Kenyan vegetable and cut flower producers are set to access the British market more efficiently and cheaply, following a plan to eliminate paperwork in trade between the two countries with long-standing historical ties.
The plan, which is still under discussion, is set to make Kenyan exports to the United Kingdom market more competitive, just seven months after the two countries signed an Economic Partnership Agreement (EPAs) in London in December 2020, ensuring continuity of their trade relations after the British government voted to exit the European Union (EU).
The UK, which voted to leave the 27-member economic bloc in 2016, formally left the bloc on January 31, 2020, with a transitional period of up to December 31, 2020, to negotiate new trade agreements with countries it was trading with under the EU terms.
The Kenya-UK EPA allows Kenyan products unfettered access to the British market, free of duty and quota restrictions.
On Monday, July 26, Kenyan-based non-profit making organisation TradeMark East Africa (TMEA), and the UK-based Institute of Export and International Trade ((IOE&IT), signed a memorandum of understanding providing a framework for collaboration in the implementation of a digital trade corridor between the UK and Kenya.
The Agreement, which was signed in London, provides for the implementation of the UK-Kenya Trade Logistics Information Pipeline (TLIP), which aims to eliminate paperwork and introduce much better visibility up and down supply chains that flow between the two countries.
"It will cut costs for Kenyan firms producing goods like vegetables and cut flowers for export to the UK, reducing prices for UK consumers, importers, and retailers. UK exporters will also be able to benefit from better access to one of Africa's fastest-growing markets," the two organisations said in a joint press statement Monday (July 26).
Kenya is seeking to increase its annual earnings from its exports to the UK market to Ksh1 trillion ($9.25 billion) from an average of Ksh40 billion ($370.37 million) annually, by increasing exports in flowers, vegetables, fruit, coffee, tea, textiles, and apparel as well as emerging priority value chains such as pulses, honey, nuts, minerals, edible herbs, fisheries, livestock, leather and footwear.
TLIP is the first digital trade corridor to be established between the UK and a developing country since the UK's exit from the EU, and it is strongly aligned with trade agreement (EPA) signed between the two countries.
"We're proud to be partnering in the TLIP project. We believe it can deliver substantial benefits, not only to traders in the relevant supply chains but also to the UK in terms of securing its position as a global leader in digital trade," said Marco Forgione, Director General, IOE&IT.
The initiative (TLIP) is expected to accelerate trade between Kenya and the UK by reducing the administrative procedures and time to import and export by at least 30 percent and reducing order turnaround times of up to 40 percent.
It is also expected to reduce compliance costs by 20 percent and reduce duplication, thereby reducing steps in the trading process by 50 percent.
"TMEA is excited to be expanding our homegrown digital solution and expanding TLIP to the UK, which will create a transparent, efficient, and cost-effective way of managing trade information to support and boost trade efficiency between the two countries," said Frank Matsaert, Chief Executive, TMEA
In February this year, East African Community (EAC) member states secured an open-ended time frame to access the trade agreement signed between Kenya and the UK.
This Agreement shall be open to accession by any State that is a Contracting Party to The Treaty for the Establishment of the EAC.
This decision was reached after the Republic of Burundi, Rwanda, Tanzania, and Uganda demanded the extension of the negotiation period by one year to sign the Agreement as a bloc, citing country-specific issues including election cycles.
The EAC Customs Union Protocol, the first pillar of regional integration, requires all EAC countries to negotiate as a bloc on matters related to trade with third parties.
However, a member may separately negotiate bilateral trade agreements, subject to notification and approval by the other members.
However, these countries can still enjoy duty-free quota-free access to the UK market by their classification as "less Developed Countries (LDC)' under the Everything, but Arms (EBA) initiative, which was introduced in 2001 under the European Union's Generalised Scheme of Preferences (GSP).
Kenya is classified as a 'Lower Middle- Income" country and had to renegotiate and sign a new trade agreement with the UK by December 31, 2020. Its goods to the UK market will not attract duty starting January 1, 2021.
The Kenya-UK Trade agreement borrows a leaf from the European Union's Economic Partnership Agreement (EPA) that allows for the Principle of Variable Geometry where member states can sign the Agreement at different periods depending on their readiness.