Summary
Despite earlier fears over the potential impact of the UK’s MFN tariff review the proposed future schedule has largely left unaffected MFN tariffs on agri-food products of export interest to Kenya. The principal issues now faced relate to the future of Kenya’s duty free-quota free access to the UK market if the UK leaves the EU customs union on 1st January 2021, given the Covid-19 interruption of still incomplete regional trade negotiations; the need to ensure the continued smooth functioning of triangular supply chains through which the UK market is served via initial ports of landing in the Netherlands or Belgium and the future phytosanitary import controls to be applied by the UK, once the UK is no longer bound by the EU’s increasingly strict phytosanitary import regime.
In 2019 Kenya had a high dependence on fruit, vegetable and cut flowers in its total export trade with the UK, with these product categories accounting for 45.2% of Kenya’s total exports to the UK. Direct exports to the UK market were particularly important for Kenyan vegetable exports, where the UK market accounted for almost half of total vegetable exports to the EU28.
Kenya Direct Exports to the EU28 and the UK (€) 2019
| Cut Flowers (06) | Vegetables (07 | Fruit (08 | Sub-Total | Total Export (ALL) | 06-08 % Total | |
| EU28 | 514,204,401 | 180,189,345 | 100,070,762 | 794,464,508 | 1,335,491,066 | 59.5% |
| UK | 60,377,588 | 88,813,655 | 5,108,903 | 154,300,146 | 341,124,499 | 45.2% |
| UK%EU28 | 11.7% | 49.3% | 5.1% | 19.4% | 25.5% |
Source: EC Market Access Data Base https://madb.europa.eu/madb/statistical_form.htm
Direct exports to the UK were proportionally less important in the cut flowers sector, accounting for only 11.7% of total exports to the EU28. This however under-estimates the importance of the UK market, since many of the flowers sold through UK florists are imported from the Netherlands, with in the case of roses, many of these originating in Kenya. The scale of this triangular trade is likely to be such as to make cut flowers even more important than the vegetable sector in terms of the value of Kenya production destined for the UK market.
In the fruit sector the UK market accounted for only 5.1% of the value of total Kenyan exports to the EU28. However, with fully 59% of Kenyan vegetable exports to the EU28 entering via the Netherlands it is unclear what volume of this trade is subsequently onward traded to the UK.
What is important, whether exported directly or indirectly to the UK market, is that for many of these products, as a result of the MFN tariffs and associated Standard GSP tariffs applied under the EU’s common trade regime, Kenyan exporters enjoyed significant margins of preference over other potentially competing third country suppliers, such as Brazil, Thailand (MFN) and India and Uzbekistan (GSP).
Against this background the outcome of the UK’s MFN review was potentially of considerable significance to Kenya. Indeed, this saw the Fresh Produce Exports Association of Kenya (FPEAK) submitting evidence to the UK’s on-line consultation over its MFN review, highlighting areas of concern.
According to the UK governments 19th May 2020 press release announcing the UK’s new MFN tariff schedule largely maintained in place tariffs where this supports ‘imports from the world’s poorest countries that benefit from preferential access to the UK market’ (1).The announced new MFN tariff regime will enter into effect once the UK leaves the EU customs Union – currently scheduled for 1st January 2021.
This was certainly the case for many Kenyan fruit, vegetable and cut flowers, with only a light cautionary note being required in the areas where the UK is planning to move away from minimum entry price requirements.
Kenyan agri-food exports to the UK fall into 4 categories:
- Products where no MFN tariffs were applied under the EU Common External tariff (CET), which will cover Kenya’s trade with the UK until at least 1st January 2021. This export trade in black tea, coffee and fresh tamarinds was valued at €142.5 million in 2019 (almost 42% of total Kenyan exports to the UK). These export products would never have been affected by the UK’s MFN tariff review since exporters from all countries already enjoyed duty free access for these products.
Areas Where No Tariffs Applied Under EU CET and Value of Kenyan Exports to the UK in 2019 (€ millions)
| Commodity | Description/Value 2019 | EU CET | UK Global Tariff | Change |
| 090240 (€134.4m) | Black fermented tea and partly fermented tea, | 0% | 0% | No Change |
| 090111 (7.1m) | Coffee (excl. roasted and decaffeinated) | 0% | 0% | No Change |
| 08109020 (€1m) | Fresh tamarinds, cashew apples, lychees, jackfruit, sapodillo plums, passion fruit, carambola, and pitahaya | 0% | 0% | No Change |
- Products where existing ad valorem tariffs have been marginally reduced, with this trade being valued at around €80.6 million in 2019, representing 23.6% of the value of total Kenyan direct exports to the UK in 2019.
| Commodity | Description/Value 2019 | EU CET | UK Global Tariff | Change |
| 06031100 (€48.2m) | Fresh cut roses and buds, of a kind suitable for bouquets and other cut flowers | 8.50% (1Jan-31May, 1Nov-31 Dec
12% (01 Jun-31 Oct) |
8% | Simplified |
| 07099990 (8.6 m) | Fresh or chilled vegetables n.e.s. | 12.8%
|
12%
|
Simplified |
| 070810
(€7m) |
Fresh or chilled peas “Pisum sativum shelled and unshelled | 8.00% (1Jan-31May, 1Sep-31 Dec)
13.60% (1Jun-31Aug) |
12% (1Jun-31Aug)
8% (1 Sep-31May) |
Simplified |
| 20082090 (€6.1m) | Pineapples, prepared or preserved, not containing added spirit, or added sugar | 18.4% | 18% | Simplified |
| 07093000 (€3.2m) | Fresh or chilled aubergines “eggplants” | 12.8% | 12% | Simplified |
| 08044000
(€2.8 mill) |
Fresh or dried avocados | – 4.00% (1Jan-31Mar, 1-31Dec)
– 5.10% (1Jun-30Nov) |
4% | Simplified |
| 07096099 (€1.7m) | Fresh or chilled fruits of genus Capsicum or Pimenta | 6.4% | 6% | Simplified |
| 20082079 (€1.5m) | Pineapples, prepared or preserved, containing added sugar but no added spirit, sugar content of > 13% but <=19%, in immediate packing of a net content of <=1 kg | 19.2% | 18% | Simplified |
| 08102010 (€0.9m)
08102090 |
Fresh raspberries
Fresh blackberries mul & loganberries
|
8.8%
9.6%
|
8.0%
8%
|
Simplified |
| 071022 (0.6 m) | Beans (Vigna spp., Phaseolus spp.) | 14.4% | 14% | Simplified |
- Products where the fixed EU CET was maintained and subjected to a currency conversion at the rate of €1 = £0.83687, with this trade being valued at around €7.4 million in 2019, representing 2.8% of the value of total Kenyan direct exports to the UK in 2019 .
| Commodity | Description/ | EU CET | UK Global Tariff | Change |
| 24012035
(3.6m) |
Partly or wholly stemmed or stripped light air-cured tobacco, otherwise unmanufactured | 18.40% MIN €22.00/100kg MAX €24.00/100kg | £18/100kg | Currency Conversion |
| 07099960
(€2.8m) |
Fresh or chilled sweetcorn | €9.40/100 kg
|
£7.80/100kg
|
Currency conversion |
- Products where the UK is moving away from a minimum import price requirement with seasonal tariffs, to a simple all year-round ad valorem tariff. In 2019 the direct trade to the UK in these Kenyan products was valued at around €63.4 million, representing 18.6% of the value of total Kenyan direct exports to the UK. While given the market positioning of Kenya fresh beans on the high quality end of the UK market suggests the removal of the minimum import price requirement with have little effect in this product area, for headed broccoli, trade developments will need to be more carefully monitored.
| Commodity | Description/ | EU CET | UK Global Tariff | Change | |
| 070820
(€45.1 mill) |
Fresh or chilled beans “Vigna spp., Phaseolus spp.”, shelled or unshelled | 10.4% MIN €1.6/100kg/net (1Jan-30June, 1Oct-31Dec)
13.60% MIN €1.6/100kg/net (1Jul-30 Sep) |
10% | Simplified | |
| 070410
(€18.3 mill) |
Fresh or chilled cauliflowers and headed broccoli | 9.60% MIN €1.1/100 kg/net (1Jan-14Apr, 1Dec-31Dec)
13.60% MIN 1.6€/100kg/net |
8% | Simplified | |
|
Comment and Analysis The maintenance of existing MFN tariffs at only slightly reduced rates on the vast majority of products where Kenyan exporters enjoyed tariff preferences when exporting to the UK will leave Kenya’s margins of tariff preference for most of its exports to the UK unaffected. However, this of course assumes the Kenyan government can successfully re-consolidate its current duty-free access to the UK market. If the Kenyan government is successful in reconsolidating duty free access to the UK market from 1st January 2021 (even if only on a temporary basis) then a number of opportunities could arise, depending on how the EU/UK trade negotiations proceed and the long term effects of the current Covid-19 related disruptions of air freight services between East Africa and the UK. For fresh beans, while the UK government concluded a ‘rolled over’ Continuity Agreement with Morocco in October 2019, if there is no trade agreement between the EU and UK, Morocco may need to find new routes to serving UK markets. This could open up new opportunities for Kenyan exporters on the UK market, if Kenyan exporters were able to overcome the current Covid-19 related air freight transportation problems and Moroccan exports faced EU/UK border clearance and freight service availability issues as a result of the failure to conclude a EU/UK trade agreement. This needs to be seen in a context where in 2019 ,while Morocco accounted for 14% of UK imports of fresh beans, (compared to Kenya’s 52% share), it accounted for 66% of total EU28 imports (compared to Kenya’s 15%), suggesting there may well be an extensive trade in fresh beans from Morocco to the UK via the EU27. Turning to cut flowers, Kenya has a strong position serving the supermarket component of the market in the UK. Given Covid-19 related disruptions to high street florists and the likely exit of many independent florists from the business, Kenya may be able to strengthen still further its market position in the UK. Once again this will depend on the ability of Kenyan exporters to overcome the current Covid-19 related air freight transportation problems, which have seen freight rates from East Africa to the UK increase by up to 200%. How air freight services recover after the Covid-19 pandemic could become an important issue in determining future patterns of UK rose imports. Despite extensive private sector investment in protected rose production and state supporting investment in cold stores and other export orientated infrastructure, Indian rose producers until recently faced the twin disadvantages of the standard GSP 5% duty and unfavourable air freight rates. If higher East African-UK air freight rates were to become a long-term feature of Kenya-UK trade and air passenger services were to recover more rapidly along the far larger UK-India route, then Kenyan rose exporters could come to face more intensive competition in the UK market, even with the retention of current MFN and associated Standard GSP tariffs applied to imports from India. However, such intensified competition would be likely to first affect smaller African rose exporters who trade into the UK market via the Dutch flower auctions, rather than the well-established Kenyan rose exporters who export supermarket ready bouquets to the UK. For products such as broccoli the situation is more complex. While there appears to be no immediate competitors in serving the UK market with imported broccoli, with Kenya accounting for over 91% of UK imports, it is unclear what the impact of the removal of the minimum entry price requirement alongside what amounts to a 41% reduction in the import tariff relative to the highest seasonal tariff applied, could be on trade flows. For most other products where Kenya exports to the UK (valued at between €0.6 million and €8.6 million) the proposed MFN tariff changes look likely to have little impact on current patterns of UK imports. Indeed, with the Covid-19 pandemic boosting demand for preserved fruit and vegetables in the UK considerable new market opportunities could emerge, in a context where Kenya would enjoy significant margin of tariff preferences, including over currently competing EU27 suppliers. In the event of a no deal UK exit from the EU customs union, MFN duties, most of which range from 14% to 25%, would then be imposed on imports of preserved fruit and preserved vegetables. However, that is assuming that in the event of a no deal UK departure from the EU customs union, the UK does not implement a last minute review of its MFN tariffs to reduce food price inflationary pressures and fall more into line with the ambitious liberalising agenda of the hard Brexit wing of the Conservative Party. |
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Sources:
(1) gov.uk, ‘UK Global Tariff backs UK businesses and consumers’, 19 May 2020
https://www.gov.uk/government/news/uk-global-tariff-backs-uk-businesses-and-consumers
(2) UK Global Tariff: Search Engine
https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff?q=070410&n=25&p=1
(3) Agreement establishing an Association between the United Kingdom of Great Britain and Northern Ireland and the Kingdom of Morocco London, 26 October 2019
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/854581/CS_Morocco_2.2019_UK_Morocco_Agreement_establishing_an_Association.pdf