TRALAC - Trade Law Centre

What would a US-Kenya trade deal mean?

Friday, 21 February 2020 Published: | Claire Felter

Source: Council on Foreign Relations

The Trump administration hopes that a free trade agreement with Nairobi will be a counterweight to Beijing’s growing role across Africa and a model for bilateral deals with others on the continent.

President Donald J. Trump’s pursuit of a trade deal with Kenya marks a shift in U.S. policy toward Africa, which has not been a focus of his administration.

The move is the latest of Trump’s aggressive pushes for more bilateral trade deals, and officials hope it could help counter growing Chinese influence on the continent.

What’s happening?

Trade talks with Nairobi were announced during a White House visit by Kenyan President Uhuru Kenyatta in early February. It would be the United States’ first free trade agreement (FTA) with a sub-Saharan African country and its second on the continent, after the 2006 FTA with Morocco.

The announcement came shortly before Secretary of State Mike Pompeo’s first visit to the sub-Saharan region, which he used to warn about the risks of Chinese investment.

What would a deal mean for U.S.-Kenya trade?

Trade between the two countries currently stands at around $1 billion annually, just barely putting Kenya in the United States’ top one hundred trading partners. While the United States is a major destination for Kenyan exports, Kenya’s total U.S. trade is dwarfed by that with other partners, especially China, from which it imports more than $3.6 billion worth of goods each year.

It’s unclear how much a new trade pact would move the needle. Kenya already has preferential access to the U.S. market through the African Growth and Opportunity Act (AGOA), a program started in 2000 that eliminates import tariffs on goods from dozens of African countries. Kenya is one of AGOA’s top five exporters to the United States, primarily sending apparel, cocoa, tree nuts, coffee, and tea. It imports American aircraft, machinery, agricultural products, and plastics.

AGOA’s goal is to foster development for its members; in a bilateral trade deal, Washington will likely look for increased benefits for U.S. firms. That could mean increased market access for U.S. farm and manufacturing exports, greater openness to U.S. investment, intellectual property protections, and domestic pro-market reforms.

What’s at stake?

Perhaps foremost among Washington’s concerns is China’s growing influence across Africa. While U.S.-Africa trade has declined since 2008, African trade with China has soared. China is also devoting hundreds of billions of dollars to its Belt and Road Initiative, which comprises infrastructure investments across Africa, Asia, and Europe. That has included Kenya, with a $4 billion railway between Nairobi and Mombasa that opened in late 2019. The rail project—financed, built, and operated mostly by Chinese firms—raised domestic concerns about a debt trap.

China is not the only power deepening its ties to the continent. The European Union has launched a series of EU-Africa summits and is working on trade and investment agreements with most African countries.

Kenya is already a top U.S. foreign aid recipient and major U.S. partner in the region, particularly on counterterrorism, and is among the fastest growing economies in sub-Saharan Africa. After three years in office, the Trump administration has put little effort into bolstering partnerships in Africa, but U.S. Trade Representative Robert Lighthizer has argued for changing that. For Trump, Kenya is a good candidate for his broader trade philosophy—one based on bilateral deals that he sees as more advantageous for securing concessions—and a deal with Nairobi could serve as a template for the rest of sub-Saharan Africa. Kenyatta, meanwhile, is eager to maintain access to U.S. markets in case AGOA—set to expire in 2025—is not renewed.

At the same time, some observers have cautioned that a bilateral approach could backfire for Africa. They argue that a U.S.-Kenya deal could undermine attempts to build a region-wide economic bloc, the African Continental Free Trade Area (AfCFTA).

What are the next steps?

Once negotiations are officially launched, final signatures on a trade deal could be years away. Negotiators will have to hash out the details on many thorny issues, including Kenya’s obligations to the AfCFTA (which remain unclear), purchases of U.S. agricultural goods, and environmental protections. And even after an agreement is reached, it will need to be approved by Congress, a process that has held up other major efforts by Trump, such as the revamped U.S.-Mexico-Canada trade deal.

 

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