Brexit - new trade agreements between the UK and Kenya must be negotiated timeously
The United Kingdom (UK) is one of Kenya’s biggest trading partners, with the UK being Kenya's biggest export market for horticulture and tea; and also Kenya’s biggest source market for tourism. Therefore, the quick finalisation of new trade agreements that will be in effect after the UK has exited the European Union, will be essential for Kenya.
According to the Kenya High Commission, Kenya and the UK established diplomatic relations soon after independence in 1963. The UK is the largest European foreign investor in Kenya. There are many British companies based in Kenya, including Vodafone, Barclays Bank, Diageo, Standard Chartered Bank, GlaxoSmithKline and Unilever. Kenya accounts for 27% of the fresh produce and 56% of the black tea market in the UK. Kenya imports motor vehicles, printed materials, machinery and chemicals from the United Kingdom.
“If Brexit does happen, we will have to negotiate separately with the UK to finalise new trade agreements, as most of our trade agreements at present are with the EU,” explains Paras Shah, partner in Bowman Gilfillan Africa Group’s Coulson Harney Kenya office.
“There is optimism that once the dust settles, political certainty in the UK will emerge and direction on the future relations with the EU will become clear. The UK will begin to negotiate trade agreements with its trading partners and over the next two years, a lot of work will need to be done to ensure our trade relationship with the UK does not suffer and that all the necessary trade agreements are negotiated and signed in time. This massive exercise will present the opportunity for Kenya to negotiate improved terms with its major trading partner,” Shah says.
Shah explains that if the new trade agreements are not in place by the time the UK leaves the EU, then Kenyan exporters will be subjected to higher tariffs and trade barriers. In addition,the country will lose its favourable trade status, which will adversely affect the export market and have a knock on effect on the economy.
Shah notes that Kenya had been in a situation before when there was procrastination on the signing of a trade agreement with the EU for the horticulture sector. The agreement was eventually signed in 2014 but at the time, the Kenya Flower Council said that because of the delay in the signing of the trade agreement and the resultant higher trade tariffs, the Kenyan horticulture industry lost more than Kenyan Sh1 billion every month.
“Negotiating trade agreements is a bureaucratic process that requires a lot of administration, as well as the meeting of parties in person to iron out the details. It takes time. In this regard the UK will likely prioritise the negotiating of trade agreements with its key partners, namely the EU, the United States and China.
“When it comes to negotiating Kenya's trade agreements with the UK, we are going to have to wait our turn in the queue. What we need ensure, however, is that we are as far in front of the queue as possible!” he adds.