The Business Daily reports that Kenya’s annual custom tax collection is expected to drop by KES 16.5 billion ($193.8 million). This will come about if tariffs on European products are removed under a proposed economic pact. South Centre, an international policy institution, has said that the direct revenue loss would outstrip the KES 10.4 billion ($121.8 million) that Kenya would realise from increased trade with Europe.
As the Business Daily reports, South Centre’s Trade Policy Advisor Aileen Kwa told the East African Legislative Assembly’s (EALA) committee in charge of international trade, that the magnitude of loss can be collected from recordsin the current statistics which show that even with current tariffs, imports have been growing at a faster rate than exports.
Ms Kwa said that apart from tax losses, the Economic Partnership Agreement (EPA) that the region is negotiating with European Union would stifle expansion of industries and restrict trade with other partners. The Switzerland-based agency estimates that this adverse impact would cost KES 100 billion.
Economic Partnership Agreements are schemes geared at creating a Free Trade Area (FTA) between the European Union and the African, Caribbean and Pacific Group of States (ACP).
A report titled The EPAs and Risks for Africa: Local Production and Regional Trade notes that the EAC is more competitive than the EU on only 10% of total tariff lines. It further outlines that 51.3% of tariff lines / products where there is current local production will be put at risk, perhaps even damaged (1,100 tariff lines out of 2,144 ) as these are lines where liberalization will take place and the EU is more competitive on these tariff lines than the EAC, thus clearly exposing the inappropriateness of the pact.