supports jobs and economic development in Kenya, as well as avoid possible disruption to UK businesses such as florists and retailers who will be able to maintain tariff-free supply routes for Kenya’s high-quality flowers,” the Council says.

“Kenya flowers will benefit from enhanced privileges for agricultural goods that confers originating status to East Africa Community (EAC) exports, even if they transit through EU’s 27 countries.”

The council also reveals that the amount of duty that would be on Kenya’s agricultural exports to the UK is estimated to be Sh2.6 billion this year if the EPA is not ratified in time.

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Available data indicates that cut flowers are now Kenya’s second-largest export after tea, contributing around 1.06 percent of the country’s GDP.

The industry is also one of the country’s leading employers with over 200,000 people working directly in the flower industry and an estimated two million indirectly.

“Under this EPA, KFC believes Kenya’s cut-flower exports will remain competitive and certainty in terms of trade will encourage investment, leading to more production and more jobs. It also, in our opinion sets up the framework for further trade negotiations going forward.”

The UK is a critical development partner to Kenya, as well as the largest foreign investor in Kenya.

The UK is Kenya’s second most important export destination. Trade between the two countries reached Sh44 billion in 2019.

Presently, Kenya-UK balance of trade is tilted in favor of the latter with exports in 2020 standing at Sh49.5 billion against imports of Sh29.3 billion in 2019.

Top goods imports to the UK from Kenya in 2019 were in coffee, tea, and spices (Sh13 billion), vegetables (Sh24 billion) and live trees and plants, mostly flowers (Sh11 billion).

The UK market accounts for 43 percent of total exports of vegetables from Kenya as well as at least 9 percent of cut flowers.

As a result of Brexit, trade between Kenya and the UK could not be regulated through the EU Market Access Regulation mechanism and a new agreement was necessary to come into effect on 1 January 2021 at the end of the UK-EU transition period.

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On 8 December 2020, the UK signed an Economic Partnership Agreement with Kenya.

Last week, United Kingdom legislators endorsed the trade deal with Kenya after completing scrutiny of the document, paving the way for its enforcement once the Kenyan counterparts approve it.

 

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