The A-Z of Kenya’s trade pact with European Union

Kenya signed a preferential trade pact with the European Union (EU) on June 19, assuring exporters of long-term access to the 27-country bloc without restrictions on taxes and quotas.

The deal enables Kenya and the European Commission to bilaterally enforce the Economic Partnership Agreement (EPA) between the EU and the now seven-nation East African Community (EAC), subject to approvals by lawmakers on both sides.

The EU-EAC EPA was negotiated and concluded in October 2014, but could not be implemented pending endorsement from all EAC partner states.

So, what are EPAs?

These are trade and development agreements initiated by the EU in a bid to largely secure free market access for a majority of the bloc’s products in integrated regional markets like the EAC.

The EU reciprocates in equal measure by allowing countries which sign the deal to export their produce duty- and quota-free.

The EPAs are a product of the Cotonou Agreement, a treaty the EU signed with African, Caribbean and Pacific countries engaged in regional integration processes in 2000.

The agreement, reached in Benin’s port city of Cotonou and which came to force in 2003, aimed to align the EU’s preferential trade deals with the World Trade Organisation’s rules.

That followed criticism of a non-reciprocal and discriminatory approach in the bloc’s preferential trade dealings.

Why has it taken long for the EAC-EU EPA deal to be implemented?

The negotiations for the deal were done and concluded in October 2014. However, it needed all the EAC countries to endorse it before it comes into force in line with the EAC rules.

Kenya signed and ratified it in 2016. Rwanda signed but did not ratify the EPA, while Tanzania and Uganda refused to approve the treaty for various economic and political interests, including the fear of European goods flooding the market.

Burundi could not sign it because the EU had unilaterally placed trade and aid sanctions on the country in 2016 due to a political crisis in the land-locked country, considered amongst the poorest in the World.

Why did Kenya sign and ratify the EAC-EU deal while other EAC partner states were reluctant?

The EU had set January 2017 deadline for the EAC-EU EPA to be signed and ratified. Countries which had not endorsed the deal then were to have their exports to the EU subjected to higher tariffs under the Generalised Scheme of Preferences.

This forced Nairobi to enter into a temporary special arrangement with the EU to allow duty-and quota-free entry of Kenyan goods ahead of the January 2017 deadline set by the EU.

The other EAC countries were shielded from higher tariffs on exports under the "everything but arms" trade arrangement, regardless of the EPA.

Why is Kenya and EU implementing the deal bilaterally now and not before?

The EAC Heads of State Summit on February 27, 2021 allowed individual partner states who wish to implement the EAC-EU EPA to engage the EU bloc under the principle of variable geometry.

Kenya and the EU used this window to sign the deal bilaterally and leave room for other EAC countries to join in future. This is subject to ratification by Kenyan and the EU parliaments.

What reservations did other EAC members have on the pact with the EU?

Tanzania was wary that the EPA will open the door for EU countries to flood EAC with cheap products thereby stunting the growth and development of local factories.

Dar es Salaam was also not convinced how the resultant revenue loss as a result of market liberalisation will be compensated.

Uganda insisted it will only sign and ratify if and when there will be concurrence amongst all EAC partner states.

Rwanda did not publicly have any issues with EPA and even signed it but did not ratify it, while Burundi’s hands were tied due to then sanctions which have since been lifted.

What does EPA say about agriculture and industrial development concerns raised by EAC countries?

The EU has committed not to apply export subsidies for agriculture products, even in times of market crisis.

The EU and Kenya will reinforce joint work on sanitary and phytosanitary measures by engaging in deepened policy dialogue on agriculture and food security in a transparent manner.

The EU has further committed to supporting the capacity of Kenyan farmers to comply with agricultural standards. The EPA also has a chapter on enhancing the competitiveness of the Kenyan economy by building supply capacity.

How will the coming into force of the EPA affect trade?

All goods from Kenya, except arms, will access the EU market duty- and quota-free immediately after the deal comes into force.

Due to different levels of development, Kenya has been allowed to open up its market for EU products partially and gradually within 25 years.

The EPA, however, has special safeguards which will see Kenya and the EU reintroduce duties if a surge in imports from either side threatens to kill industries in either economy. These are aimed at protecting infant industries in either country.

How does the deal address climate change issues?

The two parties have committed to implement multilateral environmental agreements, including the Paris Agreement on climate change.

Each party is further obligated to combat illegal wildlife trade and logging as well as unreported and unregulated fishing.

What is the space of civil society groups in the implementation and monitoring of the EPA?

The deal has clauses, where domestic advisory groups will be set up with independent civil society representatives to advise both parties on the implementation of the Agreement, as well as a Consultative Committee, which were representatives of business associations, trade unions, non-governmental associations from Kenya and the EU and Kenya will meet regularly.

What is the timeframe for the EPA to be enforced?

The full document of EU-Kenya EPA is currently undergoing legal revision which will pave the way to translation to other languages before it can be adopted by the Kenyan Cabinet and European Council.

This will then allow the EU and Kenyan Trade Secretary to sign the full document before forwarding it to respective parliaments for ratification.

It can only come into force if approved by respective parliaments which will set their own timelines to act on the document.

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