Open economy: Is the Kenya-EU trade deal on track?

WASHINGTON: Today’s agreement heralds a new dawn where Kenyan goods gain immediate duty- and quota-free access to the European market,” Kenyan Trade Minister Rebecca Miano said before signing the trade deal at a ceremony in Kenya’s capital, Nairobi, on Monday.

“Over time, European goods will also gain preferential access to the Kenyan market,” she added.

The European Union Council approved the trade agreement last week, but it still needs to be ratified by both Kenya’s parliament and the European Parliament before it comes into force.

“The core of this arrangement is to put real money into the pockets of ordinary people,” said Kenyan President William Ruto at the signing ceremony. EU chief Ursula von der Leyen, who was also in attendance, called the partnership a “win-win situation on both sides.”

The pact comes as Brussels seeks stronger economic relations with Africa to counter China’s influence, while promoting development commitments between the EU and Kenya in areas including environmental protection and labor rights.

The EU-Kenya Economic Partnership Agreement (EPA), which was finalized in June 2023, guarantees duty-free and quota-free access for goods originating in Kenya to the 27-member bloc, excluding weapons.

The EU is Kenya’s most important export market and second-biggest trading partner. In 2022, Kenya exported 1.2 billion euros ($1.31 billion) of mainly agricultural products to the EU, including tea, coffee, cut flowers, peas and beans. More than two-thirds, or 70%, of Kenya’s total flower production is sold in the European market.

As for Kenya, East Africa’s largest economy will gradually and partially open its market to European goods, with the agreement seeing tariffs reduced over a 25-year period. Currently, Kenya mainly imports machinery as well as mineral and chemical products from the EU.

Kenya will be able to protect some so-called “sensitive products,” either by excluding them from tariff cuts or by triggering safeguards in case of a sudden increase in imports from the EU. The agreement comes as trade between the EU and Kenya is growing, increasing by 27% from 2018 to 2022.

The EPA is the latest broad trade deal between the EU and an African nation since the EU signed a similar agreement with Ghana in 2016. “It’s a good time to have a deal that may help diversify Kenya’s traded products and trading partners within the EU,” said Sherillyn Raga, a research fellow at the Overseas Development Institute, a global think tank.

The Netherlands, Germany and France are currently the leading destinations for EU imports. The world has experienced multiple economic shocks from the COVID-19 pandemic and the fallout from Russia’s war in Ukraine to climate change. “When your trade structure is very concentrated to a limited number of partners or a limited number of products, then you’re very vulnerable to sharp global price movements,” said Raga, a macroeconomics and trade specialist, adding that because of this, “trade diversification is one way to increase Kenya’s resilience against shocks.”

For Kenya’s exports to the EU, however, the deal won’t change that much in the short term. Kenya already enjoys duty- and quota-free trade with the EU under a temporary special arrangement, which was put in place in 2014 after an agreement that the EU negotiated with the East African Community (EAC) stalled.