Ideas & Debate

UK, US trade pacts beef up Kenya and region's lead

uk

Kenyan President Uhuru Kenyatta. The US-Kenya trade talks started in February. FILE PHOTO | NMG

Summary

  • The acquisition of fair trade terms as in the UK trade deal will elevate Kenya’s standing as not just a continental but also a global leader.
  • We need to manage a very tough period in this pandemic with the resilience spirit, maintaining consistent safety and health protocols. Trade, digital and innovation are driving factors in a New Normal

Plenty of water has flown under the bridge so far in 2020 masked largely by the worldwide Covid-19 pandemic.

Part of this flows have included changes in world trade and geopolitics. For instance, right at the onset of the pandemic at the end of January, the United Kingdom marked its official exit from the European Union (EU) save for an 11-month transition period to December 31.

Closer home, Tanzania held its general elections in October with the incumbent John Magufuli winning a second and final term in office. President Magufuli has immediately announced and made the private investment sector to report direct to him to spur new economic developments, attract investors, and to drive global trade for his country.

Up North, Nobel Prize Winner and Ethiopia Prime Minister Abiy Ahmed has to handle the country during tough times, as he battles internal issues and dissidents. Meanwhile, Uganda’s political arena is reaching fever pitch ahead of January polls.

In Kenya, the shortlist of major occurrences too cannot be understated. Among the noteworthy achievements have been on trade.

While the country should have seen great leadership of its goal of producing the next World Trade Organisation (WTO) Director General, but did not realise that appointment. However, Kenya potentially remains a strong nation and has two or more landmark trade deals in the bag.

UK post Brexit pact

With barely a month to the December 31, 2020 end of Britain’s transition from the European customs union, Kenya has on its side a deal in principle may continue accessing the United Kingdom market on a duty and quota free basis.

This follows its prompt action to negotiate for a post-Brexit deal will barely months to the end of the year.

The deal to be fully concluded before January 1, 2021 has been on the back of an uphill task that saw Kenya enter negotiations directly.

East African Community (EAC) have lots to negotiate and action in regional development and removing both tariff and non-tariff barriers in the region to grow intra Africa and global business.

Without the deal announced earlier in November, Kenya would have seen its exports to the UK which largely include fruits, flowers and vegetables attracts custom taxes with the country pulling out of the EU which anchored the EU-EAC economic partnership agreement.

Meanwhile, Kenyan peers may have been more thoughtful on hastening in negotiations with the UK after they failed to agree on timelines for discussions on the crucial deal.

This is as they take solace in their assured UK market access under their categorization among the least developed countries (LDCs) which enjoy unrestricted/preferential trade with other countries.

On its part, the UK has used the negotiations to fashion deeper trade ties with Kenya and other countries as they transition from their continental customs union.

Model deal

The negotiations which barely exceeded two months have produced what will be a model deal for UK’s engagement with the rest of the continent.

The solo mission by Kenya has seemingly turned into a blessing in disguise with the country now leading the way in negotiations between Africa and the rest of the world.

Principally, the new Kenya-UK trade deal has retained the same terms as those in the EU pact to include a free duty and free market access for locally sourced goods.

The new deal is expected to be used a model or manuscript for future negotiations between the UK and other continental sovereigns.

For instance, the deal has handed Kenya’s EAC partners a five-year period to join the pact while keeping similar terms.

At the same time, the country has deployed negotiations to safeguard its own markets from a disproportional impact of the tap such as the dumping of UK goods domestically.

Moreover, Kenya has put additional buffers in the deal to include the gradual reopening of the country to UK goods over the course of 25 years but with a cap of an 82.6 per cent on the size of market open to the trade.

A seven-year moratorium to the opening up of trade further insulates Kenya’s nascent industries including agriculture and manufacturing.

The deal is expected to see Kenya grow its volume in value of trade with the UK.

Already, Kenya enjoys the favourable end of the balance of trade with exports to the UK standing at Sh40.1 billion in value in 2019 against imports of Sh35.3 billion.

Raw deal?

In contrast, Kenya is additional negotiations with the United States to reach a new Free Trade Agreement (FTA) with discussions having commenced in July this year. President-elect Biden and Vice President=elect Kamala Harris have already planning the new teams and international trade remain a high priority as difficult times both internally and global recession remains a worrying challenge at the moment.

The nature of the deal couldn’t however been further from the pact reached with the UK as concerns continue to be drawn from various quarters.

For instance, Secretary to the United Nations Conference of Trade and Development (UNCTAD) Mukhisa Kituyi in certain reports, may have warned Kenya maybe walking into a trap as the US seeks terms favouring its own industries over local ones.

In a recent media interview for instance, Kituyi further questioned the premise of the deal arguing Kenya already fails to take full advantage of its existing free market to the US under the Africa Growth and Opportunity Act (Agoa).

Years since the implementation of the pact, Kenya still has apparel as its biggest export to the US in spite of having the eligibility of exporting nearly 1,000 products under Agoa.

US push to abolish import duty for its agricultural goods has meanwhile been viewed as a tough move to stifle local industries.

As negotiations on a new Kenya-US FTA continue into 2021, Kenya should endeavour to protect its own interests while pushing for terms that instil confidence to its peers and create a winning formulae for growth of global trade.

Moreover, the pact should ensure the agreed FTA must respect regional and continental trade rules as Kenya seeks to participate actively in the upcoming Africa Free Continental Trade Area (AfCTA). Africa has greatest potential to drive trade, manufacturing, export growth and enhance economic development in the continent.

Both improved security measures and a more attractive business environment should be further strengthened. Investments and private sector should remain focused on driving new innovations and trade growth. 

The acquisition of fair trade terms as in the UK trade deal will elevate Kenya’s standing as not just a continental but also a global leader.

We need to manage a very tough period in this pandemic with the resilience spirit, maintaining consistent safety and health protocols. Trade, digital and innovation are driving factors in a New Normal. The vaccine roll out expected in December and beyond will drive more tourism, health and trade forward.

Chris Diaz, Brand Africa Trustee and EABC Director

@DiazChrisAfrica