Kenya has left its fellow East African Community member states and signed a 25-year Economic Partnership Agreement (EPA) with the European Union. This is part of a larger EU-African, Caribbean and Pacific Group of States (ACP) economic partnership deal.
ACP members are largely former colonies of European countries that provided cheap labour and raw materials for the industrialisation of Europe.
The latter’s dependency on raw materials led to ACP countries negotiating for a trade agreement leading to the signing of the Lomé Convention and Cotonou Agreements.
Since 2016, the EAC member states have sought to negotiate the EU-EAC EPA as a bloc-to-bloc agreement requiring ratification by all members. But some asked for more time to think it over.
The EAC Common Market Protocol obliges Kenya to develop a common market policy with the other EAC members. But as a lower middle-income country, it does not benefit from the automatic duty- and quota-free EU market that other EAC countries, which are in the Least Developed Countries (LDC) category, enjoy. Its exports to the EU, its second-largest trading partner, would attract a 10 per cent duty tariff.
Our main export to Europe is agricultural produce. Kenya will save $100 million in tariffs or taxes annually on these exports, which it will pay as a non-LDC country. And it is this tariff that is the main driver to Kenya going it alone.
These are mainly primary products with limited value addition. Textiles, while also offering a good export opportunity to the EU, have in past ACP agreements suffered the bloc’s regulatory framework restrictions like Rules of Origin. The food category is challenging for many exporters.
The EAC countries were concerned about the removal of tariffs on up to 90 per cent of high-value EU imports and its impact on local manufacturers and value-addition industries. Will our industries survive once the zero tariffs crystallise? A major concern is the potential dumping of agricultural products, which will have a far-reaching implication on Kenya’s agriculture and agro-processing sector.
The EU provides massive subsidies to its farmers, making its agricultural products cheaper than ours. The impact on our food production and food security will be enormous. However, the agreement may provide for safeguards to protect some sensitive agricultural products, either by excluding them from tariff cuts or by keeping the option of triggering safeguards in case of unforeseen, sharp and sudden increase in imports from the EU.
Liberalising agriculture in Kenya and placing it in competition with the subsidised products from the EU could hurt the economy and expose the very vulnerable in society.
On its website, the EU describes the EPA thus: “...it is the most ambitious trade deal ever signed by the EU with a developing country when it comes to sustainability provisions such as climate and environmental protection, labour rights and gender equality. The balanced agreement takes into account Kenya’s development needs by providing a longer period to gradually open its market. It also includes a special safeguard for agriculture, food security and infant industry.”
However, the agreement is likely to undermine Africa and EAC free trade area pacts and common market protocols. Currently, 60 percent of our export of processed or manufactured goods is within the region alone with more to the rest of the continent. Will the export of these goods to the EAC or Africa survive under the EU’s EPA?
Another concern is the free movement of EU labour into our market—with no reciprocity—which with a huge impact on the professional and skilled jobs market. Some countries had also expressed their reservations about the EPA, citing it’s huge potential impact on government revenues in the long term.
The EU-ACP agreements, Lomé Convention and Cotonou Agreements did not reduce the cycle of unemployment, underdevelopment and poverty in the continent due to their lopsided partnership.
Mr Kerrow, an economist, is a former senator for Mandera. [email protected] . @billowkerrow
