•The EU is Kenya’s second-largest trading partner and its most important export market.
•Last year, the value of Kenya’s exports to the EU totaled Sh150.1bn, the Economic Survey 2024 indicates, having grown 12.7 per cent from Sh133.2 billion in 2022.
Image: GEORGE MUGO
Kenyan exporters are faced with numerous non-tariff barriers which are limiting them from fully taping the European Union market, a new report indicates.
This is despite the existence of trade agreements over the years, with the latest being the EU-Kenya Economic Partnership Agreement (EPA) that entered into force, on July 1, 2024.
The pact gives Kenya’s exports duty free access to the 27-member European Union with a potential 500 million people market and in return, Kenya will have to open its markets to EU products gradually over a 25-year period.
According to the Investments, Trade, and Industry Ministry, led by CS Salim Mvurya, the EU-Kenya EPA is the most ambitious deal negotiated with an African country in terms of sustainability and can serves as a template for other sustainable trade agreements.
A report by the Kenya Institute for Public Policy Research and Analysis(KIPPRA), on the market review, shows EU markets offering the largest average preferential margin to Kenyan exports include Bulgaria (8.75%), Slovenia (8.49%), Luxembourg (7.20%) and Romania (6.96%).
Others are Poland (6.62%), Slovakia (6.53%), Latvia (6.32%), Lithuania (6.31%), Netherlands (6.23%), Ireland (6.16%), Cyprus (6.10%) and Estonia (6.07%).
Although these countries would conventionally be considered more attractive to Kenyan exports, because they offer the largest reduction of tariff barriers, they have the largest number of non-tariff barriers (technical regulations and standards).
The technical regulations mainly exist in the form of rules of origin and anti-dumping and countervailing measures.
The regulations also exist in the form of safeguard measures aimed at protecting domestic industry and health and safety of consumers.
Kenyan exports enjoy duty-reductions and quota-free access to the EU market and the trade arrangement encouraging cooperation in the field of standardisation, certification, and quality assurance to eradicate unnecessary technical barriers.
However, Kenyan exporters still encounter difficulties in complying with labelling requirements, rules of origin, and phytosanitary controls while accessing the EU market.
“The more the number of rules that must be satisfied, the more stringent accessing the market becomes and the higher the cost of complying with the requirement. The high cost could discourage exports or even make exports less competitive,” KIPPRA notes in its report.
The technical regulations exist in many forms, including requirements to demonstrate proof of the territory where the exported products originate, the input composition of the exported product, sources of the inputs used in making a product, and level of processing undertaken.
“Given that non-tariff measures are highly opaque and more trade-prohibiting compared to tariff measures, which are more transparent and quantifiable, it would mean these markets are attractive to large firms that enjoy competitive edge emanating from technology and economies of scale, but unattractive to Micro, Small, and Medium Enterprises (MSMEs),” KIPPRA said.
The Czech Republic (4.10%), Finland (4.61%), and United Kingdom (which exited the EU-4.89%) have the lowest preferential margin to Kenyan exporters.
While these markets have retained tariff measures relatively high, they are more attractive to both MSMEs and large firms because they have relatively lower number of non-tariff measures.
Larger preferential margins indicate larger export incentives to exporting firms with incentives realised through lower market entry barriers.
The EU is Kenya’s second-largest trading partner and its most important export market.
Last year, the value of Kenya’s exports to the EU totaled Sh150.1 billion, the Economic Survey 2024 indicates, having grown 12.7 per cent from Sh133.2 billion in 2022.
“The rise was partly contributed by increase in domestic exports of cut flowers and avocados to the Netherlands and beans to France,” KNBS said.
The earnings from fresh horticultural exports increased from Sh146.1 billion in 2022 to Sh147.2 billion in 2023.
Export earnings from the Russian Federation however declined by 37.5 per cent, largely on account of decreased exports of tea.
The value of imports from the EU totaled Sh223.1 billion up from Sh202.2 billion.
The Kenya Integrated National Export Development and Promotion Strategy aims at realising 25 per cent annual growth in exports.
“To achieve an export-led growth, there is need to enhance export competitiveness in markets where the country has the largest untapped export potential,” KIPPRA said.
CS Mvurya has since said the the government will embark on a nationwide sensitisation programme to appraise the Kenyan business community on opportunities presented by the EPA.
"It is crucial that both the business and investor communities are fully informed about the stakes involved, not only for the private sector but also for public and government agencies,” he said.
According to the EU Ambassador to Kenya, Henriette Geiger, the EPA provides a unique opportunity for Kenya’s business community to access the European market duty-free.
“Once fully embraced and adopted, this agreement will significantly increase employment opportunities and strengthen economic ties between Kenya and the EU," Geiger said.