GLOBAL TRADE

The Kenya – UK trade agreement vs EAC geopolitics

Kenya goes it alone in trade agreement with UK

In Summary

•The trade deal was initially meant to be concluded between the UK and the EAC

•Lack of political will forced  Kenya to adopted a go-it-alone approach with a view to protect its trade interests with the UK

The Kenya – UK Trade Agreement vs EAC Geopolitics

The earnest attempt by the Government of Kenya to secure a trade deal with the United Kingdom (UK) prior to the expiry of its transitional relationship with the European Union on 31 December 2020 has come to a successful close with a few days on the clock.

The Governments of Kenya and the UK signed the long-sought Kenya – UK trade agreement on November 3, preventing the impending cessation of the trade in goods and services between the two nations guaranteed by EU – EAC Economic Partnership Agreement.

The Kenya – UK trade agreement cements a long-term symbiotic relationship between the two nations, guaranteeing access to each other’s markets under preferential terms.

Specifically, under the agreement, certain products from Kenya will have duty free access to the UK market including flowers, tea, coffee and an assortment of vegetables. Conversely, motor vehicle, pharmaceutical and paper imports from the UK would benefit from duty free access to the Kenyan market.

Both trade benefits would be available from the year 2021 once the UK has completed its protracted exit from the European Union, with or without a deal, on December 31, 2020.

While the two governments are confident that the trade deal will serve to boost the already significant trade between the two markets, currently valued at GBP 1.4 billion per annum, the Government of Kenya is cautious to prevent a negative reception of the trade deal by members of the East African Community (EAC).

The trade deal was initially meant to be concluded between the UK and the EAC. However, noting lack of political will from its EAC colleagues, exacerbated by the tenuous trade and foreign policy relationships within the regional block, Kenya adopted a go-it-alone approach with a view to protect its trade interests with the UK. Its EAC colleagues, on the other hand, lobbied for the commencement of negotiations on the trade deal in 2021.

Kenya’s go-it-alone approach may lead to a backlash from the EAC where it deems Kenya’s preferential trade agreement with the UK damaging to the regional block’s single customs territory, most likely in the form of imposition of punitive tariffs and duties on Kenya’s goods and services. This, however, would be a self-defeating strategy as it would hinder growth of intra-EAC trade – a key interest of the EAC member states.

In order to prevent the above double-jeopardy scenario, EAC member states would be encouraged to consider joining the Kenya – UK trade agreement and upscaling the same for the benefit of the regional block, taking advantage of provisions imbedded into the current agreement by the Governments of Kenya and UK.

Under this option, the entire regional block would retain preferential access to the UK market, thereby presenting an opportunity for increased exports, foreign currency flows and skills transfer, while the UK would benefit from an expanded trade footprint in Africa, in line with its post-Brexit trade policies.

Karen Kandie – MD, IDB Capital