On Wednesday, September 7, 2016, Parliament received the final version of the Economic Partnership Agreement (EPA) as signed by the Government Republic of Kenya on 1st September 2016.

The EPA is a contract between the Member states of the African, Caribbean and Pacific regions on the one part, and the European Community and its Member States on the other part. The Economic Partnership Agreement is intended to address regional and national market concerns as well as promoting trade opportunities through regional integration and enhancing access to global markets.

Africa has been negotiating its terms with the European Union (EU) as a bloc, with the different regional blocs in the West, South and East required to sign the EPAs. As such, Kenya has been negotiating the EPA with the EU and other East African Community (EAC) Partner States, since October 2007, pursuant to the EAC Summit directive of 2002 and 2007 for the EAC to negotiate the EPA as a bloc. The Executive has explained that, by ratifying the EPAs, the country is assured of enjoying export tariffs to the EU and guaranteed duty-free quota-free market access of specified items to the EU market.

Kenya and Rwanda signed the EPA on 1st September 2016. However, Kenya has to sign and ratify the EPA and inform the EU of its decision by 30th September 2016 to avoid losing its duty-free, quota-free market access to the EU. Pursuant to section 8 of the Treaty Making and Ratification Act, 2012, the National Assembly shall consider the Treaty, ensuring public participation, and may approve the ratification of the Treaty with or without reservations. To meet this deadline, the Speaker of the National Assembly has appointed Tuesday, 20th September, 2016 as a day for a special sitting of the House to consider the proposal to approve the ratification of the Agreement.

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Objectives of the Memorandum

The objectives of this Memorandum are to:

1. Inform both houses of Parliament on the finalisation of the Economic Partnership Agreement (EPA) negotiations

2. Inform both houses of approval by Cabinet in June 2016 for signing and ratification; and

3. Seek Parliament’s ratification of the EPA in good time to allow for notification of the ratification to the EU Council before 30th September 2016, the deadline that Kenya needs to meet in order to avoid trade disruption in the EU market.

Background

The Economic Partnership Agreement (EPA) negotiations begun in 2002 at the all-ACP Level. This phase was aimed at setting the principles and objectives of the negotiations. The substantive negotiations started in 2013 at the regional level. The negotiations were finalised in October 2014, with the initialing of the agreement to signify conclusion of the negotiations.

Trade between Kenya and the EU for over 30 years until 31st December 2007 has been conducted under a non reciprocal preferential Trade regime under Lome Conventions (1975-2000) and later under the Cotonou Agreement (2000-2007). Most of Kenya’s (and other ACP countries) exports entered the EU market on duty free under this arrangement.

The main objective of the preferential trade regime was to promote industrial development in the ACP countries. However, the preferential trade regime did not achieve its overall objective, since the share of Kenya’s exports in the EU market remained very low and scarcely diversified.

The legal scrubbing of the EPA has been concluded and currently undergoing translation into the 23 EU languages and Kiswahili. The agreement is expected to be signed in June, once the translation has been finalised to pave way for the ratification process. Ratification, according to the EU roadmap, should be completed by October, 2016. The Agreement will enter into force when all the EU Member States and the EAC Partner States have deposited the instruments of ratification. However, there is a possibility to start implementing the agreement on provisional basis once it has been signed.

Problem analysis and justification

The overall objective of the ACP-EU preferential trade regime, of promoting ACP countries exports to the EU faced challenges that could not be addressed by the regime. For instance the objective of promoting the industrial development in the ACP countries failed due high tariffs, tariff escalations and tariff quotas that affected some agro-processed products. The share of Kenya’s exports in the EU market remained very low and scarcely diversified and most of it in primary form/raw materials. The total imports from the ACP into the EU decline from 6.7% in 1976 to 2.0% by 2007. Even where trade volume improved, the value did not follow suit.

At the same time, the regime faced additional challenges at the WTO. The non-reciprocal preferential market access extended to Kenya and other ACP countries was often challenged by other WTO member countries for being discriminatory to WTO developing countries who were not members of the ACP Group and therefore incompatible with the WTO rules. Brazil, Australia and Thailand challenged the regime, at the WTO Dispute Settlement, on the EU-Sugar Subsidy issue (ACP Countries under the Sugar Protocol); Similarly the ACP-EU Banana regime was challenged twice (Banana I and II) by the Latin American Countries for the same reason of being a discriminatory regime.

Additionally, ACP continued to face obstacles in accessing the EU market due to the supply side constraints, and technical and health standards that were imposed unilaterally by the EU.

Consequently, the ACP and the EU agreed to address these concerns through the Economic Partnership Agreement which is compliant with WTO rules and as well as promoting South-South trading opportunities through regional integration and enhancing ACP countries’ access to the global market.

The commitment by the EU and ACP to enter into EPA arrangement is enshrined in the Cotonou Partnership Agreement which was signed in June 2000. The legal basis of EPA therefore is the Cotonou Agreement, which Kenya is a signatory State.

Way forward

Given the fast approaching deadline of 1st October 2016, the Parliament needs to ratify the EPA by 20th September 2016 in order to allow for the notification of the ratification to the EU Council by 30th September 2016. This is the only option that Kenya has in order to save over KES125bn EU export market, which has potential to be lost overnight if the ratification is not notified to the EU by 30th September 2016.

Other negative ramifications to the economy that need to be avoided is threat of about 4million people working directly or indirectly with companies or ventures that are exporting to the EU, losing their livelihoods. Further, investments worth over KES2bn in floriculture, horticulture, agro-processed products, fisheries, among others is also at stake, come 1st October 2016.