'The opportunities are vast in a potential US-Kenya FTA'

'The opportunities are vast in a potential US-Kenya FTA'
Published
Thursday, 06 May 2021 ~ SEAN HACKBARTH

Last year, the U.S. and Kenya announced the launch of free trade negotiations, the first of its kind between the U.S. and a sub-Saharan Africa country.

If successful, it would be the most significant trade development in the region since the enactment of the African Growth and Opportunity Act (AGOA) trade preference program in 2000.

To better understand the key issues surrounding FTA negotiations, the U.S. Chamber’s U.S.-Africa Business Center (USAfBC), in partnership with Covington and the American Chamber of Commerce Kenya (AmCham Kenya), released a new in-depth analysis, “U.S.-Kenya Trade Negotiations: Implications for the Future of the U.S.-Africa Trade Relationship" [see link to document below], examining the challenges and benefits of a potential (FTA) between the two countries.

“A trade agreement between the two countries would be the first of its kind between the U.S. and a sub-Saharan African country and would provide a steady framework for strengthening our relationships with economies across the continent by providing the necessary legal protections and enduring, reciprocal trade,” said Scott Eisner, Chamber senior vice president and USAfBC president .

What do businesses and stakeholders want to see from a U.S.-Kenya Free Trade Agreement? At a recent event, Kenyan and U.S. business leaders discussed the report’s findings.

Increased predictability

“A predictable long-term framework between the U.S. and Kenya will spur economic growth…. It will create jobs and increase the standard of living,” said Brenda Mbathi, CEO of GE East Africa and Board Chair, AmCham Kenya.

The report finds “hope that an FTA would increase transparency and long-term stability in the application of duties imposed on Kenyan products exported to the United States.” In addition, “an FTA could increase predictability in market access in Kenya for U.S. exporters and investors, including in the regulatory environment.”

Engaging small and medium enterprises

An FTA would also help small and medium enterprises (SMEs) in both countries and promote inclusive economic growth. SMEs “are the foundation of a successful economy,” said Charles Murito, Google’s Director of Government Affairs & Public Policy for Sub-Saharan Africa, and an “FTA can be a platform for [them] in our economy.”

The key is digital trade, “which can promote increased opportunities for participation by SMEs,” the reports states. “This was seen as a key way in which both SMEs and younger workers can participate more actively in the global economy while minimizing costs, especially given physical restrictions currently in place as a result of the COVID-19 pandemic.”

Facilitating digital trade

In the digital trade space, a key concern is how the two governments regulate it. In 2020, Kenya passed a digital services tax, while the U.S. has been a vocal opponent of countries imposing unilateral digital taxes.

“Predictability is absolutely essential,” said Raghav Prasad, Mastercard’s Division President for Sub Saharan Africa, and is “critical for the digital economy.”

Solving this creates vast opportunities in the region. “The US-Kenya FTA will serve as a blueprint for further U.S. agreements on the continent,” Prasad added. 

Expanding reciprocal access

A U.S.-Kenya FTA would help U.S. companies be more competitive in Kenya and in the entire African region.  

“Kenya is a long-standing, strategic U.S. partner in Africa.... A successful trade agreement between both countries would mark an important development in U.S. trade policy toward Africa in general, and sub-Saharan Africa in particular,” said Witney Schneidman, chair of Covington’s Africa Practice Group.

“U.S. executives expressed concern that U.S. firms were often disadvantaged in Africa as compared to European firms,” the report states.  They also described “ a potential U.S.-Kenya FTA as a positive development that could more broadly begin to level the playing field for U.S. firms seeking to do business in Africa.”

Tackling trade in GMOs

A key issue in negotiations around agricultural goods will revolve around the treatment of genetically modified organisms (GMOs). Kenya imposed a ban on them in 2012, but the report finds there would be significant benefits if a solution can be found. “While consumer expenditures on food in Kenya are among the highest in the world, 69 imports of both U.S. agricultural products and technology help to reduce both food prices as well as the overall amounts spent by Kenyan households on food,” the report states. “This would free up disposable income for other activities and have a positive impact on domestic demand in Kenya.”

Improving IP protections

Improving intellectual property protections and enforcement in Kenya ”would have an overall positive impact on the predictability of the Kenyan market,” the report states. “And would serve as a signal to potential investors that the general, overarching regulatory framework in Kenya is conducive and welcoming to investments.”

GE’s Mbathi agreed: “Investors want to invest in markets that are open to receive them.”

Enhancing transparency, capacity building, and enforcement

A U.S.-Kenya FTA would improve the overall business environment in Kenya. 

“Kenya needs to build capacity,” explained Erastus Mwencha, Chairman of the Board for TradeMark East Africa. This is an opportunity for Kenya to “join the global supply chain.” 

It would also position Kenya as a place for U.S. companies to set up manufacturing, Mbathi added. 

Preserving the benefits of AGOA

Kenya has taken advantage of the African Growth and Opportunity Act (AGOA) since it was passed in 2000. It had the second-highest AGOA utilization rate in 2018. Over 70% of Kenya’s U.S. exports are covered by AGOA, supporting thousands of workers and farmers.

“Kenyan decision-makers will want to maintain this access in trade negotiations with the United States,” the report finds. “At the same time, U.S. negotiators will seek to ensure that any agreement contains adequate reciprocal market access.”

While there are challenges to negotiation a U.S.-Kenya FTA, the business communities of both countries know how important and beneficial it would be. “There is a resounding message from Kenyan and U.S. business executives: We want to see an acceleration of a high-standard agreement,” said Maxwell Okello, CEO AmCham Kenya.

agoa business connector

View related news articles

Biden, Kenya President Kenyatta to hold White House meeting

President Joe Biden will host Kenyan President Uhuru Kenyatta for a meeting in Washington on Thursday as the White House weighs sanctions against parties to the conflict in a northern region of the neighboring East African country of Ethiopia. The meeting at the White House will mark Biden's first as president with an African leader. White House spokesperson Jen Psaki said in a statement that the two would discuss "efforts to defend...

13 October 2021

AAFA formalizes relationship with Kenya Association of Manufacturers to promote economic growth

Today, the American Apparel & Footwear Association signed a memorandum of understanding in cooperation with the Kenya Association of Manufacturers (KAM). As the representatives of the apparel and footwear industry in both the United States and Kenya, the groups have agreed to collaborate on policy areas that are of mutual interest to its membership through joint advocacy and information sharing on industry best practices. The MOU was...

20 September 2021

Kenya seeks US market access for fresh oregano, parsley

Kenya has asked the United States Department of Agriculture’s Animal and Plant Health Inspection Service (Aphis) to authorise the importation of fresh oregano and parsley to the US from Kenya. Aphis has drafted a pest risk assessment that describes potential pests associated with the commodities ahead of the possible approval process.  Download and view the documents at the links alongside The agency is making the assessment...

07 September 2021

'US pressured over delayed promise to Kenya' in letter sent to USTR Tai

US President Joe Biden has come under pressure to fulfil the American government promise of achieving a Free Trade Agree (FTA) with Kenya.  Seven Republican Senators want the negotiations for an FTA deal between the US and Kenya hastened to pave way for business and investment.  In a letter written to U.S. Trade Representative Katherine Tai, the Senators asked for the process to be given priority after delaying for close...

20 August 2021

'We examined 20 years of US-Kenya trade: Some lessons for Africa'

Kenya is one of the top five beneficiaries of the US-Africa trade initiative, the African Growth and Opportunity Act (AGOA). It also had the second-highest utilisation rate in 2018 with over 70% of its US exports covered by the programme. Launched in 2000, the trade pact gives sub-Saharan Africa the most liberal access to the huge US market available to any country or region with which Washington does not have a free...

16 August 2021

US trade chief plans summit to discuss Africa duty-free access

The U.S.’s trade chief plans to convene a meeting with African ministers before the end of the year to strengthen partnerships and discuss a law that provides duty-free access to the U.S. for thousands of goods from sub-Saharan nations. “It is important that we meet despite the pandemic to discuss how we can build on the successes of the African Growth and Opportunity Act,” U.S. Trade Representative Katherine Tai said in remarks...

27 July 2021

Report: A look at the potential benefits and challenges of a US – Kenya trade agreement

The American Chamber of Commerce (AmCham) Kenya has partnered with the U.S. Africa Business Centre (USAfBC) and Covington to publish a business trade report. The report, titled US-Kenya Trade Negotiations: Implications for the Future of the U.S.-Africa Trade Relationship, examines the challenges and benefits of a potential free trade agreement (FTA) between the U.S. and Kenya. Speaking during the report launch, AmCham Kenya CEO,...

30 April 2021

Kenya: 'Uhuru–Blinken talks a breath of life to US trade deal'

Trade talks between Kenya and the US could resume soon following Tuesday's virtual meeting between President Uhuru Kenyatta and US Secretary of State Antony Blinken. This is after a five-month break occasioned by change of g-uard in the US as President Joe Biden took over from Donald Trump after last November’s elections. The settling down of the Biden administration put foreign trade negotiations and policies on hold, which included...

29 April 2021

'Hope for Kenya-US trade deal as talks resume'

Kenya and the United States have resumed talks on the Free Trade Agreement (FTA) ongoing since last year. Kenya's Trade Cabinet Secretary Betty Maina and US Trade representative Katherine Tai held talks that focussed on the importance of the trade relations between Kenya and Africa as important partners to the US. The bilateral trade talks paused in the wake of American presidential elections last November. A change of guard at the White...

08 April 2021

'Biden Administration dampens Kenya's hopes for bilateral trade deal'

The Biden administration's plans to review foreign trade policy and refocus it on America's economic recovery have thrown long-running free trade negotiations with Kenya into disarray. In a development that casts doubts on the future of a bilateral free trade agreement (FTA) with Kenya, United States Trade Representative Katherine Tai has informed Kenyan Minister of Industrialization, Trade and Enterprise Development Betty Maina of...

05 April 2021