TRALAC - Trade Law Centre

Kenya risks AU wrath as it seeks solo deal with America

Friday, 31 January 2020 Published: | Frankline Sunday and Wainaina Wambu

Source: Standard Media (Kenya)

Kenya has broken ranks with other African countries as it pushes for a bilateral trade agreement with the US.

The move, analysts reckon, could cause a diplomatic headache for East Africa’s leading economy.

President Uhuru Kenyatta is set to fly to Washington next week where, according to a Bloomberg report, the two countries will announce negotiations on a trade pact that will form a model for other African countries.

Foreign Affairs Principal Secretary Macharia Kamau told Bloomberg that the two nations expect real progress on an agreement by the third quarter of this year, depending on how the negotiations go.

This comes even as the African Union (AU) is pushing to have a continent-wide trade pact with the US instead of individual bilateral deals once the Africa Growth Opportunities Act (Agoa) lapses in 2025.

AU Commissioner for Trade Albert Muchanga last year said the AU would opt for a continent-wide trade deal with the US, with the much-anticipated African Continental Free Trade Area (AfCTA) billed as the best bet.

“Fragmentation in Africa brings with it small economies, small markets, un-competitiveness and a host of other weaknesses, which make African economies fail to grow at rates high enough to reduce poverty and overcome the underdevelopment trap that they find themselves in,” said Ambassador Muchanga at the Africa Business Summit in Chicago.“

With this structural weakness, our countries are also vulnerable to manipulation, politically and commercially,” he added. And according to the Institute of Economic Affairs Chief Executive Kwame Owino, Kenya going it alone sets the pace for the continent’s future engagement with the US.

“The Agoa was not going to last forever, and as much as the AU would have wanted a continent-wide agreement, this deal could serve as a model replacement that other countries can later join,” he said.“It is, however, a lost opportunity for the East African Community (EAC) as a regional bloc.”

Mr Owino said EAC’s strength as a trading bloc had waned, with diplomatic tiffs among member states weakening ties drastically.

The negotiations between Kenya and the US come at a time when trade between the two countries has remained flat, with Kenya exporting Sh47.2 billion worth of goods to the US in 2017 and Sh47.3 billion in 2018.In the recent past, however, the US has stepped up its charm offensive on Kenya as it looks to hedge China’s growing economic influence in the region.

The latest development came as the American Chamber of Commerce (AmCham) yesterday faulted the Kenyan government for reneging on promises to ease bilateral trade.

“Unpredictable, excessive taxation inhibits businesses on accelerating reinvestment needed for growth in output and job creation,” said AmCham Board President Phillipine Mtikitiki during the lobby’s 2020 Economic Outlook forum in Nairobi.

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