Trade is vital for a country’s development. One needs only to look at the rise of emerging economies like India, China and Brazil to see

the impact that trade-driven development can have. Millions have been lifted out of poverty. Yet, while showing positive growth and increased trade, some other developing countries have been further marginalised in an increasingly competitive global landscape. They are often held back by lack of productive capacity, difficulties in diversifying their economy, poor infrastructure and export conditions.

On January 27th 2012, the European Commission adopted a Communication “Trade, growth and development”. This Communication redefines how the EU’s trade and development policy will work for the development of those poorer countries - in particular, Least Developed Countries (LDCs) - ensuring they can increasingly enjoy its benefits. In the Communication, the European Commission proposes a number of ways to improve the effectiveness of EU trade and development tools for those countries most in need, including:

• reforming the EU’s preferential trade schemes to focus more on the poorest countries; • stepping up negotiations on free trade agreements with our developing country partners,including Economic Partnership Agreements(EPA);• facilitating developing country exporters, especially small operators, to enter the EU, for instance through the Export Helpdesk.

At the same time, the Communication underlines that developing countries’ leadership and sense of ownership of their own development is crucial for growth. Developing countries need to undertake domestic reforms to ensure that the poor benefit from trade-led growth. The EU leads the way in providing trade policy support to the neediest countries, inter alia with the Everything But Arms initiative, and development assistance, in particular on Aid for Trade.

The Economic Partnership Agreements (EPAs) between the EU and African, Caribbean and Pacific group of countries (ACP) are

aimed at promoting trade between the two groupings – and through trade development, sustainable growth and poverty reduction. The EPAs set out to help ACP countries integrate into the world economy and share in the opportunities offered by globalisation. For well over 30 years, exports from the ACP countries were given generous access to the European market. Yet preferential access failed to boost local economies and stimulate growth in ACP countries.

In 2011, the EU remains Kenya’s largest trading partner accounting for over 15% of Kenyans imports and 26% of its exports (total trade with EU approximately 18%).

2012 is a crucial year for EPAs: interim agreements are getting ratified and regional negotiations run at a brisk pace. The two movements are reinforcing each other and the renewed momentum in the negotiations is finally creating a real perspective for concluding the process. Time is of the essence. We must provide certainty and predictability to operators and to potential investors. Economically, ambiguity is the worst enemy of investment and growth. Politically, the EPA negotiations cannot be sustained indefinitely, ten years after they were launched.

The EPA on offer is clear. It is an international treaty with the EU providing free market access and cooperation support. Asymmetry is the word, as ACP countries have less far-reaching obligations. Only if ACP countries wish, EPAs will include commitments on services, investment and trade-related areas, identified in the Cotonou Agreement as important drivers of growth. So the EPA is a very flexible, development-oriented agreement. Its development potential lies in regional integration, enhanced investment and an improved business climate.

It is time for ACP Governments - including Kenya - to take a sovereign decision as to whether they opt in or opt out of such a partnership. If Kenya decides to opt out, the EU’s reformed Generalised System of Preferences will offer an alternative, in terms of market access for goods rather than a partnership (GSP however is a “unilateral” system of preferences, which, contrarily to an EPA, can be revoked any moment).

The Export Helpdesk is an online service, provided by the European Commission, to facilitate market access in particular for developing

countries to the European Union. This free and user friendly service for exporters, importers, trade associations and governments, provides the following online: • Information on EU and Member States’ import requirements as well

as internal taxes applicable to products; • Information on import tariffs and other import measures; • Information on EU preferential import regimes benefiting developing

countries; • Trade data for the EU and its individual Member States.

http://ec.europa.eu/trade/creating-opportunities/trade-topics/market-access/export-to-eu/

Aid for trade is financial assistance for developing countries specifically targeted at helping them develop their capacity to

trade. It can include help in building new infrastructure, improving ports or customs facilities and assistance in helping factories meet European health and safety standards for imports. Helping developing countries develop the means to benefit from open global markets is an important part of a long-term strategy for global poverty reduction, alongside debt relief and general development aid. The EU is the leading global advocate of aid for trade and the world’s biggest source of aid for trade. In December 2005 the EU made an overall commitment to increase its collective annual spending on trade-related assistance (one component of the overall Aid for Trade budget) to €2 billion every year (€1 billion of this is to come from the European Commission and another €1 billion from EU Member States).

Since 1971, the EU has had rules ensuring that exporters from developing countries pay lower duties on some or all of what they sell

to the EU. This gives them vital access to EU markets contributing to the growth of their economies. This scheme is known as the “Generalised System of Preferences” or “GSP”. The three main variants of the scheme (the overall GSP scheme, the “GSP+” incentive scheme for the respect of labour, human, environmental and good governance rights and rules, and the “Everything but Arms”- scheme for least developed countries) is currently being reinforced, by re-adjusting the preferences and ensuring they have a higher impact.

On 10th May 2012, the European Commission adopted a new scheme. Its objectives are to focus help on those truly in need; to strengthen GSP+ as an incentive to good governance and sustainable development; and to make the system more transparent, stable and predictable. Within the EU GSP-structure, the “Everything But Arms”-scheme (EBA) is the most favourable since it grants duty-free access to imports of all products from least developed countries (LDCs). Kenya is not an LDC and therefore cannot benefit from the EBA-scheme.

TRADE, GROWTH & DEVELOPMENT EXPORT HELPDESK

AID FOR TRADE

EU’s PREFERENTIAL TRADE SCHEMES

ECONOMIC PARTNERSHIP AGREEMENTS (EAC/EU)

 

 

EPA benefits for farmers and manufacturers in Kenya and EAC:• Duty Free Quota Free Access to the EU – free access to the EU market of half a billion people for all ACP products, providing plenty of scope for economies of scale

• Building regional markets – boosting trade between ACP neighbours and regions, with very significant potential benefits for exporters • No shocks – ACP countries will only gradually open their markets to EU imports. Duties will be phased out over a period of 25 years, with safeguards and support on offer for ACP countries that encounter problems.

• No undue competition, producers of the most sensitive 17.4% goods (most of which agricultural goods) will enjoy permanent protection from competition of EU imports (the 25% duty will be kept even after 25 years’ gradual opening)

• EPAs are part of the wider development agenda for ACP countries, to strengthen the law, attract local and foreign investment and create the conditions for greater prosperity and better business climate.

• Coverage of services and foreign investment – EPAs don’t just deal with trade in goods but with issues relating to development too – because trade is development.

The rise of emerging economies like India, China and Brazil shows that trade-driven development is possible and that open markets can play a major role in generating growth. Yet those trailing behind need help. World tariffs have never been this low and the EU already offers very favourable market access to poor countries. What will make a difference are non-tariff issues - such as standards, services, intellectual property rights, public procurement, infrastructure and packaging facilities. None of this can work without political governance. Said EU Trade Commissioner Karel De Gucht.

Kenyan MP Musikari Kombo co-president of the 23rd Plenary session of the ACP-EU Joint Parliamentary Assembly who met in Denmark on 28-30 May 2012, explained that when Kenya became independent in 1963, its economy was must stronger than South Korea’s. “But then they went for growth… So we must ask what we can do for growth and trade. Business together is the right approach.”  

TRADE BETWEEN KENYAAND THE EUROPEAN UNION

For FUrthEr inFormAtion:

Catherine Ashton

High representative of the European Union for Foreign Affairs & Security Policy and Vice-President of the European Commission

Karel De Gucht

European Commissioner for Trade

Lodewijk Briët

Head of the European Union Delegation in Kenya

Delegation of the European Union to KenyaUnion House, Ragati Road, Upper Hill

P.O. Box 4511900100 Nairobi

Tel: +254.20.280.20.00Fax: +254.20.271.09.97

E-mail: Christophe.de-vroey@eeas.europa.euWeb : http://eeas.europa.eu/delegations/kenya/index_en.htm

KENYA DELEGATION

trADE PAttErnS EU/ KEnYA

 

   

 

The Major Imports Partners The Major Export Partners The Major Trade PartnersRk Partners Mio euro % Rk Partners Mio euro % Rk Partners Mio euro %

World (all countries)11,237.7 100.0% World (all countries)3,820.5 100.0% World (all countries)15,058.2 100.0%

1 EU27 1,700.6 15.1% 1 EU27 984.6 25.8% 1 EU27 2,685.1 17.8%2 India 1,671.8 14.9% 2 Uganda 390.9 10.2% 2 India 1,747.2 11.6%3 China 1,489.1 13.3% 3 Tanzania 380.1 10.0% 3 China 1,516.2 10.1%4 United Arab Emirates 1,063.1 9.5% 4 United States 223.8 5.9% 4 United Arab Emirates 1,126.4 7.5%5 South Africa 991.2 8.8% 5 Congo, Democratic Republic of166.1 4.3% 5 South Africa 1,020.8 6.8%6 Saudi Arabia 744.6 6.6% 6 Egypt 141.4 3.7% 6 Saudi Arabia 757.0 5.0%7 Japan 514.0 4.6% 7 Rwanda 140.3 3.7% 7 Uganda 542.8 3.6%8 Bahrain 337.5 3.0% 8 Pakistan 128.8 3.4% 8 Japan 541.5 3.6%9 United States 299.7 2.7% 9 India 75.3 2.0% 9 United States 523.5 3.5%

10 Indonesia 202.6 1.8% 10 Somalia 69.5 1.8% 10 Tanzania 422.8 2.8%

1. Trade in goods, EU27 with Kenya

2. EU27 merchandise trade with Kenya by product (2011)

3. Kenya’s Trade with major partners (2010)

4. Kenya main agricultural exports to the EU, and alternative tariffs