Kenyan firms fret over US duty free access in new Biden deal

New Wide Garments Kenya Epz limited in Athi river in Machakos county on 20th May 2022. [David Gichuru, Standard]

Kenyan companies want duty-free access to the American market guaranteed in new trade agreements with the Joe Biden administration.

Kenya is looking to wrap up a fresh trade deal with the United States before the expiry of the African Growth and Opportunity Act (Agoa).

The Agoa pact allows Sub-Saharan African countries to export thousands of products to the US without tariffs or quotas until 2025.

Safeguarding Agoa benefits will protect over 600,000 jobs and forestall collapse of multi-billion-shilling businesses that have been exporting products to the US, said the firms.

In a letter to the Biden administration over the ongoing trade talks, Kenyan manufacturers raised fears that the preliminary communication on the new proposed partnership is silent on trade in goods, "an important element in the commercial relationship between the two countries that is supported by the duty free, quota free market access to the US under Agoa".

"It is our request that this element be considered in the proposed strategic partnership or be addressed in an Agoa renewal embracing the US-Sub-Saharan Africa relationship," said the Kenya Association of Manufacturers (KAM) in the letter to the United States Trade Representative and seen by The Standard.

The lobby says scrapping of benefits under Agoa threatens collapse of Kenya's textile industry, which supplies global fashion brands, and the country's nascent hopes of becoming a light manufacturing hub.

It also warns that any disruption could lead to job losses that could pile more pressure on a Kenyan economy already reeling from the economic after-effects of the Covid-19 pandemic, the Ukrainian conflict and high inflation.

"Kenya's manufacturers request to have post-2025 duty free, quota free market access issues incorporated in the ongoing United States of America - Kenya strategic trade and investment partnership," KAM said.

"This guarantees sustained livelihoods to the over 600,000 dependents to the sector in form of 50,000 direct employees, 100,000 indirect employees and over 450,000 dependents on sectors anchored on Agoa in Kenya."

The Biden administration in July launched a fresh strategic trade and investment partnership with Kenya, replacing an agreement the Donald Trump government had inked with Nairobi.

A trade agreement with Kenya would be the first US free trade deal in Sub-Saharan Africa.

Textile and apparel products have dominated exports under Agoa since it was enacted in 2000 and remain the main items in Kenya-US trade.

Export of duty-free goods to the US under the Agoa jumped 20 per cent to Sh50.6 billion last year from Sh42.2 billion a year earlier, according to data by the Kenya National Bureau of Statistics (KNBS).

Investments by the Kenya-based firms that target Agoa stood at Sh23.1 billion in the period, the KNBS data shows.

The Agoa treaty was initially intended to last 15 years from 2000 before being extended for a further 10 years which expire in September 2025.

The initial deal backed by Mr Trump and former President Uhuru Kenyatta faced delays after the Biden administration sought more time to scrutinise the pact.

The new Biden plan signals that the US will be keen to protect American firms in the quest to shore up manufacturing, and seek a larger share of the global trade currently in the hands of China while pushing for bilateral trade deals.

President Biden is looking to move "beyond the old model of free trade agreements and is more geared to today's economic realities and to lessons of the last 30 years," his National Security Advisor Jake Sullivan told reporters at a White House news conference on September 21.

The Kenya-US trade talks are expected to restart this month under the new William Ruto administration.

While the Agoa pact allows preferential access to the US for thousands of products such as food and beverages, wood, plastics and rubber, Kenya has largely tapped the apparel and textiles line.

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