The EU and Kenya have concluded today the negotiations on an ambitious trade agreement through which they will implement bilaterally the regional Economic Partnership Agreement (EPA) between the EU and the Eastern African Community (EAC).
The agreement, which will bring about an important boost for trade in goods, contains substantial development and cooperation elements and is the first and most ambitious trade deal with a developing country to contain strong commitments on sustainability.
The EU is Kenya’s second largest trading partner, and Kenya’s most important export market. Total trade between the EU and Kenya reached €3.3 billion in 2022, with an increase of 27% compared to 2018.
EU’s imports from Kenya are €1.2 billion and are mainly vegetables, fruits, and flowers. EU exports to Kenya amount to €2.02 billion and are mainly mineral products, chemical products, and machinery. The EU is the first export destination for Kenya, with 16% of its total exports in 2022, followed by Uganda (12%) and USA (8%).
The EPA between the EU and Kenya is a significant milestone as it will be the first trade agreement with an East African Community country to enter into force. A regional EPA was negotiated in 2014, signed in by Kenya, Rwanda and the EU in 2016, but could not be applied as it required signature and ratification by all the EAC countries. This EU-Kenya agreement implements bilaterally the provisions of the Economic Partnership Agreement between the EU and the EAC Partner States. It follows a decision by the East African Community Heads of State Summit on 27 February 2021. The EU-Kenya Agreement will be open to accession of the EAC Partner States.
1. Trade and investment, opportunities for business in the EU and Kenya
- The agreement will provide free access to the EU market by removing tariffs and quotas on all Kenyan exports of goods (except arms).
- Trade liberalisation will be asymmetrical: Kenya will open its market partially and very gradually to imports from the EU, taking account of the different levels of development. So, Kenya will benefit from transitional periods and exclusion of sensitive products from liberalisation.
- The agreement allows dealing with unfair trade. It references and incorporates WTO law, which for example deals with dumping products at unreasonable low prices in the other party’s market. The inclusion of safeguards will also allow the EU and Kenya to reintroduce duties if a surge in imports from the other side disturb or threaten to disturb their economies. Special safeguard conditions are envisaged to protect Kenyan infant industries (those that Kenya seeks to develop). Unjustified or discriminatory restrictions on imports and exports will also be banned.
- Rules of Origin will define the products eligible for trade preferences under the EPA, as set out in the EU Market Access Regulation.This regulation provides duty-free and quota-free access to the EU market for products originating in African, Caribbean and Pacific countries which do not benefit from the EU’s Everything But Arms (EBA) scheme or have concluded, but not yet ratified, an EPA with the EU. It is envisaged that a new protocol on rules of origin will be negotiated as soon as possible, but at latest within the first five years of the implementation of the EPA.
- The EU and Kenya share the objective of providing efficient custom procedures to traders, in particular to smaller entities. Customs-related provisions will aim at facilitating trade, promoting better customs legislation and procedures, close cooperation between Kenya’s and the EU’s customs institutions and providing support to the Kenyan customs administration.
2. Agriculture, industrial development and diversification of trade
- Provisions on agriculture will aim at sustainable agricultural development, including food and nutrition security, rural development, including the sustainable use and management of natural and cultural resources, and income and job creation in the agricultural sector in Kenya. These measures will guarantee that the EU will not apply export subsidies for agriculture products, even in times of market crisis.
- Provisions on animal and plant health and hygiene (sanitary and phytosanitary – SPS) measures will allow, among others, to address animal and plant health-related trade issues, promote the harmonisation of intra-regional standards in accordance with international standards, and enhance the capacity of Kenya to implement and monitor these measures. Nothing in the agreement changes the way the EU adopts and enforces its food safety rules for imports, which are the same for domestically produced and imported products.
- The EU and Kenya will reinforce joint work on SPS matters and engage in a policy dialogue on agriculture and food security, which will include transparency on their respective domestic policies.
- EU development assistance, through trade capacity-building measures, will support farming and rural employment, and farmers’ capacity to comply with agricultural standards. This alignment of standards will make it easier to comply with the requirements necessary to bring those products into the EU and open trading opportunities in the agricultural sector.
- The agreement will put in place an effective mechanism to solve disputes that may arise regarding the interpretation and application of its provisions. Among other things it will include independent panellists and due process and transparency involving open hearings, the publication of decisions, and the opportunity for interested parties to submit views in writing.
3. Trade and sustainable development
- The agreement includes a dedicated chapter on Trade and Sustainable Development that covers labour, gender equality, as well as environmental and climate matters.
- This includes the respect and promotion of the International Labour Organization fundamental rights, and the implementation of UN standards and obligations to prevent gender discrimination and support women’s empowerment.
- It also commits the parties to the implementation of multilateral environmental agreements (e.g. the Paris agreement on climate change), and contains obligations to combat illegal wildlife trade, illegal logging, and illegal, unreported and unregulated fishing.
- The EU approach for the joint implementation around these commitments is fundamentally centred on cooperation and engagement. Change is best facilitated with continuous and positive engagement, supported by regulatory dialogue, technical assistance and capacity building.
- The Trade and Sustainable Development commitments are binding and enforceable. In case one of the two parties violates these commitments, the agreement envisages the possibility to trigger a specific dispute settlement mechanism. The dispute settlement mechanism also includes a so-called compliance stage, which means that the party found in violation of its TSD commitments will have to promptly inform how it will implement the panel report and carry this out within a certain period of time. This will be subject to panel review.
4. Implementation and monitoring
- The agreement will have an institutional chapter that envisages to set up ministerial, senior official and technical bodies to steer, support and oversee its implementation.
- A chapter on economic and development cooperation will aim at enhancing the competitiveness of the Kenyan economy by building supply capacity and assisting Kenya in implementing the EPA smoothly.
- The agreement will offer the possibility of adding new areas once Kenya is ready to take up such commitments. For instance, provisions on trade in services, , competition policy, investment and private sector development, intellectual property rights, transparency in public procurement could be envisaged to be added within five years following the entry into force of the deal.
- The agreement will give civil society representatives (business associations, trade unions, non-governmental associations) a role in its implementation, including on the provisions on trade and sustainable development. Domestic advisory groups will be set up with independent civil society representatives that will advise both sides on the implementation of the Agreement, as well as a Consultative Committee were representatives of civil society from the EU and Kenya will meet regularly.
- The agreement includes a commitment to initiate a review process of the TSD aspects of the agreement, as soon as the trade agreement comes into force.
Next steps
The EPA will have to go through legal revision (“legal scrubbing”) and then be translated before the European Commission submits it for signature and conclusion to the Council. Once adopted by the Council, the EU and Kenya can sign the agreement. Following the signature, the text will be transmitted to the European Parliament for consent. After the consent by the Parliament, the parties may decide to provisionally apply parts of the agreement. Once Kenya and the EU Member States ratify it, the agreement enters into force.