TRALAC - Trade Law Centre

What Trump’s ‘Buy American, Hire American’ policy means for Kenya

Thursday, 02 February 2017 Published: | Dominic Omondi

Source: Standard Media (Kenya)

During his inauguration speech, US President Donald Trump championed his trademark policies, proclaiming, “Buy American, Hire American”.

The policy is supposed to encourage Americans – through legislation, persuasion or coercion – to buy products made in the US, as well as get American firms to employ American workers.

“America will start winning again. Winning like never before. We will bring back our jobs. We will bring back our borders. We will bring back our wealth. And we will bring back our dreams,” said Mr Trump at Capitol Hill in Washington on January 20.

To achieve all this, Trump said, Americans would “follow two simple rules: buy American and hire American”.

“We will seek friendship and goodwill with the nations of the world, but we do so with the understanding that it is the right of all nations to put their own interests first,” he thundered to the applause of thousands of supporters.

Protectionists policies

Today, policymakers around the world are burning the midnight oil trying to figure out how Trump’s protectionist policies will affect their economies. Kenya is no exception.

The US is Kenya’s second-largest market, after Uganda. In the year to October 2016, exports to the US increased to Sh35.3 billion from Sh33.1 billion. In these 10 months, Kenya’s exports to the US surpassed those to the United Kingdom and Netherlands, and are fast-approaching Uganda’s, where exports declined by about 20 per cent.

The tide of products crossing the Atlantic from Kenya into the US has been going up since 2011. In fact, exports to the US have been growing the fastest among the country’s destinations.

Exports into the world’s biggest economy increased by about 58 per cent from Sh25.7 billion in 2011 to Sh40.7 billion in 2015. Most of this trade was done under the umbrella of the African Growth and Opportunity Act (Agoa).

This landmark US trade legislation enhances market access to the US for sub-Saharan African (SSA) countries that meet a set of conditions, including improving rule of law, human rights and respect for core labour standards.

Agoa, which was signed into law in May 2000 under former US President Bill Clinton’s administration, was extended to 2025 under Barack Obama. However, in a recent article in the New York Times, the Trump transition team was quoted questioning the value of the Act to American interests.

“Most Agoa imports are petroleum products, with the benefits going to national oil companies. Why do we support that massive benefit to corrupt regimes?” the team asked. While many people across SSA have raised concerns that Trump might get rid of Agoa in line with his ‘Buy American, Hire American’ stand, most analysts are convinced that his regime will not touch Africa, as the continent has the least effect on America’s job market.

However, the continent might suffer a knock-on effect as other emerging economies, such as China, are hit by Trump’s policies. “Africa is unlikely to be the direct target of any Trump-induced trade protectionism.

But if trade tensions escalate, potentially weakening confidence in emerging market prospects, sub-Saharan African economies are likely to be affected,” said Standard Chartered Chief Economist Razia Khan. She added that over the last two decades, Africa’s trade with emerging markets has grown rapidly at the expense of trade with more developed partners.

“A slowdown in global trade would be a negative for trade-dependent emerging markets and could hurt their demand for sub-Saharan Africa’s export commodities,” she said. Mark Bohlund, an economist with Bloomberg, agreed with Ms Khan.

“The main risk for Sub-Saharan Africa is not direct. That one [direct effect] will be relatively low,” he said, adding that Africa trades more with Europe than the US. He also does not think Agoa will be repudiated by Trump. Moreover, the legislation does not look like a trade agreement that is stealing jobs from Americans.

The New York Times article highlighted a series of questions from Trump’s transition team to the State Department that smirked of “overall skepticism about the value of foreign aid, and even about American security interests” in Africa.

Business opportunities

Trump, according to the article, is torn between rolling back “development and humanitarian goals” even as he pushes “forward [American] business opportunities across the continent.” J Peter Pham, who has been mentioned for the job of assistant secretary of state for African affairs in Trump’s administration, said he does not expect the president to make a complete U-turn in relations with Africa.

He, in fact, expects Trump to support the pact.

“Agoa has created more than 120,000 jobs in the United States,” Mr Pham noted. Scholastica Odhiambo, an economics lecturer at Maseno University, thinks that if Trump decides to shed America’s “Big Brother attitude”, where US relations with Africa are largely aimed at uplifting Africans rather than benefiting Americans, then the US might reconsider relations with Africa.

However, Dr Odhiambo agrees that so far, the Trump administration has no problem with Africa, but rather with “Far East countries, such as Thailand, Vietnam and China”.

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