logo logo

EU agrees trade deal with Kenya as Brussels aims to boost Africa ties

EU agrees trade deal with Kenya as Brussels aims to boost Africa ties

Financial Times | 14th June 2023

By Andy Bounds, and Andres Schipani

The EU has agreed a trade deal with Kenya, marking an important step in Brussels’ efforts to boost economic relations with Africa. The accord, which will be announced on Monday, according to EU officials, comes as Brussels contests growing Chinese involvement in the continent. The Interim Economic Partnership Agreement (IEPA) will give Kenya duty-free, quota-free access to the EU market for all its exports, including coffee, flowers and minerals.

Kenya will gradually open its market to more EU imports. It has also agreed to binding commitments on environmental protection, climate and labour rights, an EU demand that has complicated trade negotiations with other middle-income countries such as Brazil and Indonesia.

“It is a partnership of equals,” said an EU official on Wednesday about the deal, the first trade accord the EU has struck with an Africa nation since an agreement with Ghana in 2016. “Kenya wants to show . . . [it is] a good place for companies to set up shop. This agreement sends that message very powerfully to European investors.”

Valdis Dombrovskis, European trade commissioner, will travel to Nairobi on Sunday to clinch the agreement with Kenya’s President William Ruto. The deal is the legacy of negotiations over a wider regional EPA with the east African Community concluded in 2014 but never implemented. Of the five members — Kenya, Rwanda, Burundi, Tanzania and Uganda — only Kenya ratified it. 

Two years ago the other members of the bloc allowed it to pursue a renegotiation of the agreement without them. All other members of the bloc, which now includes Democratic Republic of Congo and South Sudan, are on the UN’s list of least-developed countries and eligible for tariff and quota-free access to the EU. But they could now join the new IEPA, the official said.

Kenya is the continent’s seventh-largest economy by purchasing power parity, according to the World Bank. But Nairobi has recently experienced opposition-led protests over living costs after a surge in fuel and food prices partly driven by Russia’s invasion of Ukraine, while also suffering a decline in its currency and rising borrowing costs.

The EU is Kenya’s biggest export market with more than 20 per cent of the country’s total exports to the world, according to a 2021 European Commission document. More than 70 per cent of its flower production heads to the European bloc. It sold €1.3bn of goods to the EU in 2022 and imported products worth €2bn, with two-way trade growing by about a quarter since 2019.

In February, during an EU-Kenya business forum, Ruto said a trade deal with the EU “would enable Kenya to expand its export base”. Kenya is also in talks with the US to build a stronger trade relationship. The EU and US have agreed a joint plan to upgrade the country’s telecoms infrastructure.

During his presidential campaign last year Ruto, who is viewed as pro-business and open to western investment, struck a hostile tone towards China as debt servicing costs have climbed in recent years after his predecessor, Uhuru Kenyatta, borrowed heavily from Beijing.

The EU has launched its Global Gateway aid initiative, which will spend €150bn in Africa between 2021 and 2027 as a rival to China’s own Belt and Road infrastructure programme.

However, relations with developing nations remain strained. On Wednesday the EU shelved a co-operation treaty with 79 developing countries, many in Africa, after Poland vetoed its approval over their attitudes towards Ukraine.

The commission instead asked member states to roll over an existing deal with the Organisation of African, Caribbean and Pacific States to prevent disruption to trade and development. Due to expire on June 30, Brussels wants to extend the “Cotonou” agreement for three months.

Poland has said a glut of Ukrainian grain that would normally go to African and Asian countries has built up, reducing prices for its own farmers. Countries complaining of food shortages should take the shipments, Warsaw’s EU ambassador told the Financial Times. But many nations are keen to preserve relations with Moscow, with several African countries saying EU sanctions has made it harder to buy Russian crops and fertilisers.

Several countries such as South Africa and Uganda have also abstained on UN votes condemning Russia’s invasion of Ukraine.

 source: Financial Times