The Star | 7 February 2020

Why Kenya-US trade talks will cause disquiet in EAC

by Eliud Kibii

President Uhuru Kenyatta met US President Donald Trump in Washington on Thursday as the two states started negotiations on a free-trade agreement.

Notably, this will be US’s first such deal with a sub-Saharan nation, Bloomberg News noted, and it precedes the expiry of the African Growth Opportunity Act in 2025.

What does this expected trade deal mean for Kenya and the EAC?

According to US statistics, two-way trade between Kenya and the US was about Sh100 billion in 2018, with a Sh2.8 billion surplus in Kenya’s favour.

When the two leaders met in Washington in August 2018, they resolved to improve tourism, trade relations and improve security.

Noting the two countries have had close ties in security and defence, especially in the fight against terrorism, Uhuru said Kenya looks forward “to enhance our partnership in trade and investment".

In response, Trump said Kenya and the US will continue to work together to grow their partnerships in trade, investments and security. This looks like a follow-up on the 2018 meeting.

State House said in a statement the trade deal "would help Kenyan goods to have smooth access to the expansive US market”.

The decision to directly engage the US is, however, likely to draw criticism from other EAC states because Kenya surrendered its customs space to the regional bloc in 2005 when it signed the Customs Union Protocol. The rules and regulations require member states to negotiate all trade pacts jointly.

Based on the rulebook, the EAC has as early as 2015 been pushing for a long-term preferential trade agreement with the US to remove uncertainties over the African Growth and Opportunities Act (Agoa).

According to Agoa.Info, the five member states submitted their request to the United States Trade Representative on the modalities and the time to start negotiations on the pact.

Partner states were to give up their national Agoa strategies and change to the regional one. Kenya seems to have abandoned ship and opted to go it alone.

It appears to have been motivated to take this move by other EAC states’ tactics to delay the US talks and the unwillingness to first sign the Economic Partnership Agreement (EPA) with the EU.

In the former, senior EAC officials from Rwanda, Tanzania and Uganda opposed the US bid to review the Agoa trade deal in 2017 over the used-clothing ban, Agoa.Info reported. Kenya was exempted from this review for reversing tariff increases.

In the latter’s case, Kenya signed and ratified the EPA, which guarantees duty-free and quota-free access of EAC products to the EU market in October 2016, after nine years of negotiations. Other than Rwanda, the other member states are yet to sign it. Tanzania and Burundi have refused to sign the trade agreement on the grounds that the pact has failed to take care of their interests.

In effect, Kenyan horticulture, which accounts for about 20 per cent of the country’s exports, has been the hardest hit by the delay in signing the EPA.

“We are trying to figure out which is going to be the path forward for our arrangement with the US post-Agoa,” Foreign Affairs PS Macharia Kamau told the Financial Times.

But even as Kenya engages in these negotiations, PS Kamau told the Financial Times that it would move cautiously in terms of reciprocity, since it needed to protect infant industries and services, including its airline.

“They could easily swamp our markets into oblivion,” he said. Any deal “cannot be at the expense of our local capabilities, which are nascent at best.”

Importantly, Kamau said Kenya is sensitive to the concerns of its neighbours in East Africa where many goods transit tariff-free and which would, therefore, be affected by US goods coming into Kenya.

"Our government," he said, "will proceed with supreme caution in renegotiating a free trade agreement."

Asked by the Atlantic Council about Kenya’s strategy for ensuring continued economic growth on Wednesday, President Kenyatta said his key focus is to "design a social contract with our people that best fits our particular circumstance."

EAC INFIGHTING

Each of the EAC member states has a diplomatic or trade tiff with a neighbour or two.

The latest is the dispute between Kenya and Uganda over milk exports, which saw Kampala write a protest letter.

Kigali and Kampala are also embroiled in a diplomatic tiff over migration issues.

According to Trade Mark East Africa, Kenya has raised concerns that a prolonged diplomatic row between the two hinterland states will hurt trade, a move that could also affect business at the Port of Mombasa which is a key entry and exit point for cargo traded along the Northern Corridor.

Kenya is also having an unending trade war with Tanzania.