Kenya’s multimillion-dollar trade with Britain hangs in the balance after its East African Community partners failed to agree on the timeline for negotiating a new, post-Brexit trade deal.
Meetings called to negotiate a collective trade agreement between the EAC and the United Kingdom have failed to make any substantive progress, leaving Kenya the most exposed to losing its $393 million exports market owing to its classification as a Lower Middle Income Country.
With Britain having already exited (Brexit) the European Union early this year, the EAC has until December 31, to negotiate a deal that guarantees all member countries tariff and quota free access to the UK market, similar to the current agreement with the EU.
All the other EAC member countries, however, have a window to continue accessing the UK market beyond this deadline except Kenya, which as a Lower Middle Income Country could see its goods subjected to a raft of tariffs and export quotas.
“EAC member countries have not yet agreed on a new trade arrangement with the UK,” said Marie Angelique Umulisa, the EAC Principal Trade Officer.
Kenya’s exports and imports from the UK hit $742 million last year, compared with $91 million for Uganda and Tanzania’s $231 million.
Following the stalemate, the regional Sectoral Council of Ministers of Trade, Industry, Investment and Finance has directed the EAC Secretariat to prepare proposals to the UK by September 18, 2020, for a transitional mechanism and extend the timelines for negotiations of an EAC-UK trade agreement by one year.
The Council, through an emergency meeting convened on September 11 to review regional integration programmes including reaching a common position on trade agreements with third party countries, also directed the EAC Permanent Secretaries to engage the British on the proposal for a transitional mechanism to allow Kenya, as a non-Less Developed Country (LDC), to access the UK market on preferential terms after December 31.
Tanzania this year officially joined the ranks of Lower Middle Income Countries, but it is still in a transition period in trade terms, during which its trade agreements with other countries remain unaffected.
The UK exited the EU on January 31, this year, after which it was given an 11-months transition period to December 31, to renegotiate new trade agreements with its trading partners outside the 27-member bloc.
Failure by the EAC countries to collectively sign a new trade agreement with the UK by December 31, will leave Kenya most exposed while Uganda, Tanzania, Rwanda and Burundi will continue trading with the UK under preferential terms by virtue of their classification as LDCs.
Afraid of losing its UK market access, Kenya presented its grievances to the EAC Council of Ministers to be allowed to negotiate individually and be joined by any willing member.
But the request was not accepted. Kenya’s Principal Secretary in the Ministry of EAC and Regional Development Kevit Desai, told The EastAfrican that he is hopeful other EAC member states will reconsider their positions and ‘‘prioritise’’ the negotiations “in the interest of regional integration and unity.”
“This agreement is not just about maintaining existing opportunities but it is about advancing trade volumes, technology transfer, building industrial capacity and creating markets which are all-inclusive. It is about taking us to another level as a region. Therein lies the potential. The negotiations area about securing a new industrial future,” said Dr Desai.
While most of the EAC Partner States expressed the view that more time would be required for the negotiations, Kenya wants to proceed and conclude negotiations for an agreement with the UK by December due to the possibility of future loss of preferential market access by virtue of its status as a non-LDC.
The report for the deliberations seen by The EastAfrican show that all the Partner States are in agreement that a trade agreement with the UK was needed, but they hold divergent views on the timeframe for negotiations.
Kenya reiterated its readiness to move ahead with the negotiations with UK, as a result of their status as a non-LDC, resulting in the future loss of preferential Market Access to the UK from January 2021.
However, Burundi, Rwanda, Tanzania and Uganda emphasised the need for the EAC to move together and negotiate as a bloc, and that adequate time would be needed to prepare for and undertake the negotiations.
They proposed that the EAC seeks from the UK a transitional mechanism that would enable Kenya not to suffer any disruptions in its trade with the UK.
Tanzania proposed that negotiations with the UK should commence in January 2021, as it is currently engaged in preparations for a general election which will take place on October 28, while Uganda proposed that the negotiation timeline should be extended by one year, until December 2021.
Uganda justified its position by virtue of the forthcoming poll coming in February 2021 and the formation of a government around May 2021. The meeting also received a legal opinion from the EAC Secretariat on the application of Variable Geometry in negotiating a trade agreement with the UK.