With both the Kenyan Parliament (on 9 March 2021) and the UK Parliament (on 2 March 2021) ratifying the twenty-five (25) year Economic Partnership Agreement between the United Kingdom of Great Britain and Northern Ireland (UK) and the Republic of Kenya entered into on 8 December 2020 (EPA), this article provides a brief overview of its terms.
Why was entry into the EPA necessary?
The EPA was entered into against the backdrop of the impact of the UK’s decision to exit the European Union effective 31 January 2020 (Brexit) and the Brexit transition period expiring on 31 December 2020 on UK trade relations and the need to (a) maintain the trade relations between the two countries; (b) govern the future trading relationship between the two countries; and (c) foster a progressive opening up of the Kenyan market for UK goods.
- Kenya-EU Agreement: Trade relations between Kenya and the UK were predominantly dealt with within the framework of the European Union Market Access Regulation and specifically the Economic Partnership Agreement between the East African Community (EAC) Partner States and the European Community and its Member States (EAC-EU EPA). The EAC-EU-EPA however is not yet in full effect since unlike Kenya, most East African Community Partner States (EAC Partner States) are yet to sign and ratify it. Under the EAC-EU EPA, Kenya would have duty-free and quota-free access for trade in goods to European markets including the UK market.
- Brexit: Trade relations between Kenya and the UK as envisaged under the EAC-EU EPA would not materialise. Therefore, there was need for the UK and its trading partners Kenya included to enter into alternative trade arrangements to sustain, modify or enhance trade relations.
- Kenyan Exports and UK Market Access: The EPA therefore allows the two countries to maintain the trade relations and grants Kenyan goods particularly horticulture exports for example, fresh or chilled vegetables and beans, black tea, flowers especially fresh cut roses and buds quota-free access to the UK market which would have been lost at the end of the Brexit transition period.
- Kenyan Exports to UK and the Post-Brexit Tariffs: The UK has developed a preferential tariff scheme (UK GSP) where Post – Brexit, countries that currently benefit from a similar scheme under the EU would be entitled to the same tariff reductions on their goods being imported into the UK. Kenya would not be entitled to the full complement of reduced tariffs under the UK GSP, on account of it being classified as a Lower-Middle Income Country and not a member of the Least Developed Countries. To secure access to these preferential import tariff rates, it was important for Kenya to enter into the EPA.
- UK Imports into Kenya and Kenyan Post-Brexit Tariffs: For the UK post-Brexit, not having an agreement in place would have meant its imports into Kenya (particularly machinery, electronics, technical equipment and pharmaceuticals) would be subject to most-favoured-nation (MFN) tariff rates under the World Trade Organisation (WTO) rules. This would result in the UK losing access to preferential tariffs in the event Kenya increases existing tariff rates in the future. Moreover, Kenya has committed to the gradual liberalisation of tariffs imposed on UK imports.
Notable Aspects of the EPA
Form: The EPA is largely based on the existing EAC-EU EPA.
Territorial Application: The EPA applies to the EAC Partner States that have signed and ratified the EPA (currently only the Republic of Kenya) on the one hand and the UK, Gibraltar, the Channel Islands and the Isle of Man.
Initial Scope: The EPA focuses on trade in goods between Kenya and the UK. In particular, it deals with:
- customs duties, non-tariff measures, customs and trade facilitation, and trade remedies;
- grant of immediate duty-free and quota-free access to the UK market for all Kenyan goods;
- a gradual liberalisation of the Kenyan market for UK goods;
- fisheries (marine and inland) and aquaculture development;
- agriculture and particularly; sustainable agriculture development, food security, livelihood security, rural development, and poverty reduction in Kenya;
- economic and development co-operation in relation to infrastructure, agriculture, private sector development, fisheries, water and environment, customs and trade facilitation; and
- dispute settlement.
Expanded Scope: Additionally, the EPA makes provision for a 5 year negotiation period to expand the EPA to include: trade in services; competition policy; investment; private sector development; trade, environment and sustainable development; intellectual property rights; and transparency in public procurement.
Accession by EAC Partner States: The EPA allows for other EAC Partner States to accede to it and has appropriate provisions for its amendment, therefore avoiding the need for entry into a new agreement with the EAC.
Development Co-operation: While the EPA recognises the need ‘to cooperate in order to facilitate the implementation of the EPA and to support regional integration and development strategies’ and reaffirms ‘development cooperation’ as a ‘core element’ of the partnership, it is instructive to note it does not create financial or non-financial obligations on the UK.
Kenya- EAC Relations: Kenya’s trade relations within the other EAC Partner States have not been free of tension. Kenya is the only EAC Partner State which has entered into the EPA and it remains to be seen whether the other EAC Partner States will opt in. Consensus within the EAC Partner States is key for the full implementation of the EPA and realisation of benefits by the parties, given that the reduction of tariffs imposed on UK goods must be implemented after the expiry of seven years from the date it comes into force.
Consultations/Public Participation in the Process: The UK Government held various consultative meetings with various stakeholders and the EPA was debated in the UK Parliament. The Kenyan Government undertook the same process but there has been criticism that wider stakeholder consultations should have been carried out.
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