Uncertainty has engulfed the future of Kenya’s preferential exports window to the US as the market entry rules are set to change.

The ‘third country rule’ of the African Growth and Opportunity Act (Agoa), which allowed countries such as Kenya to export goods made of raw materials from outside national borders is set to expire in September next year, locking out Kenya’s textile from the US market.

Agoa allows the export of about 6,500 products from Africa into the US without paying duty or being subjected to quota restriction.

“Lapse of third party fabric rule could have a serious repercussion and we are on our way to the US to lobby for review of this Act ahead of the Agoa 2011 forum to be held in Zambia in June,” said Mr Jas Bedi, chairman of the Kenya Association of Manufacturers.

Mr Bedi said African exporters have taken a uniform position that the Agoa should be reviewed to allow countries that have integrated their economies to develop cross border value chains.

Garments and apparel have dominated Kenya’s exports to the US in past ten years after Agoa opened the US market to African exports.

Kenya’s export oriented textile firms have successfully used Agoa export window to build a multi-billion industry whose exports peaked at Sh15.8 billion in 2008 of the total of US-bound exports of Sh20.5 billion for the year.

This export growth sharply contrasts with Kenya’s average cotton production, which has stagnated in the past decade at 6,000 bales annually or three per cent of the annual consumption level of 180,000 bales.

This means 97 per cent of raw materials for exported clothes have always come from neighbouring countries.

The Cotton Development Authority, the government agency formed to revive cotton production says in its strategic plan that runs up to 2013 that it can only raise the level of production to 108 bales, way below the national consumption level.

“The anticipated lapse of this rule and failure to make this trade arrangement permanent has put 6,000 direct jobs at stake because investor can tell for sure whether will be extended after 2015,” said Mr Bedi, who also chairs African Cotton and Textile Industries Federation.

Agoa was extended to Sub-Saharan Africa in 2000 – long before the East African Community integration took an economic shape.

Today, Kenya, Uganda, Tanzania, Burundi and Rwanda — which are EAC members — have installed a common market which allows free movement of goods and factors of production, strengthening calls by US-bound exporters to be allowed to build cross border value chains.

Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Kenya's bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.

Other regularly updated trade statistics on AGOA.info include: (click each link to view)