•With the deal, Kenya now is hoping to increase its exports to the 27 country member European market, with the agriculture sector standing out as the biggest beneficiary.
•The EU’s imports from Kenya are mainly vegetables, fruits, and flowers while exports exports to Kenya are mainly in mineral and chemical products and machinery.
Kenya is now banking on the Economic Partnership Agreement with the European Union to grow its exports and cut the huge trade deficit, even as it taps Foreign Direct Investments.
The Kenya - European Union Economic Partnership Agreement (EPA) was signed at State House Nairobi on Monday, a week after the Council of the EU adopted it.
Once the agreement is signed, and EP (European Parliament) gives its consent, the agreement can enter into force, the council said last week.
The signing now sets Kenya on fresh trade terms with the EU in post-Brexit era, with the agreement now assuring the country of duty-free, quota-free EU market access to all exports, except arms.
It also sets the ground for a partial and gradual opening of the Kenyan market to imports from the EU.
It brings to an end a long wait on the deal where negotiations on EPA between the East African Community and the EU (EAC-EU EPA) were concluded in 2014.
Only Kenya and Rwanda warmed up to the pact with Kenya signing and ratifying the agreement in September 2016.
The EU and its member states also signed it in June 2016.
However, implementation of the EPA has not been possible because not all EAC partner countries signed and ratified it.
The EAC Summit of February 27, 2021, under the chairmanship of Kenya, reached a decision allowing individual EAC states to implement the EPA.
Subsequently, in May 2021, Kenya formally requested to engage with the EU to move forward with the implementation of the agreement on a bilateral basis.
With the deal, Kenya now is hoping to increase its exports to the 27-country member European market, with the agriculture sector standing out as the biggest beneficiary.
The EU’s imports from Kenya are mainly vegetables, fruits, and flowers while exports to Kenya are mainly in mineral and chemical products and machinery.
Last year, the value of exports to the EU totalled Sh133.2 billion, Kenya Economic Survey 2023 indicates, which was a growth from Sh115.8 billion.
Imports were valued at Sh202.2 billion, a drop from Sh227.9 billion the previous year.
Kenya’s key export destinations included Netherlands (Sh69.7 billion), Germany (Sh15.9 billion), France (Sh10.1 billion), Belgium (Sh8.7 billion) and Spain (Sh7.4 billion).
Exports to the UK, which exited EU were valued at Sh44.6 billion.
Yesterday, President William Ruto said the agreement establishes a permanent mechanism to underpin trade and investment and transform mutually beneficial relations.
“The EU is not just a giant, lucrative market, it is a premium market whose demand guarantees higher earnings for our products and will drive our export production to higher levels of competitiveness,” Ruto said.
He is also hoping the deal will allow FDIs in Kenya, including investments in manufacturing areas of chemicals, pharmaceuticals, medical supplies and equipment.
Kenya lost over $345 million (Sh52.9 billion) worth of FDIs in the first half of this year, official data shows, pegged on among others, the political tension that had been occasioned by demonstrations from the opposition.
An increase in exports is expected to help the country cut reduce its trade deficit, which widened to Sh1.62 trillion last year, from Sh1.41 trillion in 2021.
While earnings from exports of goods grew by 17.4 per cent to Sh873.1 billion in 2022, according to government data, it was not enough to offset the deficit as the country spent Sh2.5 trillion on imports.
The deal now means that the EU will fully liberalises access to its market immediately upon application of the EPA and all goods from Kenya (except arms) can enter the EU market without tariffs or quotas, boosting export volumes.
Kenya on the other hand will open its market gradually to imports from the EU, benefitting from transitional periods.
In addition, Kenya will be able to exclude sensitive products from liberalisation and may also benefit from other provisions that consider its development needs, such as special safeguards for agriculture, measures on food security, and infant industry protection.
The EU-Kenya Agreement will remain open to accession of the EAC Partner States, according to the EU, which was led by the president of the EU Commission Ursula Von der Leyen, during the signing.