The government of the United Kingdom (UK) has announced a raft of trade reforms in Africa that may affect Kenya’s trade activities with the European nation.
In a statement released on Tuesday, July 15, the UK noted that the changes are aimed at simplifying imports from developing countries in Africa, such as Kenya, helping to lower prices on everyday goods while supporting jobs and growth.
“African exporters and entrepreneurs are set to benefit from a new package of UK trade reforms unveiled on 10 July, designed to simplify access to the UK market and strengthen economic ties between the UK and developing countries,” stated the UK government.
The changes are primarily centred around the Developing Countries Trading Scheme (DCTS), with upgrades to the scheme aimed at making it easier for businesses to trade with the UK and helping to reduce prices.
Launched in 2023, following the UK’s exit from the European Union (EU), the DCTS is the UK’s flagship trade preference scheme, covering 65 countries and offering reduced or zero tariffs on thousands of products.
Upgrades include simplified rules of origin, which will enable all DCTS countries – including those further up the value chain, such as Kenya – to source inputs for finished goods from across the African continent, while ensuring that goods can continue to enter the UK tariff-free.
In addition to the DCTS changes, the UK is set to offer targeted support to help exporters in developing countries access the UK market and meet import standards.
Another intervention aims to make it easier for partner countries to trade services, such as digital, legal, and financial services, by strengthening future trade agreements. This will create new opportunities for UK businesses to collaborate and invest in fast-growing sectors.
Even in its existing Economic Partnership Agreement (EPA) with the UK, changes or upgrades to DCTS could still impact Kenya’s trade activities within Africa and with the UK.
The EPA provides duty-free, quota-free access for a wide range of Kenyan products (like horticultural products, tea, coffee, apparel, textiles) to the UK market.
If the DCTS is significantly enhanced for other African countries (especially those that export similar products to Kenya, like horticultural goods, textiles, or agricultural commodities), it could make their exports to the UK even more competitive and increase competition for goods.
For example, the recent DCTS upgrades, including the simplified "rules of origin," would make it easier for countries like Lesotho and Nigeria to export garments to the UK tariff-free, even when using components from elsewhere in Africa.
Also, Kenya's EPA already provides duty-free, quota-free access for most of its exports to the UK. If other African countries gain similar (or nearly similar) benefits under an improved DCTS, Kenya's relative advantage might slightly diminish, as more players gain better access to the UK market. This means Kenyan exporters face increased price competition.
Even so, with the recent DCTS changes, the emphasis is on simplified rules of origin that allow DCTS countries to source inputs from anywhere on the African continent and still enjoy tariff-free access to the UK. While this does not directly apply to Kenya's EPA, it could indirectly boost intra-African trade, which Kenya, as a regional economic hub, could potentially benefit from as a source of inputs or transit point.
In the four quarters to the end of Q4 2024, total trade in goods and services (exports and imports) between the UK and Kenya was £1.8 billion (Ksh313 billion). This marked a 10.1 per cent increase (£169 million- Ksh29 billion) in current prices compared to the four quarters to the end of Q4 2023.
