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Positioning Kenya to Gain from the Economic Partnerships Agreement with UK in Post-Brexit Era

Background to the EPA

Until 31st December 2020 (Brexit transition deadline), Kenya was accessing the United Kingdom (UK) market under the European Union (EU) standard Generalized Scheme of Preference (GSP) and the EU-African, Caribbean and Pacific (ACP) countries agreement. The EU GSP grants low and lower middle-income countries partial or full removal of customs duties on two thirds of tariff lines, while the EU-ACP Cotonou Agreement provides asymmetric market access. After 31st December 2020, however, the UK not only ceased to be a member of the EU, but also stopped being a member of the EU-ACP Cotonou Agreement. In effect, Kenyan exports would no longer access the UK market under the existing EU GSP framework, the EU-ACP Cotonou Agreement, and the new UK-EU Trade and Cooperation Agreement signed on 30th December 2020. Since the UK would no longer be covered by both existing and future trade deals between the EU and other parties, it was in Kenya’s best interest to secure a trading agreement with the UK before the Brexit transition deadline.

To secure the UK market in the post-Brexit era, Kenya had to either ensure the EU-ACP Agreement was replicated between the UK and ACP countries— particularly between the UK and the East African Community (EAC) or negotiate for a new bilateral trade agreement with the UK. The fact that EAC’s low-income members could still enjoy duty-and quota-free access to the UK market under UK’s GSP, however, created disincentive to negotiate for a UK-EAC deal, making the former option unfeasible. Being a lower-middle-income country, all Kenyan products exported to the UK market would face tariff barriers under UK’s GSP in absence of an Economic Partnership Agreement (EPA) — only exports from low-income countries enjoy duty-and quota-free market access under the GSP framework. Some product lines would, however, face relatively lower tariff rates compared to the rest of the Kenyan exports in absence of an EPA as shown in Table 1.

To enjoy a quota-and duty-free access to the UK market, Kenya was left with a single option of negotiating for a bilateral Economic Partnership Agreement (EPA) with the UK. Negotiations commenced in August 2020 and concluded with signing of an EPA on 8th December 2020. With the EPA, all Kenyan product lines— including those in Table 1, would enjoy duty-and quota-free access to the UK market in the post-Brexit era.

Table 1:  Kenyan product lines with lowest tariff rates under UK’s GSP

NoProduct lineGeneral Framework Tariff
1Orchid, hyacinth, narcissi and tulip bulbs, in growth or in flower4.50%
2Bulbs, tubers, tuberous roots, corms, crowns and rhizomes, in growth or in flower (excl. those used for human consumption, orchids, hyacinths, narcissi, tulips and chicory plants and roots)2.50%
3Fresh cut roses and buds, of a kind suitable for bouquets or for ornamental purposes4.50%
4Fresh cut orchids and buds, of a kind suitable for bouquets or for ornamental purposes4.50%
5Fresh cut chrysanthemums and buds, of a kind suitable for bouquets or for ornamental purposes4.50%
6Fresh cut lilies “Lilium spp.” and buds, of a kind suitable for bouquets or for ornamental purposes4.50%
7Fresh cut gladioli and buds, of a kind suitable for bouquets or for ornamental purposes4.50%
8Fresh cut ranunculi and buds, of a kind suitable for bouquets or for ornamental purposes4.50%
9Fresh cut flowers and buds, of a kind suitable for bouquets or for ornamental purposes (excl. roses, carnations, orchids, gladioli, ranunculi, chrysanthemums and lilies)4.50%
10Dried, dyed, bleached, impregnated or otherwise prepared cut flowers and buds, of a kind suitable for bouquets or for ornamental purposes6.50%

Source: GOV.UK.

Kenya-UK Trade Status

Source: ITC Trade Map

Overall, whereas UK’s market share in Kenya has been shrinking, Kenya’s market share in the UK in terms of both exports and re-exports has remained relatively more or less the same over the 20-year period.  Over this period, Kenya’s market in the UK has been 1.5% of Kenya’s GDP and 9.3% of Kenya’s total export value. In absence of the EPA, Kenya would have witnessed significant reduction in the size of the UK market and its contribution to Kenyan GDP due to quota-and duty-related entry barriers. With the EPA being in force and guaranteeing quota-and duty-free market access, however, the market and its contribution to Kenyan GDP has been secured.

Kenya’s leading exports to the UK include coffee, tea, mate and spices, edible vegetables and roots and tubers, live trees and plants, bulbs, cut flowers and ornamental foliage, printed books, newspapers, pictures and products of the printing industry, manuscripts, and edible fruit and nuts, peel of citrus fruit or melons. The leading re-exports include mineral fuels, mineral oils and products of their distillation, bituminous substances, machinery, mechanical appliances, nuclear reactors, boilers, sugars and sugar confectionery, beverages, spirits and vinegar, and vehicles other than railway or tramway rolling stock. The EPA is expected to sustain entry of Kenyan products into the UK market in the post-Brexit era and policy incentives should target to enhance exports of these products into the UK market. They constitute Kenya’s frontier products bearing potential to advance the country’s export diversity and complexity, are the products targeted by the National Exports Development and Promotion Strategy (2017-2022), comprise products in which Kenya enjoys the highest comparative advantage in the UK market, and constitute over 60% of Kenya’s total exports to the UK.

Kenya’s leading imports from UK include machinery, mechanical appliances, nuclear reactors, boilers, vehicles other than railway or tramway rolling stock, and parts and accessories, electrical machinery and equipment, sound recorders and reproducers, television, pharmaceutical products, paper and paperboard, articles of paper pulp, of paper or of paperboard, printed books, newspapers, pictures and other products of the printing industry, manuscripts, textile articles, worn clothing and worn textile. With the EPA, Kenya has enhanced her access to high-technology capital goods from the UK market while sustaining intra-industry trade in consumer goods.

Gaining from the EPA

Going into the post-Brexit period, Kenya will need to not only sustain her pre-Brexit market share in the UK, but also expand it. To achieve this, the country needs to improve her policy and legislative environment, undertake targeted capacity building initiatives, and re-orient her incentives towards certain industries and product categories.

On the policy and legislative environment, Kenya currently lacks a national quality policy to anchor the country’s quality infrastructure as regards market surveillance, conformity assessment, certification, accreditation, and metrology. Developing a national quality policy in line with Articles 38 and 46 of the Kenya-UK trade deal would support seamless access to the UK market. The Kenya Communications Act, 1998, and the Kenya Communications (Electronics Transactions Regulations, 2009) need to be reviewed and fully implemented to anchor online consumer protection and trust, secure online data on transactions, and enhance online dispute resolution.

Currently, Kenyans spend 3.10% of monthly income on broadband connectivity. Re-orienting policy incentives to support national digital connectivity through reduction in cost of Internet is key in supporting digital trade in the post-Brexit era. Government budgetary allocation on research and development above the current average of 0.08% of GDP could support innovations that enhance diversity of Kenyan exports. Kenya is currently participating in negotiations for the WTO e-commerce Joint Statement Initiative (JSI) on digital trade, openness, trust, telecommunication, and market access. Ratifying the treaty would further support market access for Kenyan exports. Digital diplomacy could further anchor digital consumer protection and trust.

On capacity building initiatives, government support to private-sector innovations through seed capital and incubation would promote exports to the UK. Collaboration between the government and the private sector in executing trade fairs, expos, exhibitions, and summits would showcase Kenya’s products, services, and investment opportunities especially those targeting public-private partnerships (PPPs) and joint ventures. Through the collaborations, awareness could be created about Kenya’s innovation hubs, clusters, and special economic zones. The collaborations could further support trainings on UK rules of origin, including Sanitary and Phyto-Sanitary (SPS) requirements for accessing the UK market. Promoting public-private sector dialogue in line with Article 26 of the Kenya-UK pact could support pro-export trade policy advocacy. Targeted incentives to support value addition, seed diversification, sustainable land use and management, and modern farming methods would promote Kenya’s agricultural productivity.

Re-orienting government incentives and policy reforms to target Kenya’s frontier industries and sectors, products earmarked in Kenya’s National Export Development and Promotion Strategy (NEDPS) (2017-2022), and products that Kenya enjoys revealed comparative advantage (RCA) with the UK bears potential of positioning Kenya to gain from the EPA with UK. The frontier industries transcend agricultural, chemical, non-metallic, wood, machinery, and metallic. The NEDPS sectors include manufacturing, agriculture, livestock, fish, mining, gas and oil, handicraft, and services. Kenya enjoys comparative advantage with the UK in vegetables, raw materials, and consumer goods.

Authors: Shadrack Mwatu, Policy Analyst, Trade and Foreign Policy Department

Paul Odhiambo, Policy Analyst, Trade and Foreign Policy Department

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