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Shipping & Logistics

How free trade zones hurt war on counterfeits

President Uhuru Kenyatta
President Uhuru Kenyatta leads destruction of fake goods last year. FILE PHOTO | NMG 

More than Sh2 billion worth of counterfeit goods were destroyed in the past year by the government since the crackdown on illicit products was reignited last year, according to the Ministry of Industrialisation and Trade.

However, Kenya’s participation in free trade zones could hinder its anti-counterfeit efforts. Research shows that an extra free trade zone within an economy increases the value of counterfeit goods exported from that country by 5.9 per cent.

Kenya is among the countries that have ratified the African Continental Free Trade Agreement (AfCFTA) that will see member states remove tariffs from 90 per cent of goods, allowing free entry of products and services across the continent.

The country has also ratified the Tripartite Free Trade Area (TFTA) agreement that is expected to come into effect in April this year and to open the market to member states of the Common Market for Eastern and Southern Afria (Comesa) and the East African Community (EAC).

While free trade zones offer benefits to member countries, the easy movement of goods and relaxed custom controls also lead to the entry of fake and illicit products.

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There are over 3 500 free trade zones in the world and most of them are set up around ports.

Mombasa port being the regional hub acts as the gateway to other neighbouring countries such as South Sudan, Rwanda, Burundi, Congo DRC, Malawi, Uganda and Zambia. According to the 2016 Organisation for Economic Co-operation and Development (OECD) and European Union Intellectual Property Office (EUIPO) report, Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact, trade in counterfeit and pirated goods amounted to up to 2.5 per cent of world trade, translating to €338 billion.

“Globally, free trade zones employ 66 million people and generate over €365 billion in direct trade-related added value. The more involved a country is in free trade zones — this is measured by the number of such zones or the number of people employed in them — the larger the value of fake products that the country exports,” reported OECD and EUIPO.

In further 2018 research by the two organisations, on ‘Mapping the Real Routes of Trade in Fake Goods,’ China was found to be the top producer of counterfeit goods while Singapore, United Arab Emirates and Hong Kong (China) are global hubs for trade in counterfeit goods.

Whereas, the United Arab Emirates, Saudi Arabia and Yemen were identified as transit points for Middle East Countries for sending fake goods to Africa, Albania, Egypt, Morocco and Ukraine are of particular significance for redistributing fakes.

“We will realise that we are all victims of counterfeit products when we eventually suffer the consequences; economically and our safety is put at jeopardy,” said Chris Kiptoo, Trade Principal Secretary in Mombasa last week when he destroyed fake goods worth Sh10 million.

“We have launched country-wide enforcement activities in all corners of the country and we are going to firmly deal with the perpetrators involved in illicit trade despite their social status, class or any other diversity.”

- African Laughter

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