The Asian economic giant has been negotiating for the creation of a free trade agreement with EAC for the past two years.
Trade principal secretary Dr. Chris Kiptoo has said 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 Monday, Mr Kiptoo said the decision not to sign the pact is intended to protect Kenya’s nascent manufacturing sector from being over-run by China’s cheaper and more efficient producers.
“China already accounts for 25 per cent of Kenya’s import bill under the current common external tariff structure of zero per cent, 10 per cent and 25 per cent 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,” said Mr Kiptoo.
Currently trade relations between Kenya and China is heavily skewed in favour of China and the proposed comprehensive free trade agreement (FTA) would see the imbalance grow even wider as Chinese goods access the EAC market at more favourable tariffs.
Kenya exported goods worth Sh10 billion ($100,000) to China in 2016 but imported goods worth Sh337.4 billion ($3.374bn) from the Asian country, indicating a trade deficit of a whooping Sh317.4 billion ($3.174bn).
“China accounts for less than two per cent 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,’ said Mr Kiptoo.
The Asian economic giant has been negotiating for the creation of a free trade agreement with EAC for the past two years and even wrote to former EAC secretary-general Richard Sezibera proposing to negotiate with the EAC partner states a comprehensive free trade agreement.
The EAC secretariat was expected to undertake a comprehensive cost-benefit analysis on the implications of negotiating a free FTA with third parties by June 30.
China also requested to undertake a joint feasibility study with the EAC on the proposed free trade area.
“The Chinese people are doing a lot here especially in the provision of services such as finance, development and we are happy with that. In the area of trade, there exists a huge imbalance which is making us feel we really need to see more in the other direction,” he said.
China is Kenya’s top lender and Beijing gave Nairobi a total of Sh487 billion ($4,733.94 million) in the 12 months through end of September 2017.
Kenya signed a double taxation agreement (DTA) with China last October to incentivize Chinese firms setting up base in Kenya.
There are currently more than 400 Chinese firms in the Kenya serving in various sectors of the economy such as real estate, finance and agriculture among others.