Trade Principal Secretary Chris Kiptoo has asserted that Kenya will not sign a free trade agreement that China has been negotiating with the East African Community (EAC) partner States since 2016.
Speaking on the deal, Mr Kiptoo acknowledges that the decision is intended to protect Kenya's nascent manufacturing sector from being over-run by China's cheaper and more efficient producers.
He, however, noted that the decision could trigger diplomatic unease between Nairobi and Beijing.
He revealed that the current trade balance is designed heavily in favour of China, and the proposed comprehensive free trade agreement (FTA) would see Chinese goods access the EAC market at more favourable tariffs.
The principal secretary explained: "China already accounts for 25 percent of Kenya’s import bill under the current common external tariff structure of zero per cent, 10 percent and 25 percent for raw materials, intermediate goods and final goods respectively.
"This means that China is likely to get even a larger share of Kenya’s market once we enter into a free trade arrangement," Mr Kiptoo highlighted.
China has been negotiating for the creation of a free trade agreement with EAC for the past two years.
"China accounts for less than two percent of our exports currently. An FTA with China might improve our export share but not significantly. A preferential trade agreement with China is what we prefer…an AGOA type of trade," noted Mr Kiptoo.
Kenya signed a double taxation agreement (DTA) with China last October to incentivize Chinese firms setting up base in Kenya with already more than 400 Chinese firms in the country serving in various sectors of the economy such as real estate, finance and agriculture.
“Kenya is ready to agree on certain commodities that China would want to import so that local exporters can focus on them specifically for the Chinese market,” noted the PS.
China is currently the leading source of Kenya’s imports.