Kenya and the United States continue to share a cordial, formidable and resilient partnership, forged over five decades since the country’s independence.
This relationship is marked by amiable diplomatic relations and cemented by solid trade ties that continue to bolster both economies. The official visit by Antony J. Blinken, the US Secretary of State to Kenya in the last quarter of 2021, which marked his first visit to Africa under President Joe Biden’s administration; underscored the depth of the relationship enjoyed by both countries, further affirming the strategic partnership.
Blinken had sought to advance US-Kenyan cooperation, on ending the Covid-19 pandemic, environmental conservation, preservation of democracy and bolstering access to clean energy. In light of this, there is a glimmer of hope in the horizon for the resumption or continuation thereof, of the stalled Free Trade Talks, as encapsulated in the recently released ‘Biden’s 2022 Trade Policy Agenda and 2021 Annual Report to Congress.’
Both countries have worked closely together, over the years on many initiatives, such as counterterrorism, boosting healthcare, strengthening the agricultural sector and supporting education. In addition, Kenya is a hub of US security initiatives in the region and hosts the largest US diplomatic mission on the continent. However, for the most part, this partnership has been fostered by the incumbent presidents of both nations, recording a peak during Baraka Obama’s term owing to his Kenyan heritage, but going down a notch under the Trump administration due to his reluctance to engage with Africa on the whole.
Review of the Kenya-US Trade Ties
Trade between Kenya and the US is governed by the World Trade Organization (WTO), given that both countries are members of the Organization.
The African Growth and Opportunity Act (AGOA), is perhaps the highlight of the strong trade relations between Kenya and the US; enacted in May 2000 and has since been renewed to 2025. Under the Act, Kenya qualifies for duty-free access to the U.S market, exporting products such as textiles, apparel, and handicrafts among many others.
The US views Kenya as a key strategic trade partner in the region, which is the second-largest beneficiary of the AGOA tariff benefits. In 2019, trade between the United States and Kenya was estimated at US$1.1 billion, recording a 4.9% increase from 2018. Top US imports from Kenya were apparel, estimated at US$454 million, edible fruit and nuts at US$55 million, titanium ores and concentrates at US$52million and coffee at US$34 million. Top exports to Kenya from the US in 2019 were aircraft estimated at US$59million, plastics at US$58million, machinery at US$41 million and cereals at US$27million.
The US provides unilateral preferential tariff treatment which is below most-favoured-nation (MFN) tariff rates, to most Kenyan exports through AGOA. By the same token, a wider range of Kenya’s manufactured products are entitled to preferential duty treatment in the US, under the Generalized System of Preferences (GSP) trade agreement. In light of this, the US and Kenya agreed on a Strategic Cooperation Framework, to provide technical assistance and trade capacity building in Kenya; with the aim of maximizing Kenya’s utilization of the AGOA trade benefits for the remaining years till expiration in 2025.
Birth of the Kenya-US Free Trade Agreement (FTA)
The trade negotiations over the Free Trade Agreement (FTA) between Kenya and the US have been on hold, as the Biden administration reviews its trade policy priorities. Initiated in 2020, under then-President Donald Trump and his counterpart Kenya’s Uhuru Kenyatta, it was anticipated to become a model for future trade agreements with other African countries, according to the U.S Trade Representative (USTR).
Under the agreement, Kenya had hoped to attract Foreign Direct Investment, from the United States, to boost different sectors of the economy; expand job opportunities, whilst catalyzing other value chains, which will prove beneficial to Micro and Small Enterprises in Kenya. Both governments also agreed upon a Strategic Cooperation Framework, to provide technical assistance and trade capacity building in Kenya.
President Uhuru Kenyatta is one of the few African leaders, to have established a positive rapport, with President Trump, and is the only African leader to have made two visits to the white house. Both presidents had established the U.S.-Kenya Trade and Investment Working Group, in 2018, under the bilateral commercial memorandum of understanding (MOU), to explore ways to deepen the trade and investment ties, between the two countries, in strategic sectors such as the digital economy, health, energy, agriculture, infrastructure and manufacturing; to forge a stronger commercial future.
The group identified key focus areas for the fruition of this endeavour; to strengthen commercial cooperation, develop short-term solutions, reduce barriers to trade and investment, maximize the remaining years of the AGOA and pursue exploratory talks, on a future bilateral trade and investment framework.
Both nations had expressed what they desired to achieve in the negotiations. The USTR had identified 24 chapters to form the basis which included digital trade, technical barriers to trade, good regulatory practices, anti-corruption, intellectual property and subsidies among others. On the other hand, Kenya’s Ministry of Industrialization, Trade and Enterprise Development had identified 22 chapters upon which it intended to negotiate.
However, at the time existential challenges had already surfaced, such as the impact of FTA hampering efforts towards the implementation of the African Continental Free Trade Agreement (AfCFTA). This was dismissed by both parties with Kenya’s stand being that the trade deal would assist the continent in the long term, by creating a reference upon which other African nations could negotiate bilateral arrangements within the AfCFTA framework going forward. Since the AfCFTA was already launched in January 2021, it’s likely not to negatively impact it.
Another dilemma was the divergent stance, on Genetically Modified Organisms (GMOs), by both countries’ clashing perspectives, as Kenya hitherto still stands firmly against the importation of genetically modified foods. They are prohibited from even entering or transiting Kenyan ports for other destinations.
However, the US has robust GMO industries that improve yields and had sought to increase market access in Kenya through the trade deal. An increase in exports of products developed using agricultural technology in Kenya, still stands to asphyxiate the authentic traditional agricultural sector, thereby jeopardizing the livelihoods of many farmers.
The deal had also antagonized the relations between Kenya and other African countries, as it was and still remains a member of a number of regional trade agreements, which had viewed it as a lack of good faith in the regional bloc. The future of the manufacturing sector had roused some concerns as well, of stifled development being a pillar under the Big 4 Agenda, in the ultimate realization of vision 2030. This was because, Kenya exports to the US mostly comprised of raw materials and still do, whilst US exports to Kenya have largely always been processed goods.
Parallel to FTA negotiations, both countries have been committed to intensifying efforts to bolster commercial cooperation under the bilateral commercial MoU signed in June 2018. This, with the aim to work together, identify and prioritize trade and investment opportunities in strategic sectors such as energy, health, digital economy, infrastructure, agriculture and manufacturing.
Future of the Kenya-US Free Trade Agreement (FTA)
Sparks of hope for the revival of the stalled Kenya-US Free Trade Agreement (FTA) are in the air, with a new report having been submitted to the US Congress by Joe Biden’s top trade diplomat, Ambassador Katherine Tai, albeit no date has been set. Titled ‘Biden’s 2022 Trade Policy Agenda and 2021 Annual Report to Congress, the report enumerates details of USTR’s planned assignments to implement Biden’s administration trade priorities this year.
Further conversations with the Kenyan government by the incumbent administration are anticipated, to establish a common vision and partnership for economic resilience; to promote investments, sustainable trade, AfCFTA and equitable and inclusive development. The proposed trade deal has faced delays as Biden’s administration sought more time to scrutinize it, advocating for a recast of the bilateral pact, to align it to Biden’s agenda as it had begun negotiations with his predecessor as aforementioned.
Furthermore, the report released on March 1, indicated that the US is committed to continuing working with Kenya to deepen the trade and investment relationship, by promoting regional and continental integration in Africa, as well as advancing worker-centred trade policies.
This offers a good opportunity for Kenya to negotiate and secure a free trade pact ahead of the lapse of AGOA in 2025. Both governments share a vision, to promote commercial cooperation and remain steadfast, in the commitment, to reach a successful outcome for the prosperity of both nations. Biden’s trade agenda projects to use the trade policy as a tool to achieve shared goals with its partners, promote confidence in trade policy through enforcement and expand stakeholder engagement. Kenya needs to assess its objectives in the FTA and ensure that they align with its national development priorities.
Tension has been brewing between the US and China in terms of their massive investments in not only Kenya but also other African countries, with Sino-African trade exceeding US$200 billion making it Africa’s biggest trade partner. In Kenya, China has been heavily investing pertinently in terms of national infrastructures, such as the Standard Gauge Railway, the Oil terminal at the Mombasa Port and the Mombasa-Nairobi Expressway among many others. However, in the new trade policy Biden seeks to realign the U.S and China trade relationship; taking a new, holistic and pragmatic approach to their relationship grounded in the principles of worker-centred trade policy.