On Monday, 19th June 2023, President William Ruto oversaw the political conclusion of the negotiations for the Economic Partnership Agreement (EPA) between Kenya and the European Union (EU). The negotiations were spearheaded by European Commission Executive Vice-President and Commissioner for Trade Valdis Dombrovskis and Cabinet Secretary of Kenya’s Ministry of Investments, Trade and Industry, Moses Kuria.

This EPA stems from discussions that were initiated from the EU 2021 Trade Policy Review, the EU’s Trade Policy with Africa and the unsuccessful Regional EPA negotiated in 2014 between the EU and the East African Community. 

•         The EU 2021 Trade Policy Review is focused on economic recovery by boosting green and digital transformations and strengthening multilateralism and reforming global trade rules to ensure their fairness and sustainability;
•         The EU’s Trade Policy’s pillars are economic, social and environmental. These anchor on dismantling restrictions on foreign direct investments, non-tariff and customs barriers;
•         EU’s strategy with Africa highlights on stronger economic cooperation, enhancing sustainable development, and co-existence between the two parties while sustaining peace, human dignity, democracy, security, prosperity and solidarity.;
•         The EAC-EU EPA covers trade in goods and development cooperation.

The European Union is Kenya’s first export and second largest trading partner making this EPA a tool that will boost the trade in goods, create new economic opportunities and provide a cushion for sustainable developments such as climate and environmental protection and labour rights. It is also essential to note that this being the very first Trade Agreement with a developing country, the EU market will be opened up more for Kenyan products, and act as an incentive for the EU’s investment in Kenya as a result of assured legal certainty and stability.

Statistically, the total trade was tallied between Kenya and the EU at KES. 508,701,002,700 in 2022 a 27% increase from 2018. Currently, Kenya’s main exports to the EU are tea, coffee, fruits, vegetables and flowers estimated to be KES 184,985,550,000 while the major imports from the EU are chemical products, mineral products and machinery at KES 311,420,683,100.

In line with Kenya Kwanza Government’s Bottom-Up Economic Transformation Agenda (BETA) and its maiden budget 2023/2024, this EPA’s key features are:

•         Boosting economic opportunities

This is to be effected through immediate duty-free, quota-free access to the EU for all Kenyan exports (except arms); asymmetrical trade liberalisation meaning the partial, gradual opening of the Kenyan market, in full consideration of its economic development within a 25-year period; a ban on unjustified or discriminatory restrictions on imports and exports as provided for by the World Trade Organization; safeguards on both sides if imports under the deal disturb or threaten to disturb the economy; special safeguard conditions to protect Kenya’s developing industry; and better customs rules and procedures for easier trade.

BETA is geared towards economic turnaround by increasing investments in strategic sectors such as Agricultural Transformation; Micro, Small and Medium Enterprise Economy; Housing and Settlement; Healthcare; and, Digital Superhighway and the Creative Industry. This is with the aim of reducing the cost of living; creating jobs; achieving a more equitable distribution of income; enhancing social security; expanding the tax base for more revenues to finance development; and increasing foreign exchange earnings.

In his speech on the Kenya Kwanza Maiden Budget 2023/2024, Treasury CS Njuguna Ndung’u highlighted the Special Economic and Export Zones making a proposal to the August House to amend the Export Processing Zones Act and the Special Economic Zones Act to be exempted from import duty, goods produced from the Special Economic Zones and Export Processing Zones that use inputs or raw materials originating from the Customs Territory, when sold into the domestic market. This, he said, will encourage enterprises operating in the zones to purchase raw materials or inputs from the domestic markets. 

•         Dedicated trade and sustainable development chapter

The EPA associates with binding and enforceable provisions with respect to workers’ rights, gender equality and women’s rights, environment and climate change, and combating illegal wildlife trade, illegal logging, and illegal, unreported and unregulated fishing.

There is a commitment to implement the Paris Agreement on climate change whose key aspects are long-term temperature goals; global peaking and climate neutrality; mitigation; conservation and enhancement of sinks and reservoirs; voluntary cooperation; enhancing adaptive capacity; minimising and addressing loss and damage associated with the adverse effects of climate change; obligations of developed countries to support the efforts of developing country parties to build clean, climate-resilient futures; climate change education, training, public awareness, public participation and public access to information; robust transparency and accounting system to provide clarity on action and support by parties, with flexibility for the differing capabilities of parties; and so on.

Relatively, BETA is set to implement strategic interventions towards climate change mitigation and adaptation including green energy, smart agriculture, decarbonized manufacturing, e-mobility and green building, all aimed at the attainment of zero carbon by 2050. The government intends to enhance cash flow from the Green Climate Fund (GCF) by continuing the implementation of the National Green Climate Fund Strategy, which provides an elaborate framework for coordinating and attracting resources from the Green Climate Fund and implementing the Financing Locally-led Climate Action (FLLoCA) Programme in collaboration with county governments and development partners to manage climate risks.

On gender equality, the Kenyan government recognises women’s participation in the key sectors of our economy as critical therefore moving towards sustaining increased incomes for women. This is through employment creation and supporting women-led enterprises and strengthening women’s participation in decision-making in governance and political institutions as well as reducing sexual and gender-based violence and provision of affordable health services.

With the International Labour Organization as the foundation for fundamental rights at work, the deal ensures prohibiting child labour, prohibiting forced labour, freedom of association, prohibiting employment discrimination and a safe and healthy environment for all workers. This upholds Article 41 of the Kenyan Constitution, 2010.

In the event that one of the two parties violates these commitments, this may trigger a specific dispute settlement mechanism which includes a compliance stage, where the party that is found in violation will have to promptly state how it will implement the panel report and carry this out within a certain period of time. This will be subject to panel review.

•     Agricultural and food security

The EPA aims at sustainable agricultural development in Kenya. There are measures in place that will guarantee that the EU will not apply export subsidies for agriculture products, even in times of market crisis. The National Treasury plans to mobilise an estimated KES 100 billion in private sector capital through various priority sectors such as agriculture to deliver nationally significant infrastructure, drive growth and unlock private investment with the greatest potential benefit to the Kenyan people.

Under the Public-Private Partnerships Framework, several high-impact projects have been appraised and approved to proceed to the development phase in line with the government’s agenda on food security. Overall, this deal will see the creation of numerous jobs for the Kenyan people while boosting the much-needed economic recovery and boost, trade creation and diversion.

The Agreement is meant to be balanced by acting as a safeguard for Kenya’s agriculture and manufacturing industry taking into consideration Kenya’s capacity. This is contrary to the history of trade between the EU and Kenya as it has always been in favour of the EU with Kenya’s continued export of primary commodities to the EU while importing high technology commodities.

In the implementation of this Agreement, there are key stakeholders that will be involved to ensure inclusivity and public participation. So as to steer, support and oversee its implementation, an institutional chapter will be set up that will include ministerial, senior official and technical bodies. Another chapter on economic and development cooperation will be focused on enhancing the competitiveness of the Kenyan economy by building supply capacity and assisting Kenya in implementing the EPA smoothly. The Civil Society will also be engaged to advise both sides on the implementation of the Agreement.

The EU – Kenya EPA is now set for legal scanning before submission for execution to the European Council. Once adopted, the two Parties will then sign the Agreement, transmit it to both Parliaments for consent and provisional application can begin. After ratification, the Agreement is then enforced. 

The Kenyan government has reinstated the port operations from Nairobi and Naivasha to Mombasa. This will revamp the coastal economy and give importers, especially the business community a choice on cargo clearance and a step towards building capacity for the context of this deal. It is, however, of great importance to ensure that we have policies in place to protect Kenya’s interests.