Kenya: British products get 25-year tax free entry in Kenya pact

Kenya’s trade pact with UK will allow British firms to ship in goods duty-free for 25 years.

The post-Brexit trade deal with the UK will, however, open the window for British companies to flood the local market with finished and unfinished goods that exclude agricultural and industrial products at the expiry of a seven-year moratorium.

The details of the trade agreement were revealed by the Ministry of Industrialisation, Trade and Enterprise Development as it asked Parliament to ratify the Economic Partnership Agreement (EPA) signed between Kenya and the United Kingdom of Great Britain and Northern Ireland (UK).

Nairobi signed a post-Brexit trade deal with the UK on December 8, preserving duty- and quota-free access of exports after London formally exited the European Union (EU) on December 31, 2020.

“Kenya is offering to open 82.6 per cent value of total trade to the UK over an extended transition period (up to 25 years with a seven- year moratorium) constituting of mainly raw materials, capital goods, intermediate products and all other essential goods,” Cabinet Secretary Betty Maina said in an explanatory memorandum accompanying the EPA that was tabled in Parliament on December 22, for ratification.

The National Assembly’s Trade, Industry and Cooperatives committee on Thursday tabled its report on its consideration of the EPA, setting the stage for debate by the House.

Kenya and UK Parliaments are required to ratify the agreement in order to take effect although the House of Lords — Britain’s upper house of Parliament – has backed a proposal by its International Agreements Committee for a 21-day extension of the initial February 10 ratification deadline.

The delay proposal is also attributed to the fact that the UK government has not explained what other options it considered for ensuring continuity of trading arrangements with Kenya and why it chose not to replicate the EU’s Market Access Regulation (MAR) that guided economic partnerships between the two sides prior to Britain formally ditching Brussels in December 2020.

Kenya exported Sh49.5 billion goods to UK last year up from Sh39.7 billion in 2019 while imports from UK dropped to Sh29.3 billion from Sh35.3 billion over the same period.

Kenya imports vehicles, machinery, nuclear reactors, boilers, pharmaceutical products, printed books, paper and paperboard, articles of pulp, paper and board newspapers, pictures and beverages, spirits and vinegar from UK.

It also buys electrical, electronic equipment, textile articles, sets, worn clothing, miscellaneous chemical products, ships, boats, and other floating structures.

The Cabinet Secretary said the prolonged transition period of seven years protects infant industries as well as safeguards agriculture, industry and Kenya’s market interest in the region.

“Therefore, the exclusion lists is the means by which the government addresses the welfare loss and threats posed by EPAs on agriculture and industry,” Ms Maina said.

She said Nairobi stands to benefit from untapped UK market potential estimated at $205 billion against the Kenya’s current level of exports which stands at 0.2 per cent of the UK market size.

“The government, through the National Export Development Agenda, is aiming at enhancing Kenya’s market share in the UK by five per cent by 2025, which will translate to $10.2 billion (Sh1.1 trillion) up from the current exports to the UK which stood at Sh39 billion for the last five years running 2015 to 2019,” Ms Maina said.

The EPA executed between Nairobi and London provides full duty-free and quota-free market conditions for goods originating from East African Community partner state(s) into the market of the UK on a secure, long-term and predictable basis.