Concerns expressed that Kenya deal with US could hurt regional trade

Concerns expressed that Kenya deal with US could hurt regional trade
Published date:
Saturday, 24 September 2022
Author:
LUKE ANAMI

The pursuit of a new trade pact between Washington and Kenya is eliciting old fears on whether it could hurt adherence to obligations under the East African Community, and hence continental ambitions for more commerce.

The US has confirmed it is willing to restart negotiations on a future trade pact with Nairobi once a substantive government is formed by President William Ruto.

And although Washington says any trade agreements in Africa will adhere to the ambitions of more integration and trade as per the African Union, some of the suggestions could contradict it.

“What you see is right now we are pursuing a number of different initiatives, one of them in a very multilateral context in the Indo Pacific,” Katherine Tai, the US trade representative told The EastAfrican last week.

“What we are doing with Kenya is not because of a preference for bilateral versus multilateral,” she added.

Policy on mitumba

Tai, however, said the US government has no plans to change its policy on the exports of second hand clothes (mitumba) to Kenya despite plans to ban the trade through increase of taxes on cotton by the East African Community.

“I am aware of this particular issue; I guess we would call it a measure or trade action. Actually, I welcome the conversation with whoever will be my new Kenyan counterpart about this,” she added.

“I think that there are some clear trade discipline concerns from a strict World Trade Organisation legal standpoint. But I will be very interested to hear Kenya’s perspective and the EAC perspective about the goals that they are about to accomplish.”

In December 2019, the EAC Council of Ministers failed to decide on the ban of second-hand clothes but approved the final draft on cotton, textile and apparels strategy.

In 2016, Kenya, Uganda, Tanzania, Burundi and Rwanda were meant to decide on whether to adopt a call for a ban on importation of used clothes.

Rwanda went ahead with the ban, but its apparel benefits under the Africa Growth and Opportunity Act (Agoa)- a free trade agreement between Washington and select African countries were suspended by former US President Donald Trump in July 2018.

Kenya, which has long sought a full free trade agreement with the US, is yet to finalise the trade agreement discussions as Tai revealed that the Washington administration still prefers a bilateral trade deal with Nairobi.

In June this year, the Joe Biden administration launched the United States-Kenya Strategic Trade and Investment Partnership (STIP), replacing earlier negotiations for a trade pact began by Trump’s administration.

The new partnership is supposed to lead to “high standard commitments in a wide range of areas with a view to increasing investment,” according to a joint statement shared by Tai and Kenyan counterpart Betty Maina. It is supposed to promote inclusive economic growth, enhance small and medium enterprises and support African regional economic integration.

Kenya enjoys substantial duty-free access to the US market through Agoa, but the pact expires in September 2025.

Kenya’s trade with the US has been growing from strength to strength as latest figures indicate that the US has overtaken Uganda as the largest buyer of Kenyan goods.

Thriving trade

Official data shows that exports to the US jumped 47 percent to Ksh38.8 billion ($321.7 million) in the first half of the year on the back of increased sales of clothes.

The sale of Kenya-made goods to Uganda dipped slightly at Ksh36.2 billion ($300.1 million) in the period under review from Ksh36.3 billion ($300.9 million) in the same half last year.

However, American technology giants want the Biden administration to compel the Kenyan government to abolish digital services tax (DST) as a condition for a new trade deal.

The bone of contention between Washington and Nairobi is a 1.5 per cent digital services tax that the National Treasury introduced last year.

Removal of the tax would stop Nairobi from collecting taxes from tech giants such as Google, Facebook and Amazon.

 

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