Kenya and the European Union are currently negotiating on an interim Economic Partnership Agreement
- The EU and Kenya bilateral relationship in 2022 continues to thrive with the regions currently negotiating on an interim Economic Partnership Agreement (iEPA)
- The agreement that is expected to enhance trade and investment opportunities and help boost sustainable economic growth and job creation
- The EU further observed that the future EU-Kenya iEPA would liberalise trade in goods on mutual basis
The European Union (EU) EU and Kenya bilateral relationship in 2022 has continued to thrive, with the two regions currently negotiating on an interim Economic Partnership Agreement (iEPA), an agreement that is expected to enhance trade and investment opportunities and help boost sustainable economic growth and job creation.
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In February 2022, the EU noted that the iEPA would be complemented by binding commitments on environmental protection, climate and labour rights adding that it reflects the pending EPA initialled in 2014 between the EU and the East African Community (EAC).
Valdis Dombrovskis, Executive Vice-President and Commissioner for Trade, said they were moving forward with the Economic Partnership Agreement, and they would also negotiate the trade and sustainability aspects.
“Africa is much more than just our neighbour – it is our partner. The closer our economies, the greater the benefits for our people and businesses. This applies not just to our relations with Kenya, but to the entire Eastern Africa region and to Africa as a whole,” he said at the time.
The EU further observed that the future EU-Kenya iEPA would liberalise trade in goods on mutual basis.
It would also give duty-free quota-free access to the EU market for all Kenyan exports and partial and gradual opening of the Kenyan market, including agriculture and fishery products.
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It would also set up trade-related rules on sanitary and phyto-sanitary measures, technical barriers to trade and customs and trade facilitation.
“This liberalisation will be accompanied by trade-related development cooperation with a view to boost sustainable economic growth and job creation,” the commissioner said.
Trade between Kenya and EU
Kenya is still a net importer of goods from countries in the European Union, with data showing that imports and exports between the East African nation and the region reached $1.9 billion and $916 billion respectively as of 2019.
Data released in 2021 by ODI, a global affairs think tank, shows that in the past five years, ten Kenyan products have accounted for three-quarters of total Kenyan exports to the EU.
The products have been dominated by fresh cut roses at 31.2 per cent, other flowers at 5.5 per cent, not roasted nor decaffeinated coffee at 11.8 per cent, pineapples at 5.4 per cent and live plants at 4.9 per cent.
The finding further showed that the value of exported petroleum oil (not crude) drastically declined by more than 50 per cent in 2016 and almost 100 per cent in 2017 due to the global oil price shock.
This lowered the share of petroleum oil in total Kenyan exports to the EU from 13.14 per cent in 2015 to 0.01 per cent in both 2017 and 2018.
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By 2019, exported petroleum oil increased to $31.9 million but was still below 2015 levels ($114 million).
At the same time, the report noted that Kenya’s exports to the EU declined by 4.8 per cent (or by $167 million) in 2016, driven by a double-digit contraction of exports to major trading partners such as Spain, Italy, Finland, Poland and Ireland.
Weak demand from European countries continued in 2017, with Kenya’s exports to the Netherlands – its top European destination – declining by 6.8%.
This may have been driven by the sharp contraction of two of Kenya’s main exports to the EU, namely pineapples (ranked fourth, with 5.4 per cent of total exports to the EU) and non-crude petroleum oils (ranked seventh, with 4.6 per cent of total exports to the EU), during the same period.
The report highlighted several barriers that Kenyan exports face. These include lack of capabilities especially skills, technology and design). The report also noted that Kenyan exports lack competitiveness and regulatory frameworks to support them.
At the same time, the report noted lack of access to finance is a major barrier to exportation of goods to the European Union. Additionally, exporting goods from Kenya is also disadvantaged by the lack of trade related infrastructure.
Barriers of market access, in terms of standards, labelling and tariffs are also a major issue.
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The East African nation ordinarily enjoys access to the European Union through the EC Market Access Regulation.
The regulations allow developing countries such as Kenya that are still negotiating EPAs to access the EU market until the agreement is signed.
Kenya has been keen on strengthening trade and investment ties with the EU.
In 2020 for instance, Kenyan embassy in Brussels, noted that the country enjoys a longstanding cordial association and trade relations with the European Union, under the framework of the successive Rome Convention and the Cotonou Agreement.
The cooperation began in the 1960s, prior to the Lomé Convention, and has been in the areas of, inter alia: development finance, trade, political, industrial development, energy, socio-cultural, regional cooperation development, agriculture and environment, with the objective to increase export income, promote industrialisation, and promote economic growth of developing countries.
To achieve these objectives, the European Union (EU) provided Kenya and other ACP countries preferential market access for primary products, essentially agriculture and other agro-based products, together with funds and other forms of assistance towards trade and private sector development.
The preferences have been non-reciprocal, and are in the form of lower tariffs and/or tariff exemption in value-added (manufactured) products and agricultural products, provided they pose no direct competition with the East African Community products and do not discriminate among EU member states in terms of tariffs charged on their imports to Kenya.
The arrangement has benefited Kenya, particularly in the areas of horticulture and fisheries, due to the production and supply capacity potentials, and other agricultural products like tea, coffee, and sugar.
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ACP member states benefited at different levels, depending on their production and supply capacities.
Surveys carried out show that ACP states that had production and supply capacity performed better in terms of exports compared with non-ACP developing countries that are at the same level of economic development.
“As you know for sure not only do we share a common historical heritage but the European Union is without doubt our largest single trading bloc. And that does not only apply to Kenya, it applies basically to the entire continent (Africa),” President Kenyatta said at the time.
EU with EAC
Overall, the East African Community (Burundi, Kenya, Rwanda, Tanzania, and Uganda) finalised the negotiations for an Economic Partnership Agreement (EPA) with the EU on 16 October 2014.
Kenya and Rwanda signed the EPA in September 2016, and Kenya has ratified it. For the EPA to enter into force, the three remaining EAC members need to sign and ratify the agreement.
South Sudan became the sixth member of the EAC in September 2016.
The European Commission submitted a proposal for conclusion, signature and provisional application of the full EPA with the East African Community to the Council in February 2016.
As such, exports to the EU from East African Community are mainly coffee, cut flowers, tea, tobacco, fish and vegetables.
Imports from the EU into the region are dominated by machinery and mechanical appliances, equipment and parts, vehicles and pharmaceutical products.