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Wednesday, July 17, 2024

Kenya to open market for duty-free EU imports after trade deal takes effect

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Kenya and the European Union have enforced a trade deal after a decade of negotiations, opening up the domestic market for tax-free goods from the 27-country bloc after 25 years.

EU-Kenya Economic Partnership Agreement (EPA), which preserves unrestricted access of Kenyan goods to the European bloc except for arms, came into force on Monday, Kenya’s Cabinet Secretary for Investment, Trade and Industry Rebecca Miano announced.

“The EU-Kenya EPA is one of the most ambitious agreements negotiated between the European Union and an African country in terms of promoting economic sustainability. It can serve as a template for other African countries, particularly those in Eastern Africa to adapt,” Ms Miano said in a statement.

“The agreement includes trade, economic and development cooperation and a chapter on trade and sustainable development which covers provisions on labour issues, gender equality, forestry and environment and the fight against climate change.”

The pact, the first trade agreement between the EU bloc and a developing country, ensures Kenya’s largely agricultural produce such as vegetables, cut flowers, fruits, tea and coffee continue to enter the bloc duty-and quota-free.

Nairobi, on the other hand, has committed to gradually lower duty on imports from Europe within 25 years after which trade will be liberalised.

This means no duty will apply for goods from Europe such as machinery as well as mineral and chemical products, while investments from the EU will also be incentivised.

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The EPA deal, however, has a protectionist clause which bars the EU from applying blanket subsidies to agricultural exports to Kenya in the absence of a deepened policy dialogue with Nairobi. This clause is aimed at safeguarding agriculture and food security in Kenya against unfair competition from the EU.

Trade between the two parties favours the EU, which sold goods worth Ksh223.12 billion ($1.7 billion) to Kenya, while importing Ksh150.08 billion ($1.2 billion).

The enforcement of the EU-Kenya EPA comes after approval from the European Parliament on February 29, paving the way for heads of State and government to complete the ratification process.

Some 366 EU lawmakers voted in favour of the deal with 86 members rejecting it, while 56 members abstained.

Kenyan lawmakers also approved the document for it to become enforceable.

The document is largely a modification of the text in the stalled EU-East African Community pact, which was first agreed in October 2014 subject to approval by respective parliaments. The major change is the inclusion of clauses around climate change.

The implementation of the EU-EAC treaty, which Kenya endorsed in 2016, had stalled after the other EAC countries rejected it.

Rwanda signed but did not ratify, while Tanzania and Uganda refused to approve the pact for various economic and political interests, including the fear of European goods flooding the market.

Unlike Kenya, which is a lower middle-income country, the other EAC countries are shielded from higher tariffs on exports under the “everything but arms” trade arrangement for least-developed countries.

This is provided for under the World Trade Organisation’s (WTO’s) Special and Differential Treatment (S&D) because they are the least-developed countries (LDCs).

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The refusal to cooperate by EAC peers prompted Nairobi to enter into a temporary special arrangement with the EU, which has allowed Kenya’s exports to continue accessing the EU markets duty- and quota-free.

The EAC Heads of State Summit in February 2021, however, allowed partner members to sign bilateral trade deals on condition that they leave room for other EAC countries to join in future.

Kenya and the EU have utilised this window to re-engage on the pact, leaving the door open for other EAC member States to join when they choose to.

This culminated in the signing of the new document last December subject to ratification by respective parliaments.

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