President of the European Commission Ursula von der Leyen (left) and President William Ruto at State House ahead of the signing of a new trade agreement in Nairobi on December 18, 2023. Photo/AFP
By Business Daily Africa
Kenya has inched closer to concluding a preferential trade deal with European Union (EU), preserving a long-term tax-free access of exports to the 27 countries in the bloc while gradually opening up her market for duty-free imports and investments from Europe.
The European Parliament on Thursday endorsed the pact, paving the way for heads of State and government to give final approval and complete the ratification process on the EU side.
Kenyan lawmakers have also to debate and approve the document for it to become enforceable.
“It is the first agreement with a developing country in which the EU’s new approach to trade and sustainable development is reflected,” the European Parliament said in a press statement on its website.
“The agreement includes binding and enforceable provisions on international standards and agreements on labour, gender equality, climate and the environment, and prevents both parties from lowering labour and environmental standards.”
Some 366 EU lawmakers voted in favour of the EU-Kenya Economic Partnership Agreement (EPA) which was rejected by 86 members, while 56 members abstained, the statement said.
The pact will ensure Kenya’s largely farm produce exports continue to access the EU markets 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 while investments from EU will also be incentivized.
The EPA deal, however, has a protectionist clause which bars EU from applying blanket subsidies to agricultural exports to Kenya in the absence of deepened policy dialogue with Nairobi. This clause is aimed at safeguarding agriculture and food security in Kenya against unfair competition from the EU.
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.
The refusal to cooperate by EAC peers prompted Nairobi to enter into a temporary special arrangement with EU which has allowed Kenya’s exports to continue accessing the EU markets duty- and quota-free.
Total trade between the EU and Kenya was in 2022 estimated at €3.3 billion (about Sh512 billion under the prevailing conversion rate for the euro), according to data from European Commission.