TRALAC - Trade Law Centre

US eyes big chunk of key sectors in trade deal with Kenya

Saturday, 06 June 2020 Published: | ANTHONY KITIMO

Source: The East African (Kenya)

The United States government is seeking unfettered access to the Kenyan market in the proposed free trade agreement between Nairobi and Washington, which could have far-reaching implications on Kenya’s critical agricultural sector and its industrialisation plans.

The Office of the United States Trade Representative (USTR) has made public a summary of key negotiation points in the proposed bilateral deal, which will see Kenya lift tariffs on all US agricultural products and open its maritime, textile, telecommunications financial services and other industries, including those classified as sensitive sectors to US investors.

Kenya’s Trade and Industrialisation Cabinet Secretary Betty Maina, last week launched a secretariat to draft Nairobi’s proposals in readiness for the negotiations expected to start in a few months, even as she sought to assure East African Community member countries that the free trade agreement will not breach regional trade protocols.

“We would like to assure our partners in the EAC and the African Continental Free Trade Area (AfCFTA) that we do not intend to jeopardise our regional interests.

The team will work putting in mind the promise we indicated in the letter to the EAC Heads of States in which we informed them regarding our intention to offer preferential market access to the US,” said Ms Maina. Once the deal is signed, Nairobi expects to export a range of goods tax-free to the US.

'America First' Policy

President Donald Trump’s administration has been pursuing an “America First” policy in its trade negotiations with other countries as part of his attempt to counter a surging Chinese economic and political influence around the world.

In the proposed FTA, the US is seeking to secure comprehensive market access for its agricultural goods in Kenya by reducing or eliminating tariffs and providing ‘’reasonable’’ adjustment periods for import-sensitive agricultural products.

It intends to push for establishment of new and enforceable rules to eliminate “unjustified trade restrictions,” which means its agricultural products will be allowed into Kenya at zero or reduced tariffs.

The US expects Kenya to streamline and expedite Customs treatment of its products for express delivery shipments, as per proposals in the document tabled in the Congress on May 22, by ensuring there is simplified Customs procedures for low-value goods. The US proposes the development of rules of origin to ensure that the benefits of the agreement go to products genuinely made in the US and Kenya and to ensure that the rules of origin incentivise production in the territory of the parties.

The US wants to promote supply of its telecommunications services by facilitating market entry, secure commitments to provide reasonable network access for telecommunications suppliers and establish provisions protecting telecommunications services suppliers’ choice of technology.

It also wants to expand market opportunities for its financial service suppliers “to obtain fairer and more open conditions" of financial services trade.

The office of USTR informed Congress that in its negotiation, it intends to ensure free or reduced tariff on its digital products and to ensure Kenya does not discriminate treatment of digital products transmitted electronically.

The US, during the negotiations, will also table rules that, if adopted, will provide full market access for US pharmaceuticals and medical devices.

Trade Agreement

Regional trade officials have criticised the proposed FTA, saying it is potentially in breach of the Customs Union Protocol of the EAC, of which Kenya is a signatory.

However, the Kenyan Trade Secretary said the team constituted will seek to get the best possible trade and investment deal out of the negotiations, “putting into consideration the promise made to our EAC members.”

Ms Maina defended Kenya, saying it has abided with Section 37 of the EAC trade protocol, which calls for any EAC member state to inform other partners whenever it intends to offer preferential market access to a third-party since member states share a common Customs territory before such a deal is signed.

The controversial Kenya-US deal, once signed, is meant to replace the African Growth and Opportunities Act (Agoa) agreement that expires in 2025.

It has, however, raised concerns within the EAC where critics described the planned bilateral agreement as a breach of regional and continental trade protocols since Kenya had not formally written to EAC trade officials in Arusha regarding the intended new deal before it was made public. African Head of States have discouraged African Union member countries from entering into bilateral free trade negotiations with third parties to avoid jeopardising the AfCFTA.

The planned agreement between US and Kenya is a first for US trade relations in sub-Saharan Africa and signifies a shift from multilateral trade deals, such as Agoa, to bilateral free trade agreements with individual countries.

Agoa is the current trade preference programme in 2000 providing duty-free entry into the US for almost all African products, from oil and agricultural goods to textiles, farm, and handicrafts.

US ranked third as Kenya’s export destination with data indicating the two countries share around $1 billion in trade annually.

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