One particular sector that could be affected is the country's thriving cut flower industry. Kenya is one of the world's largest exporters of cut flowers, with over 38% of its total exports going to the EU. However, without an EPA in place between Kenya and the EU, the country's cut flower industry could face significant losses due to increased tariffs and non-tariff barriers.
The Overseas Development Institute (ODI) has conducted a thorough analysis of the potential impact of the non-conclusion of the EPA process before the deadline of 1st October 2014. The report, published in the Trade Hot Topics series by the Commonwealth Secretariat, explores the implications and subsequent costs of the possible loss of duty-free access to the EU market.
One of the major challenges highlighted in the report is the impact of higher tariffs on Kenyan cut flower exports. The loss of preferential access to the EU market could result in an increase of tariffs on Kenyan cut flowers by up to 8.5%. This increase in costs could negatively affect the competitiveness of Kenyan flowers in the EU market, leading to a decline in exports and potential job losses in the industry.
In addition to higher tariffs, the report also identifies the potential impact of non-tariff barriers such as technical regulations and standards. The implementation of new regulations and standards could require additional investments by Kenyan businesses to meet the new requirements, leading to increased costs and potentially reducing their competitiveness in the EU market.
To prepare for the potential impact of the non-conclusion of the EPA process, Kenyan businesses are exploring alternative markets such as China and the Middle East. However, these markets may not offer the same level of demand for Kenyan cut flowers as the EU market. Moreover, entering new markets requires significant investments and efforts to build up supply chains and establish export relationships that may take years to develop.
In conclusion, the potential loss of duty-free access to the EU market could have a significant impact on Kenya's cut flower industry. The increased costs of accessing EU markets could lead to reduced competitiveness and potentially job losses in the sector. As the EPA deadline approaches, it is important for Kenyan businesses to explore all possible options for maintaining their competitiveness in the global market.
Keywords: Façade ACP, EPA, Kenya, cut flower industry, duty-free access, EU market, tariffs, non-tariff barriers.