Economy

Kenya to gradually remove taxes on UK goods in pact

Cabinet Secretary for Industrialisation, Trade and Enterprise Development Betty Maina

Cabinet Secretary for Industrialisation, Trade and Enterprise Development Betty Maina with UK's International Trade Minister Ranil Jayawardena during the signing of the new Kenya-UK trade deal in London, United Kingdom. Also present is Kenya's High Commissioner to the United Kingdom Manoah Esipisu. PHOTO | POOL

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Summary

  • The pact, which will now have to be ratified by respective lawmakers, preserves duty- and quota-free access for exports originating from the EAC free trade area (FTA) after the UK formally leaves the European Union bloc at the end of this month.

Kenya will gradually remove taxes on imports from the UK after seven years following a trade pact the two countries signed Tuesday last week.

Mr James Duddridge, the UK minister for Africa, said the deal— strategic Economic Partnership Agreement (EPA) — is aimed at “doing more trade with less friction” between the UK and the six-nation East African Community bloc.

The pact, which will now have to be ratified by respective lawmakers, preserves duty- and quota-free access for exports originating from the EAC free trade area (FTA) after the UK formally leaves the European Union bloc at the end of this month.

The UK minister said there is a window of seven years from the time the agreement comes to force for non-agricultural goods from the UK to start enjoying preferential import duties, a gradual process which will take 25 years.

“This is not an opening up of (market) liberalisation on day one. It is phased over seven to 25 years,” Mr Duddridge told the Business Daily in Nairobi.

Kenya’s import tax rates currently ranges from zero (largely for raw materials) to 10 percent (for intermediate goods) and 25 percent (for finished goods) based on EAC Common External Tariff (CET), while sensitive goods attract duty as much as 35 percent or even more.

The rest of the EAC states – whose exports are shielded from tariffs because they are classified as Least-Developed Countries (LDCs) – sat out of negotiations with the UK.

“Kenya came forward as a close partner and also as a lower middle income it was going to suffer straightaway whereas low-income countries which are subject to general system of preferences wouldn’t expect any major effect,” Mr Duddridge said.

“The UK relationship and trade with Kenya is incredibly important, and if we could not have signed a deal, it would have been very problematic particularly for Kenya’s revenue but also for the tea drinkers in the UK.”

The deal between Nairobi and London is based on the text in the stalled Economic Partnership Agreement between the regional bloc and the EU.