Breakfast Roundtable on the Ratification of the Kenya-UK Economic Partnership Agreement

Pic1.  MoITED CS Hon. Betty Maina EGH addresses a media briefing on the Kenya - UK Economic Partnership Agreement at a Nairobi hotel. 

Pic2.  MoITED CS Hon. Betty Maina, CAS David Osiany and PS Trade Amb. Johnson Weru go through the 700-page Agreement currently awaiting ratification by Parliament. 

Pic3. MoITED CAS David Osiany makes his remarks during the same function. 

Pic4. PS Trade and Enterprise Development Amb. Johnson Weru addressing the meeting. 

MINISTRY OF INDUSTRIALIZATION, TRADE AND ENTERPRISE DEVELOPMENT 
OFFICE OF THE CABINET SECRETARY
SPEAKING NOTES FOR USE BY HON. BETTY MAINA, EGH CABINET SECRETARY, INDUSTRIALIZATION, TRADE AND ENTERPRISE DEVELOPMENT DURING BREAKFAST ROUNDTABLE WITH EDITORS, BUSINESS WRITERS AND ANALYSTS ON THE RATIFICATION OF THE KENYA – UK ECONOMIC PARTNERSHIP AGREEMENT (POST-BREXIT CONTINUITY TRADE AGREEMENT) 
DATE:    26TH FEBRUARY 2021 at 0730 HRS 
VENUE:     NAIROBI SERENA HOTEL

• Chair of Departmental Committee on Trade, Industry and Cooperatives in Parliament
• Chief Administrative Secretary 
• Principal Secretaries present,
• Representatives of Media Houses present,
• Invited Guests,
• Ladies and Gentlemen,

Good morning!

Introduction
•    I am delighted to welcome you all to this media roundtable. Now that we have enjoyed a good breakfast, let us get down to some serious discussion on the topical subject of the Kenya-UK Economic Partnership Agreement (EPA) that we signed on 8th December 2020. 

•    I invited you here today for two reasons:
              First, update you on the ratification of the Kenya – UK EPA and what that means for our country and the greater EAC region.

             Second, listen to you and respond to any issues that you may have regarding how we got there, why we got there, and where we will be headed after the EPA is ratified to                        make the EPA work to better our country, our people. 

•    As the Ministry charged with negotiating the Kenya – UK EPA, we believe that it is critically important to have a constructive engagement with you on these issues because you have the power of the most trusted channels for information dissemination to the public. 

•    Moreover, you have a responsibility to ensure that the information you share fosters public trust and supports the spirit that guided our negotiations for this Agreement. As you are aware, my Ministry has briefed you all steps of the way.

Ratification Process of Kenya – UK EPA
•    You are undoubtedly aware that our Parliament is engaged in the process of ratifying the EPA. We are looking forward to the conclusion of this important legislative process.

•    Ratification is a significant milestone in the journey that we have walked together to achieve a balanced agreement for our people. It will pave the way for us to start implementing the Agreement.

•    It is important to note that ratification by Parliament is the culmination of a rigorous public engagement and all-inclusive process that the Kenya – UK EPA has gone through. We adhered to the due processes and procedures stipulated by our Constitution and our laws as follows:
          My Ministry submitted the Kenya – UK EPA, together with an accompanying memorandum, to the Speaker of the National Assembly. 

          The Departmental Committee on Trade, Industry and Cooperatives started scrutinizing our documents to prepare a report for debate by the National Assembly.

         The Clerk of the National Assembly published a public participation notice on 3rd February 2021 inviting all stakeholders to submit their views on the EPA to Parliament. This                     fulfills the Constitution of Kenya, 2010 and the Treaty and Ratifications Act, 2012.

         The Departmental Committee on Trade, Industry and Cooperatives considered our submission together with submissions received from stakeholders and presented a report to                 the National Assembly on 18th February 2021. 

         This Committee Report was tabled for debate in the National Assembly yesterday (on 25th February 2021).

•  Our counterparts in the UK, led by the Minister for International Trade, Rt. Hon. Ranil Jayawardena, MP, have been engaged in a similar ratification process in the House of                      Commons. They have regularly updated us on the progress they are making.

•    The latest update is that their Parliamentary procedures were concluded on 10th February 2021. 

•    The Agreement can be ratified any time once the House of Lords concludes its debate. The reason for the debate is for the House of Lords to satisfy itself that the UK government            exhausted all the options available in securing a continuity agreement between Kenya, the EAC, and the UK. 

Next Steps after Ratification
•    Once the Kenya – UK EPA is ratified, the Speaker of the National Assembly is expected to sign the Instrument of Ratification and convey it to the Attorney General, who will in turn transmit the instrument to the Ministry of Foreign Affairs.

•    The Ministry of Foreign Affairs will then make arrangements for the ratification instruments to be deposited in the Depository of the UK Government. The Agreement takes effect upon the two governments exchanging the ratification instruments by 31st March 2021 and depositing them in respective depositories. In essence, the Agreement takes effect upon the ratification instrument being deposited in the depository.

•    My Ministry is committed to continuing engagement with all stakeholders, particularly the private sector, farmers, and value chain players, on the benefits of this EPA. We are eager to share with Kenyan citizens the opportunities this Agreement opens to grow their businesses, including for the agricultural and manufacturing sectors. 

Benefits of the Kenya – UK EPA   
•    Kenya and the UK negotiated a balanced agreement that replicates the EPA initialed by the EAC and the European Union.  The UK is providing Kenya and its EAC neighbors a secure, long-term, and predictable basis for deepening their access to the UK market.

•    One of the principal benefits of this Agreement is that while exports from Kenya and the EAC Partner States gain immediate access to the UK market, free of duties and free of quota restrictions, UK access to the EAC market will be subject to a progressive and gradual reduction of duties and quota restrictions, implemented over a period of 25 years. 

•    This is particularly important to protect domestic industries from unfair international competition and to give them time to enhance their global competitiveness.

•    In this respect, Kenya has committed itself to the following:
    Progressive liberalization of 82.6 percent of the trade with the UK over a period of 25 years; 

    This will only be implemented after a moratorium of seven years;

    Liberalization of goods that attract 25 percent tariff when being imported to Kenya and the EAC will commence 12 years after the EPA enters into force and will be gradually reduced over a period of another 13 years. 

     It is instructive that these are finished products that account for just 2.6 percent of the trade that Kenya and the UK have agreed to liberalize. 

     Hence, the tariff reduction will have a minimal impact on the Kenyan economy and any industries producing goods in Kenya will enjoy a 12-year lead time before the start of the gradual liberalization.

    For intermediate goods, requisite capacity and trade defense measures have been anticipated in the Kenya -UK EPA for use to mitigate negative effects to local industries producing similar intermediate goods.

•    The gradual tariff reduction process will allow Kenya to deepen its ambitious export development program that includes innovative value chains to enhance the export competitiveness of the domestic manufacturing sector. 

•    One important and recurring question that I wish to answer is whether we have opened the gates for cheap and subsidized products from the UK to enter our market. We have taken good care of this by having a list of sensitive products on both sides, which on the part of Kenya include the same list as is in the EAC-EU-EPA. 

•    I wish to mention that during the negotiations for this Agreement, both Kenya and the UK demonstrated a firm resolve to negotiate a trade and economic pact that respects the fidelity of the EAC Customs Union Protocol and provides room for accession by the willing EAC Partner States. This is important in promoting the EAC region's sustainable development and ensure special and differential treatment of least developed countries.

Importance of UK Market to Kenya
•    In the past, Kenya has accessed the EU and, by extension, the UK market on a duty-free-quota-free basis on temporary conditions granted under the EU Market Access Regulation (MAR) 1528/2007.

•    The UK has consistently ranked in the top five export destinations for Kenya's exports with an annual average of Ksh. 39 billion (USD 390 million) for the last five (5) years (2015 – 2019) - with major exports being flowers, coffee, tea, fruit, vegetables, and textiles. 

•    Kenya's strategy is to pursue a robust marketing campaign with a target for the first year of 5% increase over the current exports to the UK market. The subsequent years will grow incrementally by the same or higher margins. Just by way of example, I will proceed to give you a few lines and statistics. 

•    The market share of Kenya's exports into the EU averages Ksh. 133 billion per annum, with exports destined for the UK accounting for approximately 30% of the EU market share.

•    The current provisional trade data up to August 2020 shows Kenya's exports were valued at Ksh. 34.9 billion (USD 337.7 million), while imports were valued at Ksh. 18.9 billion (USD 185.2 million) at the average exchange rate of Ksh. 103 to 1 USD, with a trade balance of Ksh. 15.9 billion (USD 154.5 million) being in Kenya's favour. 

•    In the Agricultural Sector, coffee, horticulture, and tea remain key export products for Kenya. An analysis of the UK market shows that:
    The UK imports coffee worth USD 1 Billion from the world, with Kenya exporting a mere USD 7.8 million worth of coffee to the UK, accounting for only 0.8% of this market. If Kenya's share in the UK market were to increase by 5% by 2025, this would translate into additional exports worth USD 52 million, which is still way below Kenya's coffee export potential calculated at approximately USD 1.05 Billion.
 
    The UK imports tea worth USD 356 Million from across the world, with Kenya exporting USD150 Million worth of tea to the UK, which accounts for 42.4% of that market. 

    For Pulses and Herbs, Kenyan farmers' potential to sell to the UK is immense and unexplored. The UK imports pulses (beans, peas, green grams, etc.) worth USD 249 Million from the world, with Kenya exporting a mere USD 32 million worth of pulses to the UK.  If Kenya's share in the UK market were to increase by 5% by 2025, this would translate into additional exports worth USD 12 Million, which is still way below Kenya's export potential for pulses to the UK, calculated at approximately USD 240 Million.

    The consolidated UK import market for edible Herbs, including peppers, ginger, saffron, turmeric, thyme, bay leaves, curry, and other spices, is valued at approximately USD 234 Million, with Kenya exporting a measly 1.5% of this, notwithstanding that Kenya has the potential to export herbs worth about USD 232 Million. 

    The UK has been a traditional market for Kenya's Flowers, Fruits, and Vegetables, but we are not even scratching the surface. The UK imports fruits worth USD 6.3 Billion, with Kenya selling to the UK fruits worth USD 5 Million, which translates to 0.1% of this UK market. Kenya is estimated to have an export potential of USD 6 Billion worth of fruits. If Kenya were to expand its exports by only 5%, its exports would increase by USD 314 Million.

    For Vegetables, the UK import market is worth approximately USD 4.3 Billion, and Kenya only exports 2.3% into this market. Kenya's export potential for vegetables into the UK is estimated at USD 4.2 Billion. 

    Kenya exports flowers worth USD 105 Million into the UK. Our export potential for the floricultural sector into the UK is approximately USD 10 Billion. 

•    For the manufacturing sector, there is a focus on Agro-processing, Textiles and Apparel, Leather and Footwear, Metal and Allied, Chemical and Allied, Pharmaceutical and Medical Equipment, Plastic and Rubber, Light Engineering, Automotive parts, and Furniture. 

    For instance, for Textile and Apparels, the UK import market is valued at USD 27.7 billion, with Kenya selling a mere USD 2 Million worth of products, notwithstanding that Kenya has the potential to export approximately USD 1 billion worth of textiles and apparel if we revitalized our industries, which my Ministry is currently focused on.

    The same goes for Leather and Footwear, where Kenya is exporting a negligible USD 0.9 Million worth of products, yet we have the potential to have a thriving leather industry. 

•    The fisheries sector and the related supply chains present an immense and unexplored potential for exporting into the UK market valued at approximately USD 3 Billion.  

•    With this Agreement, we have also unlocked the export market for the Livestock Sector, focusing on Live Animals, Meat, Dairy, and Honey. For instance, the UK's import market for honey is valued at approximately USD 111 Million. Kenya is currently not even exporting any honey into the UK, yet it can produce enough for the UK market.

•    The UK is also among top Kenya's import sources, specifically capital equipment (machinery), motor vehicles, pharmaceuticals, printed books and other paper products, and electrical and electronic equipment. In 2019, Kenya's imports from EU stood at Kshs. 235 Billion, with the imports from the UK accounting for approximately 14.9% (approximately Kshs. 35 billion) of this figure.

Conclusion
•    Therefore, the Kenya – UK - EPA that we have signed is expected to drive growth and expansion of exports in some priority sectors and value chains identified in the Integrated National Export Development and Promotion Strategy, including in agriculture, manufacturing, fisheries, livestock and home décor where Kenya has substantial export potential.

•    We are confident that Kenya has negotiated a futuristic EPA that, once ratified and implemented, will deliver immense export and investment opportunities for the people of Kenya and the EAC region. It will support our Government's Big Four Agenda and Kenya Vision 2030, thus empowering our economy to social and economic prosperity.

Thank You and Stay Safe! 

Useful Links

FAQs on the Kenya - UK EPA Revised

Invitation to Public Participation and Submission of Memoranda