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EU – Kenya Trade Partnership Agreement
Background
On 1 July 2024, the EU-Kenya Economic Partnership Agreement (EPA) entered into force culminating negotiations towards an EU-Kenya Strategic Partnership.
Kenya is reported to account for nearly half of EU imports from the EAC and of EU exports to the EAC. The EU Member States together account for about 10 % of Kenya's imports, mainly mineral and chemical products, and machinery. The EU is the primary importer (16%) of Kenya's products, mainly agricultural and horticultural products (fruit and vegetables, cut flowers).
The EU had engaged negotiations towards an EPA with EAC member states in 2014 and agreed on a draft EU-EAC EPA in October 2014. Only Kenya and Rwanda signed the EPA, but other EAC member states were reluctant to ratify the EPA leading to protracted discussions and delay in the ratification process. Kenya and the EU therefore launched a strategic dialogue marking 'the stepping up of EU-Kenya bilateral relations' in June 2021 and agreed on 17 February 2022 to advance negotiations on a bilateral EPA. They concluded negotiations on 19 June 2023. The EU and Kenya officially signed the agreement on 18 December 2023 in Nairobi, which then came into force on 1 July 2024.
Features of the EPA
The EU-Kenya EPA seeks to contribute to economic growth and development by establishing a strong and strategic trade and development partnership and promoting the gradual integration of Kenya into the world economy, in conformity with the country’s choices and development priorities. To this end, some of the key features of the EU-Kenya EPA are itemised below:
a. Elimination of import and export tariffs. The EU-Kenya EPA provides for duty free, quota free access to the EU market for all Kenyan products. In this regard, all products excluding arms originating in Kenya classified under the Harmonized Commodity Description and Coding System (‘Harmonized System’) for customs purposes would be imported into the EU free of customs duties.
On the other hand, customs duties applicable to products originating in the EU imported into Kenya for would be eliminated progressively upon the entry into force of the EPA. The customs duties would be progressively abolished over a period of 15 years to 25 years depending on the category of products. As such, the EPA would require Kenya to lift taxes on EU imports, but this would be done progressively to protect products of economic importance to Kenya.
b. Limits on non-tariff barriers. The EU-Kenya EPA requires the EU and Kenya to commit to harmonising their technical standards and progressively eliminate technical barriers to trade. For instance, under the EPA, the EU and Kenya would commit to cooperating in adopting a protocol governing the rules of origin at the latest five (5) years after the date of entry into force of the EPA. Until then, the rules of origin included in the EU Market Access Regulations would apply to the EPA.
Further, the EU-Kenya EPA allows the parties to establish rules for the application of sanitary and phytosanitary (‘SPS’) measures. These are rules on food safety and animal and plant health standards that parties would be required to follow. The rules must be framed as per the World Trade Organization Agreement on the Application of Sanitary and Phytosanitary Measures (‘the WTO SPS Agreement’).
They are designed to ensure harmonised standards applicable to various products while avoiding disguised protectionism.
c. Most-favoured nation clause. Under the EPA, if the EU or Kenya enters into a trade agreement granting more favourable treatment to third countries, the same treatment becomes applicable to trade between Kenya and the EU. The clause is asymmetric: it concerns any trade agreement the EU concludes; for Kenya it will be limited to trade agreements with major trading economies. Accordingly, Kenya can agree more favourable terms, for example, with EAC partners.
d. Trade defence mechanisms. For instance, the EPA allows either party to forgo the elimination of customs duties in a particular territory for a limited duration where this would cause serious injury to the domestic industry producing like or directly competitive products in the territory of the importing party. This would be monitored by the EPA Council established under the EPA.
East African civil society organisations have, over the years, expressed criticism of EPAs. This is on the basis that liberalising trade by lifting duties and taxes would hurt Kenya’s industrial sector, including the agricultural sector being one of the key sectors for Kenya’s economy. Liberalisation would arguably place the products of local industry players in competition with the subsidised products from the EU. An additional concern is that EAC countries also apply a common external tariff on goods being imported from outside the EAC which may be disrupted by the Kenya-EU EPA.
Conclusion
The EU-Kenya EPA has been described as the most ambitious deal negotiated with an African country in terms of sustainability and can serve as a template for other sustainable trade agreements. For Kenya, the agreement provides an opportunity for the growth of Kenya's export market for agricultural products including horticulture. In addition, with the presence of trade defence mechanisms and the progressive elimination of import tariffs, local industries should have some leeway to adapt to competitive products originating in the EU.