Last year, the United States and Kenya announced the start of free trade negotiations. This is the first of its kind between the United States and the countries of sub-Saharan Africa. If successful, it will be the most important trade development in the region since the Trade Incentives in Africa Growth Opportunities Act 2000 (AGOA) was enacted.
To better understand the key issues surrounding the NAFTA negotiations, the Africa Business Center of the American Chamber of Commerce and Industry (USAfBC) is working with the American Chamber of Commerce in Cobington and Kenya (AmCham Kenya) to conduct a new analysis. in depth. US-Kenya trade negotiations announced: implications for the future of US-Africa trade relations We are investigating the challenges and benefits of the potential (FTA) between the two countries.
“The trade agreement between the two countries is the first of its kind between the United States and the countries of sub-Saharan Africa, which provides the necessary legal protection and creates a lasting and mutually beneficial relationship. The offer provides a framework stable to strengthen relations with the continent’s economy, ”said Scott Eisner, senior vice president of the Chamber of Commerce and president of USAfBC.
What are companies and stakeholders looking for in a free trade agreement between the United States and Kenya? At a recent event, business leaders from Kenya and the US discussed the report’s findings.
“A predictable long-term framework between the United States and Kenya will drive economic growth … Jobs will be created and living standards will improve,” said AmCham Kenya, CEO of GE East Africa. Said Brenda Mbugiti, president.
“We expect the FTAs to increase transparency and long-term stability in the application of tariffs to Kenyan products exported to the United States,” the report said. It may increase the predictability of market access for U.S. exporters and investors in Kenya, including the regulated environment. “
Involvement of SMEs
The FTAs will also support small and medium-sized 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 and public policy in sub-Saharan Africa. [them] In our economy. “
The key is digital commerce, which “can increase opportunities for SME participation,” the report said. “This is a more active participation in the world economy, as SMEs and young workers minimize costs, especially given the physical constraints currently in place as a result of the COVID-19 pandemic. It was considered an important way to do it. “
Promote digital commerce
In the digital commercial space, the main concern is how the two governments regulate it. In 2020, Kenya passed a digital services tax, but the United States is vocally opposed to countries imposing unilateral digital taxes.
“Predictability is absolutely essential,” said Raghav Prasad, president of Mastercard’s Sub-Saharan Africa. “It’s important for the digital economy.”
Solving this will create great opportunities in the region. “The FTA between the United States and Kenya will serve as a blueprint for new U.S. agreements on the continent,” Prasad added.
Extension of mutual access
FTAs in the United States and Kenya are helping U.S. companies become more competitive in Kenya and Africa.
“Kenya has been a long-standing strategic partner in the United States in Africa … The success of the trade agreement between the two countries will mark an important development of US trade policy towards Africa in general, especially in sub-Saharan Africa, “said Whitney Schneidman, chairman of Covington’s African Practice Group.
“U.S. management has expressed concern that U.S. companies are often at a disadvantage in Africa compared to European companies,” the report said. “The potential of US and Kenyan FTAs is a positive development that could begin to expand the competitive reach of American companies that want to do business in Africa,” they said.
Efforts to trade in genetically modified crops
An important topic in the agricultural negotiations will revolve around the treatment of living modified organisms (GMOs). Kenya banned them in 2012, but the report sees great benefits if a solution is found. “[W]Consumer spending on food in Kenya is the highest in the world, with 69 imports of both agriculture and technology to the U.S. to reduce both the total amount of food Kenyan households spend on food, and food prices. “Help,” the report said. “This frees up disposable income for other activities and can have a positive impact on Kenya’s domestic demand.”
Improved IP protection
Improving the protection and enforcement of intellectual property in Kenya “will have a positive overall impact on the predictability of the Kenyan market,” the report said. It is also general and exhaustive in Kenya. It will inform potential investors that the regulatory framework encourages and welcomes investment. “
“Investors want to invest in easy-to-accept markets,” said GE’s Mbathi.
Transparency, capacity development and application
FTAs in the United States and Kenya will improve the global business environment in Kenya.
“Kenya needs to build capacity,” explained Elastus Mwencha, chairman of the board of Trademark East Africa. This is an opportunity for Kenya to “join the global supply chain.”
Kenya will position itself as a manufacturing base for American companies, Mbathi added.
Protect the benefits of AGOA
Kenya has used the African Growth Opportunities Act (AGOA) since it was passed in 2000. In 2018 we recorded the second highest use of AGOA. More than 70% of Kenya’s U.S. exports are covered by AGOA, with thousands of workers and farmers.
“Kenyan policymakers will want to maintain this access in trade negotiations with the United States,” the report said. At the same time, US negotiators will try to ensure that any agreement includes sufficient mutual access to the market. “
Despite the challenges of the FTA negotiations between the United States and Kenya, the business communities of both countries know the importance and benefit they have. “There is a clear message from executives in Kenya and the United States. We want to accelerate a high level of agreement, ”said Maxwell Okello, CEO of AmCham Kenya.