EU cautions Kenya against trade protectionism

Says country needs to build local capacity and increase value addition on exports.

In Summary

•The recently adopted 35 percent as the 4th Band of the EAC Common External Tariff (CET) by the EAC) will affect 50% of imports from Europe.

•EU-Kenya Business Forum set for February 21-22 in Nairobi is expected to create more business opportunities for private sector.

A container vessel at the Port of Mombasa/FILE
A container vessel at the Port of Mombasa/FILE

Kenya should not rush to implement punitive policies that will hurt imports as a way of protecting local industries, the European Union now says.

It said, the alternative is to instead build local capacity to meet market demand, and enhance value addition on its raw material to gain from the export market, while applying a free trade module.

While the Economic Partnership Agreement (EPA) between the EU and Kenya recognises the need to protect infant industries and sectors, it notes that the country still heavily relies on imports.

These include raw material used in the local manufacturing sector, which could hurt players if trading partners retaliated.

Investments, Trade and Industry Cabinet Secretary Moses Kuria has indicated that Kenya plans to introduce an Export and Investment Promotion Levy targeting steel imports, furniture, paper and paperboard products, with plans to add pharmaceuticals onto the list.

Imported steel will be taxed $250(Sh31,150 ) per tonne.

Cabinet has made a preliminary approval with the levy expected to come into place once public participation is concluded. Products from the East African Community are however exempted. 

Kuria said the move aims at discouraging importation of products that can be manufactured locally.

“We are going to see some items slapped with serious levies so that we are able to protect our industries,” the CS said during a briefing in Nairobi last week.

The EU is also concerned the recently adopted 35 percent as the 4th Band of the EAC Common External Tariff (CET) by the East African Community (EAC) will affect its exports to the region, while the countries continue to access preferential terms in Europe.

Among the tariff lines in this category include: dairy and meat products, iron and steel, edible oils, beverages, spirits, furniture, leather products, spices, textiles and garments, head gears, among others.

According to EU Trade Counsellor-Regional Trade Advisor Martijn Boelen, the move affects about 50 per cent of EU imports into the region.

“Why increase the import duty on whiskey and you don’t produce it in Kenya? There are a lot of industrial produces that Kenya can increase and export, but if protecting the market first is the best step? I personally have my doubts,”Boelen said.

He said EU believes in free trade which enhances competition and efficiency while ensuring the market is served with the best qualities and prices.

He spoke during a briefing on the upcoming EU-Kenya Business Forum set for February 21-22 in Nairobi, expected to bring together more than 250 companies from each market with a number of trade agreements on the offing.

EU ambassador to Kenya Henriette Geiger has called for a conducive business and investment environment both in Kenya and European countries.

“This will enable more trade and investment,” she said, noting the EU is the largest trading partner (bloc) with Kenya.

Europe accounted for 16.5 per cent of the total import bill in 2021 with imports valued at Sh355.1 billion.

This was a 14.8 per cent increase in imports from the value recorded in the previous year.

Imports from the European Union constituted the bulk of imports from Europe at Sh228.0 billion with Netherlands, Germany, Italy, Belgium, Spain and Poland as some of the key markets.

Kenya’s total exports to the EU rose from Sh99.3 billion to Sh115.9 billion, mainly on domestic exports of cut flowers, avocados, plants and parts of plants used for pharmaceutical.

European Business Council (Kenya) chairman Darren Gillen has challenged Kenya to expand value addition on its products before exporting.

“Kenya needs to think beyond flowers and agricultural products. The country is ripe with numerous untapped business opportunities,” said Gillen.

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