Potential US-Kenya Free Trade Agreements Offer Huge Opportunities


Last year, the United States and Kenya announced the start of free trade negotiations. It is the first of its kind between the United States and the countries of sub-Saharan Africa. If successful, this will be the most significant trade development in the region since the enactment of the 2000 Africa Growth Opportunities Act (AGOA) trade incentive program.

In order to better understand the main issues surrounding the FTA 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 ) for further analysis. Has been announced.US-Kenya Trade Negotiations: Implications for the Future of US-Africa Trade RelationsWe study the challenges and potential benefits (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, providing the necessary legal protection and creating a lasting and mutually beneficial relationship. The offer provides a stable framework for strengthening relations with the economy across the continent, ”said Scott Eisner, Senior Vice President of the Chamber of Commerce and President of USAfBC.

What are businesses and stakeholders looking for in a free trade agreement between the United States and Kenya? At a recent event, Kenyan and US business leaders discussed the report’s findings.

Improved predictability

“A long-term predictable framework between the United States and Kenya will stimulate economic growth… Jobs will be created and living standards will improve,” said AmCham Kenya, CEO of GE East Africa. Brenda Mbugiti, president, said.

“We hope that FTAs ​​will increase transparency and long-term stability in the application of tariffs on Kenyan products exported to the United States,” the report said. This could increase the predictability of market access for US 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 foster inclusive economic growth. SMEs are “the bedrock of a thriving 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 SMEs to participate,” the report says. “This is about more active participation in the global economy, with SMEs and young workers minimizing costs, especially given the physical restrictions currently in place following the COVID-19 pandemic. It was seen as an important way to do it. “

Promote digital commerce

In the digital commerce space, the main concern is how the two governments regulate it. In 2020, Kenya passed a digital services tax, but the United States strongly opposes countries that impose unilateral digital taxes.

“Predictability is absolutely essential,” said Raghav Prasad, President of Mastercard for Sub-Saharan Africa. “It’s important for the digital economy.”

Solving this problem will create great opportunities in the region. “The FTA between the United States and Kenya will serve as a model for other American agreements on the continent,” added Prasad.

Expansion of mutual access

Free trade agreements in the United States and Kenya are helping American businesses become more competitive in Kenya and Africa.

“Kenya is a long-standing US strategic partner in Africa…. The success of the trade agreement between the two countries will mark an important evolution of the United States’ trade policy towards Africa in general, in particular sub-Saharan Africa. Said Whitney Schneidman., Chairman of the Covington African Practice Group.

“US management has expressed concern that US companies are often at a disadvantage in Africa compared to European companies,” the report said. “The potential of the US and Kenyan free trade agreements is a positive development that could begin to expand the competitive arena for US companies seeking to do business in Africa,” they said.

Genetically Modified Crop Trade Efforts

An important issue in 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]Food consumption expenditure in Kenya is the highest in the world, with 69 imports of American agricultural and technological products to reduce both the overall amount of food that Kenyan households spend on food, as well as food prices. “It helps,” the report says. “This frees up disposable income for other activities and can have a positive impact on Kenya’s domestic demand.”

Improved IP protection

Improving intellectual property protection and enforcement in Kenya “will have an overall positive impact on the predictability of the Kenyan market,” the report said. It is also general and comprehensive in Kenya. It will inform potential investors that the regulatory framework encourages and welcomes investments. “

“Investors want to invest in markets that are easy to accept,” GE’s Mbathi said.

Transparency, capacity building and enforcement

Free trade agreements in the United States and Kenya will improve the overall business environment in Kenya.

“Kenya needs to build capacity,” said Elastus Mwencha, Chairman of the Board of Trademark East Africa. This is an opportunity for Kenya to “join the global supply chain”.

Kenya will be positioned as a manufacturing base for US companies, Mbathi added.

Protect the benefits of AGOA

Kenya has been using the African Growth Opportunities Act (AGOA) since its passage in 2000. In 2018, we had the second highest use of AGOA. Over 70% of Kenya’s US 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 deal provides for sufficient mutual market access. “

Despite the challenges of the FTA negotiations between the United States and Kenya, the business community of both countries knows how important and beneficial they are. “There is a clear message from the executives in Kenya and the United States. We want to accelerate a high level deal, ”said Maxwell Okello, CEO of AmCham Kenya.

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