Kenya: Comesa Grants Country Safeguards On Wheat And Sugar Imports

Source from:  The East African (Nairobi) 3 December 2007 12/04/2007

Comesa has allowed Kenya to continue imposing high duties and quotas on wheat flour imports from Egypt and Mauritius - the two main low-cost producers of the commodity in the trading bloc. Under the arrangement, Kenya may impose a 60 per cent duty on the imports in addition to other taxes. According to minutes of the just concluded Council of Ministers meeting in Lusaka, Zambia, the wheat flour safeguards will run until the end of 2008, after which they will be reviewed by the trading bloc's Trade and Customs committee, its main policy-making body on trade issues. The tariff rate quotas have been set as follows: In the current year, the limit on what can be exported from Egypt on a duty-free basis has been set at 32,400 tonnes and 2,366 tonnes for Mauritius. In the event that the quotas for this year are not fulfilled, the decision is that it should be cumulated with the new quotas for 2008. Quotas for the year 2008 are as follows: 16,200 tonnes for Egypt and 1183 tonnes for Mauritius. First granted in November 2001, the Comesa safeguards for the wheat flour industry in Kenya were extended in 2003, 2004, 2005, and 2006. Although Kenya was also granted safeguards for the sugar industry, this did not come about without murmurs from some of the representatives of the trading bloc. According to the minutes of the meeting, the Council of Ministers questioned why a decision to extend the safeguards was taken by the secretariat without involving the Trade and Customs Committee. Minutes of the Lusaka meeting also show that some members of the Council of Ministers expressed reservations over the accuracy of the data Kenya had included in its appeal for the extension of the sugar safeguards. Last year, Kenya requested a review of its sugar sector by the secretariat to determine whether the industry was competitive enough to allow duty-free sugar imports from Comesa. Consequently, the Comesa Secretariat commissioned a study to assess the competitiveness of the sugar industry in Kenya. The conclusion of the study was that, considering the significance of the sugar industry to the economy of Western Kenya, duty-free imports would have negative social and economic consequences for one of the most populous areas of the country. The study also showed that the six-year period granted to the country under the first safeguard regime had proved to be inadequate and that it was not possible within that period to restructure the industry to a level where it was ready to compete with the low-cost sugar producers in the trading bloc. At the end of it all, the Council of Ministers decided to let Kenya have its way, but the safeguards were only granted on condition that: First, the Comesa Trade Remedies Rules were amended and made compliant with WTO rules to allow the safeguards on Kenya's sugar industry to run 10 years. Second, that the safeguards continued to operate as a Tariff Rate Quota. Third, that the quota was consolidated to apply to all types of sugar without distinction between white sugar intended for industrial use and brown sugar intended for domestic use. Under the new conditions, the quotas under the safeguards will be enlarged in each successive year of application, and the tariff applied on import quantities above the quotas reduced in each successive year. Within 12 months of the extension of the safeguards, the government must approve the privatisation of all remaining publicly owned sugar companies and take steps to ensure that the companies are actually privatised within two years. Also, the sugar industry in Kenya must change the cane pricing formula from the existing one based on cane weight to one based on sucrose content. The Kenyan government must also adopt an energy policy aimed at promoting co-generation and other forms of bio-energy production to make the sugar industry more competitive. Kenya continues to dominate the intra-Comesa export market with a 34 per cent share, followed by Egypt with 17 per cent. On the import side, Sudan registered the largest market share of 17 per cent followed by Uganda at 12 per cent. Intra-Comesa trade has continued to experience robust growth with agricultural commodities such as tea, tobacco, sugar, rice, coffee, cotton and wheat topping the tables. Enditem